Housing for Rent in Russia — Business or Public Welfare Housing?

Renting housing in Russia is a service which is in demand, though not liked by Russians. There are not many favourable offers on the market, and it is difficult to find them, therefore, purchase of one’s own housing is not just a fancy, but a necessity — obtaining independence from landlords’ decisions, rent increases, etc. According to KPI, about 75% of population in Russia live in their own houses and flats, and such a share can be justly called high, if to compare it with European and North American figures.

For example, in the United States, with their cheap mortgage and banks that provide loans even with very high risks, the share of people living in their own houses and flats is 65–67%. In Sweden the figure is even lower — 38–40%.

Nowadays rent offers in Russia are mainly made by individual property owners. Purchasing the second or the third flat is a profitable investment (protection against capital inflation, having stable profit from renting and providing children with housing). As for the notion “a tenement house”, where all apartments are given for rent, while the owner receives the profit, it can be met only on sign boards of architecture monuments and in classic literature.

Before the revolution tenement houses belonged to individuals and were inherited, ensuring a high level of life for their owners. At present such projects are built and managed mainly by large firms for which a house with a twenty-year payback period with high economic and other risks is simply unprofitable. Russian business places high demands on the profitability level of its projects: in the 90s, at times, the indicator was a three-cypher figure, while, for example, in Europe 3–5% is quite enough.

Thus, the state can become the main initiator of such projects, and the State Duma has started to actively discuss issues of construction of social housing for rent. By providing incentives for the land under construction, the authorities are going to demand low rent rates, amounting to a third of the average ones. Such social housing is popular in North Europe countries, the number of tenants there varies from 15 to 30% of the population.

Such a solution is nowadays implemented, for example, in Israel with the aim of periphery development: small residential centres are built, with modern small high-tech apartment houses for rent to young families.

Like in the pre-revolutionary period, having tenement houses as business in Russia is interesting, first of all, for large family businesses. Businessmen, unlike the state, risk their own money, due to which they will take better care of tenants’ convenience, use more practical technologies of work and strive to improve the offered services. But until there are more rent offers on the market than nowadays, the cost of this rent will remain steadily high and such areas will be in demand as temporary, but not permanent, places of residence.