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Russia: Housing Reform Raises Political Heat

Moscow, 12 May 1997 (RFE/RL) -- Russia's crumbling apartment blocks with their smelly stairwells, leaky pipes and dimly lit entranceways, are about to get a makeover, but not without a political fight.

Russian President Boris Yeltsin chairs a cabinet meeting today at which first deputy prime minister Boris Nemtsov is likely to square off with mayors from a dozen cities over plans to reform the housing sector.

At Nemtsov's urging, Yeltsin signed a decree late last month approving a reform plan which requires citizens gradually to shoulder more of the burden for housing maintenance costs and pay more for utilities such as water, electricity and gas.

Moscow Mayor Yuri Luzhkov, however, attacked the plan last week.

"The reforms boil down to burdening citizens with trillions of rubles of expenses," he said.

Luzhkov said that with Russian wages still low and pensions often going unpaid, raising housing costs would backfire and people would refuse to pay.

His comments were widely seen as a populist move to upstage Nemtsov, who has spearheaded the drive to reform the housing sector. Both Luzhkov and Nemtsov are widely seen as potential presidential candidates in 2000.

Nemtsov's plan is unlikely to curry any political favor with an electorate hard-hit by economic reforms and eager to retain extensive housing and utility subsidies from the state. Under his proposals, households would pay 35 percent of housing and utility costs this year, but by 2000 their share would double to 70 percent. By 2003, households would pay all their costs.

Nemtsov intends to cushion the reforms by creating special subsidies only for the most needy, phasing out a system which allows rich and poor alike to pay about one-quarter of real housing and utility costs.

But Luzhkov has said the reforms are misplaced and called on the government to redirect attention to economic stabilization and protecting domestic industry. The mayor, who runs Moscow with an iron-fist, claims to have secured a promise from Yeltsin that the Russian capital will be able to devise its own reforms, in essence blazing a trail independent of Nemtsov.

Luzhkov says Moscow began reforms to the housing sector four years ago, and should therefore be allowed to devise its own plan. Indeed, Moscow, along with Nizhny Novgorod, has been a model for efforts to reform housing maintenance systems.

Moscow has run several pilot projects to allow private companies to bid for contracts to clean up and repair apartment buildings and public grounds. Thanks to greater efficiency, these private companies have been able provide services at a much lower cost than those provided by the state.

But Luzhkov's resistance to having households take more financial responsibility for maintenance costs and utility bills misses the bottom line. According to the Russian newspaper "Kommersant Daily," housing subsidies make up between 30 and 50 percent of local budget expenditures and 20 percent of federal spending.

By Western standards, Russians spend very little of their income on housing. But forcing them to pay more could be politically costly.

Under the president's decree, local governments are expected to adopt a program for implementing the government's proposed housing reforms by August 1. Many local leaders are likely to resist the reforms and, like Moscow, call for greater independence from federal authorities.

Nemtsov's efforts to reform the housing sector are a key part of his campaign to restructure Russia's monopolies in the gas, electricity and transportation sectors. While households pay subsidized rates for utilities, struggling enterprises are charged much more to make up the difference.

Even if local authorities succeed in winning some special exemptions from carrying out the government's housing reform plan, some version of the reform plan is likely to be implemented, which means ordinary Russians are likely to feel the financial pinch sooner rather than later.