Fred Weir on Russian Housing "Reforms"

["Ken Hanly" <khanly@xxxxxxxxxxxxxxx>]

The Russians have already caught up to and surpassed the west in producing
misery for the masses, now they are about to take a great leap forward and
show how the market can impose even greater misery given sufficient policy
"reforms".

Cheers, Ken Hanly\

Christian Science Monitor
20 June 2001
Capitalism hits home in Russia
Next month, the Kremlin unveils a plan to wean the country away from housing
and other subsidies.
By Fred Weir
Special to The Christian Science Monitor

The USSR collapsed 10 years ago, but for most Russians, Communism never
really ended. It has lived on in the form of nearly cost-free housing,
municipal services, heating, and electricity. But a capitalist jolt is on
the
way.

In early July the Kremlin will hand down a plan to carry out Russia's
long-delayed "housing reform" - a set of dull-sounding but potentially
explosive changes. Experts say the reform will have to navigate a fine line
between infrastructural collapse and social chaos. "There must be a swift
and
fundamental shift from state subsidy to market relations in the housing
sphere," says Anwar Shamuzafarov, head of the State Committee on Housing and
main author of the plan. "It is extremely urgent," he adds, citing dire
figures on the deterioration of housing stock and physical infrastructure
over the past decade.

The plan aims to shift the full burden of housing, utilities, and municipal
service costs to the consumer by 2003. Then follows a program to privatize
such functions as garbage collection, apartment maintenance, repair, and the
huge Soviet-era central heating stations that warm entire city quarters.

But Valery Mansurov, president of the Russian Society of Sociologists, and a
critic of the plan, says that "in putting this reform on the agenda before
the living standards of Russians have been radically improved, the Kremlin
is
planting a bomb under the foundations of our social stability." He adds,
"All
of our studies show that over 60 percent of the population cannot afford to
pay anything near market value for their housing, heat, and utilities."

Almost every Russian family received an apartment or house free of charge,
as
a gift from the departed USSR. Fearful of popular backlash, successive
post-Soviet governments have been reluctant to tamper with the massive
subsidies that kept the charges for maintenance, utilities, and municipal
services almost negligible. That helps explain how most Russians have
weathered the past 10 winters on average salaries hovering around $100 per
month.

But there has been little investment in infrastructure over the same period.
Mr. Shamuzafarov says 60 percent of crumbling, Soviet-era apartment blocs
require major repairs, one-third of all water pipes and 17 percent of sewage
pipes urgently need to be replaced, and the natural-gas distribution network
has become dangerous due to decaying lines and equipment. Leaks in central
heating networks waste the equivalent of 80 million tons of oil annually.

Accidents and breakdowns have increased fivefold in the past 10 years. "If
we
don't energetically start reform now, the system may collapse and create
multiple catastrophes," says Franz Sheregi, director of the Center for
Social
Forecasting, an independent Moscow think tank. He cites breakdowns of
central
heating systems in several Russian Far East communities, and rolling power
blackouts that swept across Siberia last winter. "That's what awaits the
whole country if we don't act quickly."

At least $20 billion must be raised to make immediate repairs, and the only
possible source for these funds is the Russian consumer, Mr. Sheregi says.
"The poorest people must be subsidized, but I believe the majority of
Russians can pay. In the longer run, most municipal services should be
privatized and turned into profitable, competitive businesses."

Critics say Russia's beleaguered middle class will be undermined by the
reform, and that the country's tentative industrial recovery could suffocate
as consumers shift their spending to cover escalating housing costs.

"In Russia, a family of three whose combined income is 6,000 rubles (about
$200) per month is considered solidly middle class," says Vladimir
Grishanov,
a researcher with the independent Institute for Social and Economic
Population Studies in Moscow, which has surveyed possible effects of housing
reform in several Russian cities.

"Right now, that typical middle class family's bill for housing and
utilities
comes to around 400 rubles (about $12) per month," he says. "That leaves
them
enough disposable income for food, clothes, maybe newspaper subscriptions, a
few consumer goods, perhaps even an occasional vacation."

But, Mr. Grishanov continues, if the same family is forced to pay market
value for housing and services, that will devour at least a quarter of its
income. "Under the plan being prepared, this family would still not be
eligible for state relief. But the family's disposable income will be gone,
and it will have to give up most of those extra purchases. So much for our
middle class, and so much for our fragile economic recovery, too."

The plan is unlikely to meet much resistance in the State Duma, where
pro-Kremlin parties comprise a majority. But an unlikely combination of
liberal and communist deputies say they intend to put up a stiff resistance
to it.

"It is just wrong to shift the burden of a decade of neglect onto our
citizens," says Sergei Metrokhin, a deputy with the liberal Yabloko party.
"The state must find ways to pay for renovation of housing and
infrastructure, and then only raise prices as it improves the quality of
services."

Options suggested by lawmakers opposed to the plan include: using the
windfall the Russian government has reaped over the past year from high
global oil prices, asking the West to reschedule Russia's debt payments, and
ending the costly war in Chechnya.

"The state has an obligation to create a properly functioning economy before
it squeezes people," says Alevtina Aparina, a Communist member of the Duma's
social policy commission. "Prices should only rise in line with peoples'
salaries.

"We believe this so-called reform could lead to a mass refusal to pay in
many
regions of Russia. The government is flirting with social explosion and
economic collapse," she says.

But supporters of the plan say it's more likely that Russia will muddle
through this difficult passage, as usual. "A decade ago people were
terrified
when market reforms began, but step by step they adjusted," says Mr.
Sheregi.
"I'm sure the same thing will happen when the housing reform takes hold."

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