Russia

Land Reform and Private Enterprise

Experts consider reform of landownership and condominium laws an important step toward full privatization of housing. Privatization of land, both urban and agricultural, has been a controversial issue for Russian legislators; there is a strong body of opinion that land is fundamentally public property that cannot belong to any single person. In the late Soviet period, new landownership laws confused rather than simplified the legal status of various types of land. Consequently, housing privatization has been hindered because ownership of a residence may not include ownership of the land on which it stands--a disparity rare in Western property law. Legislation passed in August 1993 legalized the sale of land, allowed villages to give away plots of land to individuals, and removed the space limitation on private homes on collective farms. Although dwellings built on suburban garden plots technically still could be no bigger than a summer cottage, such land increasingly was used to build year-round housing, thus expanding the number of available residences in Moscow and other cities.

In general, Moscow was the center of land-use innovation because it was the center of new commercial activity and foreign influence. The constitution of 1993 recognized for the first time the right to private ownership of land, a departure that experts believed would have a major impact on overall real estate ownership. In late 1993, a presidential decree established Russia's first set of provisional condominium regulations, which were considered an important clarification of housing ownership policy. But additional legislation, drafted by the Yeltsin administration to expedite landownership, was blocked in the State Duma in 1996.

Especially in Moscow, the emergence of Western-style enterprises associated with housing construction, such as finance companies, real estate offices, plumbing suppliers, and lumberyards, heralds more growth. The rapidly rising cost of existing apartments has fueled a brisk property business, as speculators buy privatized property in the hope that prices will continue to rise. In the mid-1990s, private houses began to appear rapidly just outside the ring of Soviet-era high-rises that surrounds Moscow. According to a 1995 report, prices for private land and housing in Moscow ranged from US$900 for an unimproved small plot to US$300,000 for a four-bedroom villa in a compound with security guards. As of mid-1996, mortgage loans were not yet offered by the Russian banking system, so buyers had to pay cash. Many Russians build their own dwellings, bribing city officials and contractors when necessary and collecting materials wherever possible. The demand for materials has prompted the emergence of numerous building supply stores and a parallel rise in the price of materials. Thus, although many Russians remain on waiting lists for existing housing, others have begun what they hope will be a Western-style progression from a first modest dwelling to something larger. The same divergence has appeared in housing as in other aspects of socioeconomic activity: individuals with financial resources or unusual initiative have taken advantage of the new opportunities of the 1990s. Those not so fortunate remain dependent on state housing subsidies.