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“Whether housing cooperatives and housing construction cooperatives could be an alternative to mortgage loans and a way of self-organization of people?” – according to “Argumenty i Fakty”, a weekly, with an expert opinion offered by Nadezhda Kosareva, IUE

Дата публикации: 18.01.2019

I would consider housing construction cooperatives (HCC) as an additional option for improvement of housing conditions, along with a purchase of dwellings with mortgage loans. All the more so, since HCC also need bank loans, like mortgages, so that their members could acquire equity (a cooperative share). However, there still remain many outstanding legal and financial issues, in particular because equity cannot be pledged.

According to the Russian State Statistics Service (Rosstat), HCC account for 1 percent in total housing construction. Being an expert I estimate the share of true cooperatives, rather than those ‘pseudo’ ones, as close to zero. Housing cooperative schemes are being used almost exclusively under the program run by “DOM.RF”, JSC, whereby land is given to HCC for construction free of charge.

I believe that HCC, which are common in some countries of Northern Europe, have to be also developed in this country since, unlike a purchase of dwellings with mortgage loans, the use of HCC does not involve a commercial component – such as the profit made by a developer, because it is a housing cooperative who builds a house.

In my view, HCC enjoying municipal support, as is currently the case with the program run by “DOM.RF”, are the most promising types. A person entitled to benefits can become the member of a housing cooperative. Moreover, housing cooperatives could be used more widely to address the problem of the long waiting list in respect of housing.

Targeted support for HCC may consist in free provision of project documentation and free utilities connections. These measures will help reduce by 30-50% the costs incurred by the people who joined the HCC.

Meanwhile, IUE suggests returning to the old Soviet model, which is already being used abroad. According to the model a HCC’s building remains in the ownership of the HCC after its members acquire equity (purchase a share) in the HCC, following which the members own their shares and can sell them, put in pledge, bequeath, and so on. By using the model many problems related to housing management could be rectified.