Promoting efficient operation in divested Russian enterprise housing : October 1995-October 1996

HSRP activities have had an overall positive impact in the target cities, however the results remain mixed. Competitive maintenance programs are progressing reasonably well in most cities with the assistance of HSRP II staff. Moscow continues to lead the way with its fairly aggressive program. Most target cities have just completed or are in the process of organizing new competitions. The cities are also carefully scrutinizing the structure of their customer service entities, where necessary, or planning for the introduction of such organizations. As many cities reach levels of almost 90% divestiture or more, acceptance of divested stocks has slowed as the remaining stock is composed of housing in very poor condition. It is also proving very difficult to divest some housing due to legal or administrative problems (housing stock on the balance of the railroad, for example). Moscow and Novochercassk state flatly that they have no plans to accept any divested housing in the remaining months of 1996. Others have plans to continue accepting divested stocks, but only if the funding for its repair and maintenance can be secured. Because progress depends almost entirely on the cities" economic situation and the political will of the city leaders, there appears little that project staff can do to speed up the process of divestiture in the target cities. Progress on increasing the percentage of costs of maintenance and utilities recovered from residents has stagnated. In part, this results from the large real increases in tenant payments required just to maintain cost recovery levels in 1995 as energy prices were significantly decontrolled in Russia. In part, it is also due to cities" perceptions that until economic conditions improve for residents, increased cost recovery will remain a difficult goal to pursue. It is also extremely volatile politically, as can be witnessed by city leaders refusing to raise tariff rates during the summer and fall municipal and oblast election campaigns. All the cities have implemented housing allowance programs. Although application requirements vary city to city, housing allowance programs have proven successful and effective in all the target cities. The importance of the project"s activities lies primarily in helping city administrations fine-tune their programs. Also, participation rates remain well below the 25% level set by the World Bank as the maximum level consistent with efficient program operation. Thus, the cities may be able to raise cost recovery percentages further in an attempt to meet the targets set by the World Bank and then assist additional residents through the allowance program. The project has been instrumental in helping the cities formulate policies and procedures for the creation and registration of condominiums. The cities have been struggling with the questions of how much, if any, subsidy money they should pay to condominiums, the percentage of privatized units necessary before a condominium can be formed in a building, land allocation issues, and distribution of income from commercial spaces. An extremely important factor in this regard is the recent passage of the Russian Federation Law on Home Owners Associations (Condominiums). This law clarifies many of the issues regarding condominium formation and finance so that cities now have a consistent basis on which to model local regulations. Before the enactment of the Law, regulations tended to differ significantly from city to city. As these issues are worked out in coordination with the new law, the growth in the number of condominiums can be expected to continue to increase. Privatization of units has slowed significantly over the past two years. It appears that the advertising programs initiated by the Institute have had little impact on interest in and actual rates of privatization of apartments. (Author abstract)