When property relations face the built legacy of socialism

Free-of-charge housing privatisation expectations

The super-homeownership societies, as described by Mark Stephens, Martin Lux, and Petr Sunega that have emerged in post-socialist countries due to massive housing privatisation programs after the fall of state socialism received both high expectations in the early stages of market reforms and significant criticism afterwards. Post-Soviet housing privatisation in Russia, in particular, was based on expectations that privatised housing would be a source of household wealth that would function as a 'shock absorber' against the sharp income reduction during the 1990s inflation. From July 1991, the government enacted a law (№1541-I) to grant tenants the right to privatise their apartments free-of-charge. The secure, debt-free homeowners created this way were expected to actively utilise their foundational capital, forming the basis for stimulating housing development, the diversification of real estate transactions, and subsequently mortgage products. It would be an oversimplification to say that this did not happen at all, but as Jane Zavisca writes, it did not occur at the expected speed and scale, or with the expected outcomes.

In addition to stimulating the real estate market, housing privatisation allowed the Russian state to share financial risks with residents. These risks included the maintenance and care of communal spaces and housing, which simultaneously shifted to the budgets of municipalities. Under the Soviet regime, up to half, and, in some cities, even more of the entire housing stock, was constructed, maintained, and financed by the industrial sector. This was especially true for those cities and regions that underwent radical industrialisation during the Soviet period. Here, factories effectively assumed the social function of the state, controlling the distribution of social goods from housing to sanatoriums in exchange for the workers' loyalty. From a budgetary standpoint, this meant that funds for housing construction and maintenance were tied to the industrial sector and the respective ministries rather than local councils. In the early years of post-Soviet market reforms, when enterprises were liberated from their social functions, they transferred a significant portion of their housing to municipalities. The ‘newly acquired’ housing (amid other reforms and shocks) represented a financial burden for maintenance, on average significantly exceeding municipal resources.

Against this backdrop, housing property was not merely viewed as capital, but also as a risky commitment, especially in areas where housing already required renewal or major repairs by the 1990s. The concept of private life and domesticity that was about to evolve—after years of enforced communal living—was clouded by concerns of potentially high tax burdens and substantial expenses for repairs or utilities. In light of low incomes and high inflation, the perspective of becoming a homeowner gained relatively low popularity. Hence, the initial timeframe for the completion of the housing privatisation program was repeatedly extended. In fact, it is still going on in present-day Russia.

Despite the estimation of the rate of privately owned housing in Russia being at 85%, the actual tax burden on households for the property tax on multi-apartment buildings remains relatively low. Experts often explain this as a conscious policy designed to avoid social upheaval. As Russia’s Federal Tax Service noted in 2012, the share of this tax in shaping local budgets is insignificant compared to other countries. Around 68% of housing in Russia has low inventory value, lowering the tax rate to a minimum. Additionally, since 2015, the tax on the land plot beneath multi-apartment buildings, which also serves as a source of municipal budget replenishment, has been abolished.

Modernist living space under post-privatisation relations

Nevertheless, despite the ambiguity surrounding the privatisation process and its outcomes, the farewell to the state monopoly on housing and land has established new foundations for the relationships between municipalities and emerging property owners. In conjunction with reforms in land legislation, the taxation system, the urban planning code, and municipal governance between 1990 and 2005, both municipal governments and homeowners encountered new challenges of self-governance, responsibility, and financial inclusion. These transformations significantly altered the former communal residential areas into more heterogeneous spaces shaped by multiple “practices of property”. Since nearly any issue related to communal spaces or land plots now requires the consensus of the majority of property owners, (self-)governance in mass housing areas has become a substantial challenge, particularly when it comes to renovation and modernisation.

For a significant portion of Russian regional cities, renovation requirements pertain primarily to ageing housing in low-rise constructions. Examining the residential housing structure more closely, up to 60% of the dilapidated housing stock in regional cities comprises 2–3-story multi-apartment buildings. These buildings usually date from the mid-1920s to the late 1960s, when Soviet industrialisation peaked. 

These so-called ‘workers' villages’ were primarily developed according to the concept of a small industrial neighbourhood consisting of several blocks and accompanying social facilities, such as schools, kindergartens, baths, and clubs. This spatial projection of a working commune embodies the ideal model of a socialist city—uniform spatial development, a homogeneous environment, and infrastructure provided for everyone, but at an average level. Like any ideal model or utopia, its implementation revealed limitations and vulnerabilities. One of the most significant was the working commune dependence on an industrial enterprise. Once the factory that had constituted the centre of life and the main source of social goods ceases to exist, such areas quickly decline. The post-socialist transition has arguably had the most significant impact on these territories, particularly due to the lack of workplaces and former social benefits. Hence, the transformation from communal living into relations between property owners took place under unfavourable economic conditions in many cases. 

Initially, housing privatisation applied only to apartments—in this regard, it was subject to the exclusive decision of the tenant, who most often perceived it as an individual gain. Gradually, it turned out that areas in a multi-apartment building that are not part of individual apartments require management and maintenance as well. As a consequence, the concept of common property and the notion of the land plot under a multi-apartment building emerged in post-Soviet Russian legislation. The registration and management of these objects needs to be carried out jointly and, therefore, requires collective decisions of the owners. This can amount to a true challenge in high-rises with big numbers of individual owners, while the limited number of apartments per building in low-rise neighbourhoods, regularly ranging from 4 to 20, allows residents to reach a joint resolution more quickly in most situations. However, our knowledge is limited to a few instances of effective self-governance in former industrial settlements in post-Soviet Russia.

One of the most notable examples is the workers’ village in Perm. The district was constructed in the mid-1920s to 1930s to accommodate workers from an adjacent factory. Housing supply provided factories with a labour force and, vice versa, anchored workers to the enterprise. In the 1990s and 2000s, a portion of the apartments underwent privatisation. However, the option to choose self-governance as organisational form was only introduced with the adoption of the Housing Code in 2005. Since 2007, the owners of one 18-apartment building have chosen the direct form of management. This initiative originated from a single building and was joined by the owners of the entire block in the following ten years. 

Direct management implies that contracts for maintenance and repairs are decided upon at general meetings of owners. Simultaneously, each owner individually arranges a contract to provide utility services. This form is quite convenient for small buildings, as it helps reduce financial costs associated with the maintenance company. By 2021, the property owners have successfully realised major repairs in all eight buildings of the block, involving a comprehensive renewal of the roof, floor structures, windows, and basement repairs. Moreover, the owners completed the cadastral survey of the land plots for the whole block. Additionally, from 2013 to 2019, the owners' assembly prepared materials based on historical and cultural expertise that was used to delineate conservation zones for the neighbourhood as a regional heritage site. This status, which is awarded to an area larger than a single block, encompasses protective regulations that serve, among other purposes, as a barrier to state-led renovation programs. These measures may also effectively deter developers by reducing in their business interest in the area.

Arguably, the process described above could be interpreted as a step towards the maximal exclusion from the use of a good for those who do not possess a share in the common property right. This interpretation is fostered by the fact that the block mentioned above is physically enclosed with a perimeter barrier, evidently contradicting the idea of a socialist ‘workers’ village’. However, the experience of property owners jointly addressing self-governance issues in both the housing and adjacent territory allows the formation of a values-oriented approach to maintaining the modernist housing stock. It contrasts with the often-criticised absence of such approaches in privatised post-socialist mass housing. This enables us to perceive the dual nature of property—as excluding others from use and revealing the qualities of responsible management. With that it should be noted that the competencies required to sustain self-governance by homeowners take considerable time to develop. However, once they are in place, reliance on entities other than the government becomes realistic.

Retrospectively reading publications from the early post-Soviet decades reveals how much was proposed, said, and written about property transformations—but how little was ultimately translated into practice. The fact that successful transformation cases as the one from Perm remain rare raises the question whether the expectations linked to liberal reforms have been inflated. Certainly, reformers prioritised quick solutions over gradual evolution, ignoring the time needed for substantial transformation of institutions. As a result, they run into the danger of regressing to previous, undesirable states of socio-economic and political coordination.

Note

The materials have been gathered as part of collaborative research between the Karlsruhe Institute of Technology (KIT), RWTH Aachen University, and GWZO Leipzig as part of the project "Stadt.Kultur.Bauen – Baukulturelles Erbe in der post-sowjetischen Stadtentwicklung". The project is funded by the Bundesministerium für Bildung und Forschung (BMBF), covering the period from 01.04.2021 to 31.03.2024.