It is an open secret that the national "Affordable Housing" project is going nowhere. While in the Czech Republic and Hungary (also former socialist countries), the volume of funds allocated for this has exceeded one-third of the countries' GDPs, in Russia it is just barely 2 percent of GDP.
It seems that the main problem is not implementation, but a wrong strategy. Right from the start priority was given to the so-called American or bank mortgage model, under which banks grant loans for the purchase of housing. An alternative, "German," or accumulative system [where a person contributes funds to a construction savings bank and then receives housing. - Ed.] was rejected out of hand.
A draft law on state support for construction (mutual) saving banks (CSBs), without which an accumulative mortgage system is simply unable to work, has been gathering dust in the State Duma since 2000. [CBSs are not real banks, but rather a kind of building society. They are different from banks, which are companies normally listed on the stock market, and are therefore owned by and run for their shareholders. Societies have no external shareholders requiring dividends and are not companies. - Ed.] The problem is that the proposed law has formidable opponents, primarily banks and their associations.
Meanwhile, experts have warned, quite rightly, that whereas personal incomes in Russia are rather low, loan mortgage interest rates will remain fairly high, mainly due to inflation. As a result, sooner or later many people will be unable to repay their loans. There is no such problem with the accumulative mortgage system - furthermore, buyers have to pay significantly less for their housing (sometimes 50 percent less), since they do not have to pay interest to banks, but on the contrary, receive premiums (bonuses) from the state.
Finally, the American mortgage system is not really suitable for Russia due to its raw materials economy and as a result, the possibility of yet another financial meltdown. For this reason, people are often reluctant to take long-term loans.
By contrast, the German model considerably alleviates problems related to financial risks, eviction, security, etc. Unsurprisingly, about 15 years ago this model was espoused by post-communist countries in Europe and then in Asia (for example, China and Kazakhstan). But it is not until now, after so many years of debate that Russia has finally chosen to follow their example. True, thus far not the whole country but only its capital city.
And then it is not even the whole of Moscow, but only five out of 66 villages on its eastern
outskirts that are slated for demolition (Vnukovo, Zhulebino, Kozhukhovo, Kosino, and Ukhtomskoye).
Not long ago, the project's authors sent a letter to Mayor Yuri Luzhkov, proposing the creation of CSBs in these villages. Soon afterwards, the mayor approved the idea and instructed the city government to issue a relevant decree as soon as possible.
Needless to say, the operation of a CSB will differ somewhat from its European or Asian counterparts. People will receive somewhat different rights, depending on their contributions.
In Europe, members of a CSB or building society do not receive housing the moment they make a contribution (down payment). They join a waiting list - two or three years long.
In our case, there will be no wait lists at all. The villagers will all at once receive housing in a gated community. Their land plots have been secured and have contributed to their CSB savings accounts.
Those CSB members who are not the inhabitants of the five "pilot" villages but wish to join the project and start making contributions will receive housing in high-rise blocks that are being built nearby. They will have to wait about four years before they join the villages.
Construction on a tract of land allotted for a future gated community is already underway. All the paperwork for the Zhulebino project has been processed and officially okayed.
Needless to say, thus far CSBs and the managing company have to work in difficult conditions. A federal law on financial support for organizations of this sort has yet to be passed, therefore the amount of Government premiums (bonuses) on contributions cannot be fixed.
Nevertheless, the situation is not hopeless. According to Vladislav Yuzhelevsky, an author of the accumulative mortgage program and finance director of Vneshtorgstoi Ltd., a Moscow city law may be passed soon. He suggests that factoring in inflation, the annual premium from the Government should be around 20 percent. This is a little below that in Eastern Europe and Kazakhstan, but significantly higher than in Germany.
However, Yuzhelevsky points out that initially some restrictions will be imposed on investors: premiums will be limited to an annual increment in a savings account of 70,000 rubles ($2,800). Furthermore, he believes that people should be differentiated by the income level: premiums could be increased for lower and reduced for higher income brackets. Special rates may be introduced for young families and inhabitants of the villages slated for demolition.
As for investment, the managing company is ready to use it jointly with German CSBs. True, company executive Natalya Cherkasskaya stresses that German technology is far more important than financial resources. The latter are not a serious problem, but there is an acute shortage of experience in the field. After all, it is an entirely new undertaking in Russia.
By contrast, the accumulative mortgage system in Germany has a 70-year history. During this time it has become very strong. For example, managing company specialists have close ties with the largest CSB in North Rhine-Westphalia which has a mortgage balance of 20 billion euros.
Incidentally, the Germans have for years been urging the Russians to adopt an accumulative mortgage system, offering their organizational and consultative assistance. Why have the Russians been so unresponsive to these proposals? There is no secret here: the advocates of the American mortgage model have built a powerful alliance in this country. As mentioned earlier, it includes banks, which want to skim off the cream, targeting the higher income groups, while ignoring all other groups; "liberal fundamentalists," and strangely enough, Government financial authorities.
The position of the latter is utterly incomprehensible. After all, they say that they are fighting inflation while accumulative mortgage is a proven anti-inflationary instrument. Money that is accumulated within a closed mortgage system does not enter the consumer market and spur prices. On the contrary, it helps to reduce the price growth somewhat.
Exactly why Alexei Kudrin and his associates reject CSBs is an entirely separate issue. What is important, however, is that in Moscow the log jam has broken. If the capital's experience is successful, sooner or later its example will be followed all over Russia.
By Sergei Fyodorov
