In 2017, 80 million square meters of new housing were built in Russia. Yet the sufficiently high figure was the result of what had been achieved in previous years. The Presidential Decree of May 7, 2018, establishes the provision of housing as the national goal.
This strategic objective entails the attainment of certain quantitative indicators. A key measure – an increase in construction of new housing – is set at 120 million square meters of dwelling space in 2024. Other indicators include housing improvements for not less than 5 million families each year, lowering a mortgage rate down to 8 percent and below, a 30 percent increase in urban quality index and in the proportion of city dwellers who get involved in decision-making on urban development issues.
But not only targets define a pattern of development for housing construction market. Along with that a wide range of objectives have been established: a shift away from the old model of shared-equity construction, upgrading of technology and improving the quality of construction, a reduction of the administrative barriers, efficient land use, ensuring a comfortable living environment in a city and establishing effective mechanisms for resettling people from unfit-for-occupation housing.
These qualitative objectives seek to drastically change the practices adopted in housing construction in recent years. On the one hand, state support of standard housing construction, lowering of administrative burdens and improved efficiency of land use are the conditions that are conducive to increased housing construction. On the other hand, a change to new ways of housing finance, moving out of outdated technologies, let alone construction with focus on a comfortable living environment, will take up a period of time substantially longer than six years for a ‘restart’ of the industry.
To achieve the qualitative objectives and the targets, in parallel, is a matter of concern given that the year 2024 is already fast approaching.
We are starting to see the significant influence the amendments to Federal Law No. 214-FZ on shared-equity construction have on the housing market. Their adoption has been preceded by a public outcry in support of defrauded homebuyers. A move towards new ways of housing finance is a first step to developing a civilized market, which will help increase housing construction over time. In a challenging context of the relations being transformed, the transitional period, however, might lead to a decline in commissioning volumes.
The President’s goal can be achieved once serious efforts are undertaken to advocate competition in housing construction. This would require not only a revision of certain legal requirements but, in the first place, the creation of new, previously untapped, segments of housing demand. There is also a need to strengthen the coordination of housing policy and town-planning regulation and raise the motivation of local governments in facilitating the increase in housing construction. It is also necessary to devise special measures that would create an environment ensuring equal conditions of access to the market for large and small developers.
Commercial construction projects being realized on new land plots in previously undeveloped areas represent old models. We estimate that if based on the old approaches the 2017’ levels of housing construction could be maintained until 2024. But to construct additional 40 million square meters of dwelling space the new models are required.
These include housing construction for resettlement and commercial purposes as part of housing redevelopment projects in dilapidated residential areas, and also construction of rental housing for commercial and social use. Another approach involves housing construction by non-profit associations of citizens: for instance, housing construction cooperatives, low-rise housing cooperatives, partnerships of individual developers.
The Izvestia newspaper
