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The Economist (UK)
January 26-February 1, 2002
Russian reform
Pay up, please
Will rich Russians' consciences make them pay more for housing?
A MIDDLE-CLASS Russian should find state charity embarrassing. That
is the thinking behind a new advertising campaign in Moscow, urging
those who can afford it to pay the full cost of their
housing. "Respect oneself and one's city 100%," runs the slogan.
The payments are for rent and a bundle of services, like heating,
water, sewage and building maintenance, all of which Russians enjoyed
almost gratis in Soviet times. Most of these are breaking down: at
least half the pipes for heating are rotten and need urgent
replacement. More than half the country's housing stock is past the
end of its planned life. Elsewhere in Russia, there has already been
a striking improvement in making people pay. Under a reform strongly
backed by President Vladimir Putin, households now cough up 60% of
running costs. By next year, local authorities must gather the whole
amount, some $40 a month for a typical household.
But poor people can get direct subsidies, which kick in if housing
costs are more than a set proportion of household income, ranging
from 13% in Moscow to up to 20% elsewhere. Unusually for Russia's
creaky public sector, this scheme, introduced in 1994, works better
than much of Russia's public sector but is still inflexible and
patchy. For instance, if you have a hitch with your resident's permit
or other documents, you might get nothing.
But the authorities in the most prosperous part of the country,
Moscow, have been dragging their feet over the price rises. They can
afford to: the city budget gets no federal subsidies. Thanks to a
hefty subsidy (18 billion roubles, or $600m, last year) from the
city, Muscovites pay only 45% of the cost of their housing. From next
month, though, they will have the option of paying the whole amount.
The campaign is aimed at households with an income of more than 8,500
roubles a month, which make up nearly a third of the city's
population. Whether anyone will actually pay up is another matter.
The service is both slovenly and wasteful. The awarding of housing-
maintenance contracts in the city has been scandalously corrupt.
Those who pay taxes (an increasing number, since the introduction of
a flat-rate 13% income tax last year) may feel they do their bit
already. The scheme was hurriedly thought up. It is not clear what
sanctions, if any, will apply in practice to those who plead poverty
falsely. The official responsible, Elena Medvedeva, says that if even
a few per cent pay up, the campaign will be a success.
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