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across municipalities in tax base, divestiture rate, and the stock of enterprise housing.

# **6. PACE AND BARRIERS FOR DIVESTITURE**

Real rate of housing divestiture in Russia. Russian housing statistics are very much in flux, so it is not very clear how much housing was actually divested to municipalities. The report by the Urban Institute (1995) estimates that only 20-25% of the initial enterprise housing stock was divested in 1991-94. Evidence from various surveys has demonstrated that the actual estimate might be closer to the lower end of this interval. Our survey in December of 1994 showed that the share of enterprise housing in the surveyed cities was still above 40% **16** The large enterprise survey held in summer of 1994 revealed that by that time less than 5% of enterprises actually transferred any of their social assets (Commander and Lee, 1995). Only one from 24 enterprises participating in our small survey in December 1994 had completed divestiture of a portion of its housing stock by that time. The rest either still had been running negotiations with local authorities or had not even begun them yet. All figures prove that, in early 1995, at least 35 % of the total urban housing stock was still financed by enterprises.17 In addition, divestiture in rural areas was even slower (See Annex 3). However, a part of the housing which is described as being financed by enterprises is, in fact, controlled and financed by various federal ministries (e.g. Defence, Interior), and this housing is not subject to divestiture.

Barriers for divestiture. While enterprises are generally interested in the process of housing divestiture, local authorities, as we discussed above, are reluctant to accept enterprise housing. The situation with enterprises in the process of divestiture negotiations is described in Table 7. Two main tools are used by local administrations to impede divestiture.

(i) All the housing is declared to be divested (which means little as formally housing is only on corporate balance sheets,'<sup>8</sup> not in their property), but enterprises are forced to keep responsibility for maintenance and operation of the same housing stock. As one can see from Table 7, it was envisaged in the divestiture agreements that enterprises are going to continue maintenance and capital repair on their own expense in two cases from 11 and continue utility services provision on their own expense in three cases from 11. However, as the definition of divestiture is very unclear and a variety of compromise solutions (as cost sharing agreements, for example) are legally possible. Local authorities use these instruments to delay the actual divestiture.

(ii) As preliminary conditions for actual divestiture, local authorities insist on a huge amount of capital repair to both the actual housing stock and utility networks be financed and carried out by enterprises. It is impossible to determine in general what amount of repair work is reasonable and what not, but this requirement can be easily used by local authorities to delay divestiture if they would like to. Such conditions, being very frequently included in divestiture agreements, lead to a number of conflicts. If the enterprise has no money and no ability to carry out repair work, the municipality sometimes demands to acquire some additional property to compensate these costs. As the mayor of one of the cities admitted, "if it (the enterprise) has no money, we can take cars, tractors, administrative 6 The enterprise housing share in the total urban housing stock initially amounted to about 45% in 1990. 7 This also includes some housing financed by federal ministries, such as Ministry of Defence. **18** In Russia, "na balanse" means that the firm has use rights, along with the responsibilities for financing, operating and maintaining the asset, but technically does not own it.