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ADVECS Real Estate Corporation

Envisaging Affordable Rental Housing For Russia! Press Release, 16 May 2012

16.05.2012

Envisaging Affordable Rental Housing For Russia! Press Release, 16 May 2012

Official website of the 63 FIABCI World Congress, 16.05.2012

On the occasion of the 63rd World Congress of FIABCI, the International Real Estate Federation, a high ranking panel has discussed the introduction of affordable rental housing in Russia.

High level panel discussion

  • Alex Romanenko, FIABCI World President

  • Wolfgang Amann, UNECE Real Estate Market Advisory Group, IIBW, Austria

  • Rudy de Jong, Cecodhas Housing Europe, Brussels

  • Nadezhda Kosareva, President of the Institute for Urban Economics, Moscow

  • Andrey Shelkoviy, Executive Director, Agency for Housing Mortgage Lending

  • Anna Georgieva, the World Bank, Russia Country Office

  • Mikhail Grin, Director of Russian National Agency of Development of Housing Funds for Social and Commercial Lease; president of Grand & Metro Consulting

  • Alexander Makarov, president of ROSSTRO

  • Michael Milligan, UNECE, Geneve

  • Alexander Sharapov, president of NAI Becar, FIABCI-Russia President

Housing situation in Russia

Housing production in Russia has increased considerably during the past years and is today above EU average. Despite this, there is huge need for action. The average useable floor space per capita is only 22,4m², compared to 38m² in EU average. Big parts of the existing housing stock need replacement. Housing construction focuses on the big cities with owner-occupied apartments in the upscale market. There are serious problems with Monocities. Price inflation on metropolitan housing markets is again very strong.

Housing Demand

The federal government has decided to increase housing construction from today 0.4m² per capita per year to 1.0m² to meet existing demand and promote economy. This requires new approaches.

Demand for rental housing

Russia has today a rental housing stock of 16 million units. This is 27% of the total housing stock (16% social rent, 11% market rent). Supply of new rental housing is required for particularly three groups of population: migrants to the cities, young households and the poor. Hence, rental housing is an issue not only for low income groups, but also for middle class households.

Rental housing as a business case

Many European and Asian countries have developed affordable housing sectors with models of Public-Private-Partnership (PPP). Those models have in common that private companies (or foundations or cooperatives) fulfil public service obligations, and, in return, have access to subsidies (e.g. free building land, financing, tax relief), both within a framework of strict public supervision. User costs are kept low not only by public financial support, but also by reduced risks. Such PPP housing organisations are able to work with yields close to inflation rate. Due to low risks and a long term perspective they are still able to accumulate substantial assets. Social housing organisations e.g. in the Netherlands or Austria belong to the strongest players in real estate in those countries.

Implementation of PPP housing in Russia

This business case is a feasible option for implementation in Russia. It requires commitment both from the government and the real estate sector. It requires a legal framework, a subsidy scheme and an institutional setting. For the benefit of the system it should be open to all sources of Russian economy.

Rationale for implementation

The establishment of affordable rental housing promises huge benefits for Russian society and economy: It is an answer to the question of affordable housing for low and moderate income groups. It will allow young households and migrants to the cities to realize their schemes of life and their economic potentials. A capacious rental housing sector may develop to a stabilising factor in the real estate industry and economy in total. PPP housing organisations have huge potentials to develop housing management, even for existing housing stocks. Such institutions prove to be very efficient tools to implement state and municipal housing policy, e.g. in terms of energy efficiency. Rental housing may become an important investment opportunity with low returns, but very low risk.

Source: www.eng.fiabci63.com

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