10 purchasing new housing in less expensive areas. On the other hand, many people are quite prepared to pay for the privilege of moving to better housing These circumstances incline both categories to privatize their housing. In Moscow, however, where rent and utilities payments bear little relation to the quality of housing, lower rent and bills are not a motive for privatization.

Due to the social heterogeneity of the owners of housing within multi-unit houses, there are very few buildings where a majority of apartments are prvatized, and this promises to complicate the establishment of condominium associations. On the other hand, in low-quality buildiings many residents have privatized their apartments by now. This can also produce many problems (when deciding that such a building should be razed, transferred to the category of "social" housing, etc.).

As a result of privatization, households become owners of valuable reall estate which can be sold or bequeathed. From the point of view of the law, they are owners. At the same time, they do not pay property tax, which in many other countries constitutes a sizable portion of local budget revenues. Furthermore, the owners of apartments also enjoy the subsidies for housing maintenance and repairs. And if the owners belong to a low-income category, they receive housing allowances for the payment of maintenance and the utilities bills. Thus, in the present situation in Ruissia, apartments owners enjoy the same social protection as the tenants of state-owned or municipal housing.

# 1.2.1. Factors influencing housing privatization in Moscow

Before 1992, privatization of housing in Moscow was episodic. The process reached its height in 1993 and then began to decline rapidly (recall Table 1.5). In the year 1994, only 4% of the total number of apartments was privatized. By the end of 1994, half of the households surveyed in Moscow still lived in state-owned, municipal or enterprise housing.<sup>6</sup> The factors that influence households' privatization decisions may be broken down into four groups, each of which will be examined in turn:

- value of the property;

- demographic characteristics of the occupants;

- households' value orientations;

- the household income.

a. _The value of the property_ (here, a separate apartment or a room in a communal apartment) is determined by its market price. A very simple assumption is made: the higher the market price, the stronger the incentive to privatize. In turn, the market price of a dwelling depends on its quality and location.

Table 1.6 shows the dependence of the market price of housing on its caltegory and location. The figures are based on realty companies' data on the characteristics and cost of apartments put up for sale in April 1995.' 6 n this exaination ofthe factors inuencing housing privtization primarily data fron the tlhird wave ofthe Moscow Longitudinal Household Survey (Deebe 1994) have been used.

' Using infornation supplied by reahy companies _(Nedvizhimost, 1995;Modus,_ 1995), **which** includes qualitative charcteristics and maket value estimates for 1,900 Moscow apartnents put up for sale in Apfil 1995, we estimated the value of each ofthe 2,250 apartments covered by the sociological survey (MLHS, 1994). The Decenber 1994 data on the householdl units and the April 1995 data on the housing market prices are highly comparable for purposes ofthe present analysis. With this end in view, we developed an iteration procedure and a computer program to identify all aparments in the realty companies' database that matched the MLHS, 1994 apartments by qualitative parameters: number of rooms, area of geneal and hving space, category of dwelling wall material, etc., as well as by location, which was detenmined by small Moscow districts. The mrnket estimates of the value ofthe surveyed apaitments calculated in this way were icluded in the savey database and were later analyzed as regular questions included in the questionnaires. This made it possible to correlate the value estimates with the social status, incomes, and demographic composition of Moscow households, as well as with the other survey questions.