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The Moscow Times, July 26, 2004

Worries Grow Over Housing Reforms

By Caroline McGregor
The state has been promising Natasha Yakovleva and her four children an upgrade from their one-room apartment for four years. Now, as President Vladimir Putin's social reforms roll forward, she is not sure whether she will ever get it.

"They tell me that under the new Housing Code we might not be put on the new list," said Yakovleva, a single mother who scrapes by on part-time work at the post office and the government discounts granted to families with many children.

"It's scary, of course," Yakovleva said outside the municipal housing committee office near Sokol metro station, where she had come to talk to her caseworker, only to find that the woman was absent. "But then I hear from other people that we have nothing to worry about. Who knows?"

The truth is, very few people do know, and that is part of the problem.

Galina Khovanskaya, a State Duma deputy who specializes in housing issues, is one of the draft code's main critics. She worries that, precisely because of its confusing ambiguity, the new code will serve to worsen the already wide gap between Russia's rich and poor.

"It's a very raw document," she told reporters earlier this month.

Khovanskaya said that countless contradictions and catch-22s were written into the text in the rush to bring it to the floor of the Duma this summer, bundled together with 26 other pieces of legislation on everything from mortgage rates to credit bureaus to bankruptcy rules.

All 27 bills were passed in a first reading on June 10.

The pro-Kremlin United Russia party, which backs the bills, says the housing measures included in them will help to make affordable housing more accessible, create a functioning real estate market and bolster the middle class.

All this is also part of Putin's ambitious fight against poverty, declared in his state of the nation address in May.

That is the positive spin. The bills also signal the dismantling of the socialist welfare state, and they have sparked widespread discontent among those who fear the loss of their familiar safety net.

Cynics say it is exactly because the reforms are so painful and unpopular that United Russia is pushing to get them passed into law as soon as possible, to give voters as much time as possible to forget about them before the next Duma elections in 2007.

The Duma will consider most of the bills in the social reform package in its few remaining sessions before adjourning for the August and September recess, but further discussion of the new Housing Code has been postponed until the fall.

The Legislation Committee, charged with steering the Housing Code through, needs this time to process the 250 amendments before a second reading. Changes have been proposed to each and every one of the document's 160 clauses, said Ilya Mironov, a staff assistant to the committee, so the Housing Code may yet undergo major transformation.

In its current state, however, Khovanskaya told reporters that she worries about the absence of many legal guarantees present in the current Housing Code that protect the poorest and most vulnerable groups in society.

According to the Federal Construction and Housing Maintenance Agency, 4.4 million families are on the waiting list for free state housing. Khovanskaya cited experts who estimate that around 40 percent of them will no longer be eligible under the new definitions, meaning that about 1.8 million families -- many of whom have been waiting for 10 or 20 years -- will be left empty-handed.

Today's Housing Code, dating from 1983, says that the state will provide shelter to those whose income falls below the cost of living, she said, but the new version is more vague: Apartments are for those who "need" them.

Since funding comes from local authorities' budgets, it is left up to them to define who is eligible for public housing. This leaves a lot of room for arbitrary interpretation, Khovanskaya said.

Regions -- especially those without deep pockets -- will be tempted to lower the bar as far as possible, she said. "They'll face a choice: put another person on the list for free housing, or pay salaries to teachers and doctors."

Local authorities will also be tempted to slash the number of square meters they are obligated to provide an individual. Today, the minimum for one person is 15 square meters, but in the new bill, no nationwide standard is set.

"They can decide to provide a symbolic 2 square meters, like a cemetery," Khovanskaya said.

Khovanskaya made her reputation as a specialist on housing reform during years in the Moscow City Duma and was one of only a small handful of liberal-minded deputies elected to the State Duma last December. She is a member of the Yabloko party and was elected as a deputy to party leader Grigory Yavlinsky at a congress this summer.

The real kicker, she said, is that as of 2007, it will no longer be possible to privatize a state-provided apartment.

Privatized apartments can be sold or rented out, Khovanskaya reminds anyone who will listen, and are often the only capital asset people have to protect themselves in case of financial emergency.

But Pavel Krasheninnikov, chairman of the committee and one of the authors of the draft, sees it with less emotional eyes. "The state is not so rich that it can build things and give them away," he told Radio Mayak recently.

Those who have scraped together money to buy the title to their state housing also feel like they are getting the short end of the stick, as they will have to start footing the bill for building maintenance, something previously shouldered by the authorities.

Khovanskaya also notes that veterans will also lose out when the promise of an apartment upon retirement is monetized. Now they will accumulate money each year that they work, to be spent toward an apartment, if they complete 20 years of service.

But a flat-sum payment puts veterans from Moscow and St. Petersburg, where their money will not go as far, at a disadvantage. "These soldiers won't be able to retire to their native city," Khovanskaya said. And if they leave at any point before serving 20 years, they forfeit the money set aside on their behalf.

Since the new system only applies to those who entered the service after 1998, questions like what funds will hold the money and how it will be disbursed are all quite theoretical, said defense analyst Pavel Felgenhauer. "No one gives a damn right now about the small print, because the repercussions of all these changes won't be felt until long after the present administration is gone."

Concerns that the taxes apartment owners face will skyrocket as of next year, meanwhile, are more keenly felt.

Previously, apartment owners have paid taxes based on appraisals by the so-called Bureau of Technical Inventories, which set property values artificially low, often 10 to 20 times lower than market prices. On the bureau's books, an apartment near the Kremlin may be worth $5,000, when in reality it is worth more than $100,000, Mironov said.

The new legislation says that the tax would be based on market values, as set by local authorities.

Pensioners who own apartments in expensive neighborhoods are particularly concerned, worrying that they will not be able to afford the higher taxes with their meager pensions. Retired generals are among this group and have lobbied strongly against the changes.

Mironov said people will see their property tax bills rise, but not by as much as people fear. Deputies have proposed lowering the tax rate to offset the increased valuation.

"For an average two-room apartment, say, 60 square meters and nothing elite, you might have to pay 1,500 rubles ($52) a year instead of the 100 to 200 rubles ($3.50-$7) you pay now," he said.

The tax changes are part of amendments to the Tax Code that, due to their controversial nature, were postponed until the fall along with the Housing Code, to give the government and the United Russia majority in the Duma time to hammer out modifications.

Khovanskaya would also like to see clarification to the line in the draft Housing Code that says the government can evict people from their homes and relocate them, in the event of "government and municipal need." She worries that the right to relocate people from the path of new highways will be used to kick people off of prime shopping-center land.

"This is a time bomb," she said. "I can already see the court cases coming."

The new code tries to simplify the system of apartment entitlements by doing away with the special status enjoyed by different classifications of the country's underprivileged.

In the past, people whose homes were destroyed in natural disasters were bumped to the top of the waiting list, along with 30 categories of people -- including families with many children, like Natasha Yakovleva's, Chernobyl victims, orphans and the disabled. In the new code, they have no special status.

An amendment was introduced to make sure that orphans who come of age are exempt from any wait, but what about rehabilitated criminals or people released from detention after being found not guilty, Khovanskaya asked. "Where will they go? On the street, they'll be turned into criminals."

From Jan. 1, 2005, when the new code is set to enter into force, all categories of underprivileged people will join the line on a first-come, first-serve basis. But that will not be retroactive: Those already in line will keep their places.

Sergei Kruglik, who handles housing questions at the Industry and Energy Ministry and who was involved in drafting the bill from the government's side, said that under the new rules, citizens will have to wait only three to five years to get an apartment.

Some of this confusion will be ironed out in the parallel legislation on how the new Housing Code will be implemented, which the Legislation Committee is in the process of writing, Mironov said.

"I'm not against reform, but the quality of this document must be improved. This is a document the country will have to live with for another 20 years," Khovanskaya said. "I'm counting on the common sense of my colleagues."


See also:

the original at

Housing and Utility Reforms

The Moscow Times, July 26, 2004

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