Housing Policy Debate • Volume 3, Issue 3
877
The Housing System of the Former Soviet
Union: Why Do the Soviets Need Housing
Markets?
Bertrand Renaud
The World Bank
Abstract
The administrative-command system that had been in full force in the Soviet
Union between 1927 and 1990 had its own logic and internal consistency. It is now
common knowledge that this economic system has flaws that led to a deepening
secular decline over the past three decades. Because of ideological reasons, and an
inadequate economic understanding of the capacity of their system to be liberalized, many reformers sought a third way between central planning and markets.
The consensus today is that there is no third way. Among the former Soviet
republics, Russia has just embarked on market-oriented reforms and is facing a difficult and unstable transition because central planning mechanisms have ceased to
function, but markets are not yet in place. This transition is particularly problematic for housing, which is a very severely distorted economic sector.
The international evidence on market economies that has accumulated over the
past 20 years shows that, when housing sector distortions exist, they are predominantly found on the supply side. In socialist economies, however, housing is part of
the compensation provided by enterprises and other employers. As a result housing
suffers from demand-side distortions in addition to the supply-side problems
caused by the absence of land markets, vague property rights, and burdensome
urban regulations. The housing sector is already so large and distorted in these
highly urban economies that overall economic reforms cannot succeed without
housing reforms. In addition to presenting an overview of Soviet housing, this
paper provides comparative evidence indicating that, among all the distorted
socialist housing systems, Russia’s probably is the most impaired. The basic elements of a market-oriented strategy to improve housing are briefly presented.
Introduction
The period of perestroika under Mikhail Gorbachev ended in the fall
of 1991. Since 1985, the Soviet Union had been searching, like other
socialist countries, for a third way between central planning and the
market to improve its declining economy. This search culminated in
the failure of the debate on the 500-Day, or Shatalin, Plan in
October 1990 when Gorbachev conceded that there was no third
way and yet could only commit himself to a series of halfway
878
Bertrand Renaud
measures.1 Following the aborted antireform coup of August 1991
and the collapse of the Soviet Union as a political system, Russia
has taken the road to radical market reforms. The Yeltsin-Gaidar
government faces macroeconomic conditions that are considerably
worse than six years, or even 500 days, ago. In housing, the Russian
Federation had been consistently ahead of the All-Union government in privatization and housing reform. On July 4, 1991, the
Russian Supreme Soviet adopted a law entitled On the
Privatization of the Housing Stock in the Russian Federation. On
February 18, 1992, the Russian government submitted to
Parliament a Basic Law on Housing Reform. This law aims to be a
market-oriented housing Bill of Rights for Russian citizens based on
full private property rights. The transition from an administrativecommand system to a market-based economy is taking socialist
countries through uncharted waters. The voyage to a safe harbor
seems the most perilous—certainly the most arduous and costly—
for the republics of the former Soviet Union.
The administrative-command system, which had been in full force
since 1927, turned the Soviet housing system into a very disconcerting structure for market economists.2 What distinguishes housing
reform in socialist economies from housing reform in market
economies is that reform at the margin is not possible to break
away from the current bureaucratic housing system. All elements of
the system must be reformed at the same time. Socialist housing
systems suffer from major demand-side and supply-side distortions.
Large-scale simultaneous reforms are required in both the operations of existing housing stock and the production of new housing.
This analysis is motivated by central but distinct questions that
Russia and the other former Soviet republics face today: How can
the Soviet housing system be restructured? What contribution can
housing reform make to the former Soviet Union’s recovery from its
1 The presidential plan entitled Basic Guidelines for Stabilization of the National
Economy and Transition to a Market Economy was adopted by the Union Supreme
Soviet on October 27, 1990. In spite of their half-hearted or unspecified measures,
these guidelines are truly radical as they state: “There is no alternative to switching to a market,” and “The choice of switching to the market has been made, a
choice of historic importance to the country.”
As the analysis presented in this paper shows, an administrative command
economy simply does not operate like a market economy. Market economists cannot
transfer indiscriminately their modes of thought and policy views to the reform of a
socialist economy, particularly to the republics of the former Soviet Union. For an
excellent short primer on the behavior of a centrally planned economy, refer to
Campbell (1991).
2
Why Do the Soviets Need Housing Markets?
879
present supply-side depression? Is there any lesson to learn from
the Western experience with demand-side depressions?
First, this paper shows how the former Soviet Union has one of the
most, if not the most, distorted housing systems of all socialist
economies. Then the reasons why housing reform is central to the
success of overall economic reform will be discussed. Finally, international experience is used to outline the main directions in housing
reform that the former Soviet Union must take. Because of the
broad scope of this analysis, the massive political and institutional
restructuring within which housing reform must take place will not
be addressed.
Current housing conditions: underinvestment, major
distortions, and chronic shortages
Sectoral underinvestment
The present Soviet housing situation is characterized by underinvestment, shortages, and severe price and allocation distortions.
Compared with market economies, the former USSR has systematically underinvested in housing. Conditions in the civilian economy
are poor, and the per capita gross national product (GNP), which is
comparable to that of Poland or Mexico, overstates actual living
standards. The basic causes are excessive expenditures on the military and for heavy industry in a centrally planned economy where
the rate of productivity gains has been particularly low.
Distorted wages
The international evidence on market economies accumulated over
the last 20 years shows very clearly that the structural characteristics of housing demand are highly regular and stable across countries. Most of the serious distortions observed in the housing
markets of both developing and developed economies, like Japan,
are supply-side distortions.3 A fundamental difference between
socialist housing systems and housing markets is that socialist
economies suffer from major distortions that exist on both the
3 The
evidence is reviewed in a forthcoming World Bank housing policy paper entitled Enabling the Markets to Work. For international evidence and a formal analysis of supply-side distortions and their causes, see Renaud 1981.
880
Bertrand Renaud
demand side and the supply side. Large demand-side distortions
result from socialist income policies and their extraordinarily high
implicit wage taxes. These economies have been operating under
the principle of low cash wages from which the state has removed
the purchasing power for housing, transportation, health services,
and education. These services are then provided either free or
heavily subsidized as distribution goods controlled by the state. The
standard efficiency analysis of public economics suggests that such
a large wage tax is highly distortionary and carries with it a heavy
deadweight loss—a hidden drain on the efficiency of the economy
from which nobody gains. In a market economy, economic theory
suggests that the size of this deadweight loss is proportional to the
square of the tax rate and that it increases with the elasticity of
both demand and supply. For this reason, several small taxes (with
low tax rates) yielding the same aggregate resources are less
distortionary.4
This low cash wage has been an important mechanism behind the
observed Soviet underinvestment in housing. The household
savings that were appropriated by the state were not fully reinvested in state-provided housing but were diverted to priority
sectors, often for decades. Despite this low wage policy, recent
Russian studies suggest that part of the housing investment by the
state has come from income taxes (about 10 percent today) or
housing maintenance fees imposed on these low wages (Bessonova
1988).
When a state moves to a market housing system, household demand
will replace the present system of state-financed housing. For the
transition to markets it will therefore be important to reconstitute
full market wages and to put back into household compensations
the capacity to fully maintain a rental or owned housing unit. The
metaphor might be, “where is the new middle class?” The shortterm problem is that the ongoing price liberalization reforms of
early 1992 are converging—or rather colliding—into very low cash
wages. The economic weekly Kommersant estimated the following
cash consumer spending distribution for Moscow in the second
quarter of 1991 (table 1).
4
See, for instance, Stiglitz (1986, p. 375) and Harberger (1974).
Why Do the Soviets Need Housing Markets?
881
Table 1. Estimated Consumer Spending, Moscow, Second Quarter of 1991
Average Spending per Family
Member (Rubles per Month)
160 (minimum wage)
200 (economic minimum)
285 (social minimum)
1030 (second-tier consumers)
2850 (third-tier consumers)
Share of Population Found
Below This Level (Percent)
23 using price-controlled goods
40 using price-controlled goods
78 using price-controlled goods
98 using commercially priced goods
99.9 using goods of Western quality
and price
Source: Kommersant, August 19, 1991, Moscow (English version).
These imperfect data suggest that about 20 percent of the total population is in a position to consider some form of market housing
without a major wage and income reform. The proportion of the population earning market wages is considerably smaller in the former
Soviet Union than in Poland or Hungary. The authors of the 500Day Plan estimate the proportion of the shadow economy at about
20 percent of the GNP. N.V. Kalinina (1990) estimated that in 1989
about 10 percent of the population was able to finance its own
housing. This estimate was made before the acceleration of inflation, which is now destroying financial savings.
Distorted ownership structure. The former Soviet Union has the
most distorted ownership structure of all the major socialist housing
systems. It has the highest rate of public ownership of urban
housing stock: over 78 percent Union-wide, compared with 67
percent in China, 56 percent in Poland, 33 percent in Romania, and
25 percent in Hungary. Western estimates of public ownership rates
at the end of the 1980s showed the opposite: 2 percent in the United
States, 7 percent in Germany, 17 percent in France, 30 percent in
the United Kingdom, and 38 percent in Sweden; moreover, public
stock in Western countries is managed quite differently. The former
Soviet Union has a totally monopolistic structure of production and
maintenance, poor capital recovery, and nominal rents that were set
in 1928. Five of the former Soviet republics have pushed the system
of centralized state housing ownership the furthest and incurred the
greatest distortions. They are the Russian Federation, Byelorussia,
and the three Baltic states. Cities with more than 100,000 people in
these republics are almost entirely under public ownership. Ukraine
does slightly better than the rest in terms of individual ownership.
Distorted pricing structure. Three aspects of the Soviet housing
system give it the most distorted housing prices of the socialist
economies. First, rent-income ratios, which reflect the price renters
pay for state-provided housing, are extremely low. The rent-income
ratios in table 2 existed in recent years, before major reform.
882
Bertrand Renaud
Table 2. Rent-Income Ratios in Various Socialist Countries
Country
Year
Total Payment
(%)
Rent Only
(%)
Utilities Only
(%)
Bulgaria
Hungary
Poland
Romania
Yugoslavia
USSR
1988
1987
1986
1989
1988
1989
12.1
8.7
4.4
4.4
9.3
2.5
7.6
1.6
2.0
3.0
2.8
1.0
4.5
7.1
2.4
1.0
6.5
1.5
Source: National statistical agencies of each country; various household surveys.
Second, the free market sales that occur in the auction markets of
major cities, such as Moscow, are extraordinarily high in price compared with the purchasing power of ordinary households. These
auction sales figures reflect housing purchases by companies and
cooperatives, not individual households. They are driven more by a
need to place rubles in very high inflation-resistant assets than by a
specific interest in the housing sector. Again, among semireformed
socialist economies, the distortions between free market and state
market housing price-income ratios (PIR) are greatest in the former
Soviet Union (see table 3).
Table 3. Housing Price/Income Ratio in Various Socialist Countries
Country
Nature of Sale
Housing PIR
Soviet Union
Auction sale (1992)
State sale (1989)
18–750
2
Bulgaria
Market sale (1990)
11
Czech and Slovak Federal Republic
Market sale (1991)
State sale (1984)
10–12
3
Hungary
Market sale (1990)
Self-built (1990)
12–14
7
Poland
Cooperative sale (1991)
Private sale (1991)
5
9–12
Romania
Private sale (1991)
State sale (1991)
7–9
3
Source: Various national statistical sources and local business press.
In addition to reflecting distorted wages, these price-income ratios
reflect disequilibrium in prices for a narrow volume of trade. They
do not have the same statistical quality as comparable ratios in
Why Do the Soviets Need Housing Markets?
883
market economies that are regularly monitored through reliable
market surveys, particularly for family incomes.
Finally, the Soviet housing supply pricing structure is also extraordinarily distorted. The ratio of input costs to producers’ prices (i.e.,
the prices of inputs adjusted by the tax or subsidy applied to them,
including the taxes and subsidies on the inputs used to produce the
inputs) was estimated for major goods and services for 1989. These
producers’ prices are the approximate equivalent of wholesale prices
in a market economy. At 6.02, this ratio was by far the worst for
housing—compared with 2.67 for communications, 1.62 for transportation, between 1.80 and 1.20 for food products, and 0.54 for consumer durable goods (Shironin 1990). In other words, two years ago,
housing costs were more than six times the official price. This situation existed before the acceleration of distortions that are now
occurring. Moreover, there is an absence of land pricing in the
Soviet Union. The land share of total housing costs ranges from
20 percent to over 50 percent in market economies.
Regional investment distortions. Differences in housing shortages
are very significant among republics and among cities within
republics. The Western and Baltic republics enjoy better housing.
Large cities are better treated than small cities. At equal population
size, cities that are administrative centers are consistently favored.
As a showcase and a city of investment decision-makers, Moscow
has been treated best. Poor housing conditions and massive physical
and social infrastructure shortages in the new industrial centers of
Siberia and in other areas where natural resources need to be
exploited are major obstacles to labor stability and economic development. Everywhere, the quality of the rural stock is much lower
than that of the urban stock.
Chronic shortages. Due to the total neglect of housing during the
Stalin era (1927–1955) and the destruction of war, the USSR had an
extremely low per capita housing level of 4 square meters of usable
space in the 1950s—about as bad as in 1917. Thanks to massive
housing production efforts, especially in the 1960s, the level rose to
15.8 square meters by 1989. Yet, this is less than half the level of
space available in Western countries, and does not take into account
the major differences in housing quality and efficiency.5 Chronic
space shortages are reflected in the fact that 36 percent of the urban
population has a living area below the official sanitary norm of
9 square meters. As a result, per capita space standards lower than
this norm are used to allocate housing to people on waiting lists.
These standards differ among cities.
884
Bertrand Renaud
In contrast to the overall economic slowdown, housing production
rose during the 12th Plan (1986–1990) from 15.9 percent to 17.3
percent of total annual investment. In value, housing production
has risen from 30.9 to 38.0 billion in constant 1984 rubles. However,
this investment level was too low to eliminate quantitative shortages. Inflation and worsening shortages of goods have caused physical output to decline since 1987. Since 1991, total construction
output has fallen drastically for housing as well as for other types of
construction.
The basic Gorbachev target announced in 1985 of one housing unit
per household by the year 2000 cannot possibly be reached. To hide
its problems, the USSR was the only major country that never published official housing statistics. Soviet analysts find that at least
45 percent of the population may endure doubled-up conditions
(Nayzhul 1989). Notorious communal apartments, where several
families share the same kitchen, bathrooms, toilets, and corridors,
are still a reality (35.8 percent of St. Petersburg’s population was
living in such apartments in 1986). Housing units in Western countries have more rooms (n) than persons (k). The typical situation is
n=k+l or n=k+2. In the former Soviet Union, the usual situation for
new units is still n=k–1, or even n=k–2. In her pioneering 1986
study of the medium-size city of Tver, Kalinina found the following
distribution of crowding conditions based on the relation between
family size and number of rooms (see table 4).
Table 4. Family Size Versus Number of Rooms, Tver, 1986
Persons per Room
n = k–4 or k–5
n = k–1 or k–2
n=k
n = k+1 or k+2
Percent of Households
8
54
23
5
Source: Kalinina (1986).
5 In socialist economies, housing statistics often use three measures of housing
space: “construction space,” which covers all the area within the outside perimeter
of the building, including common spaces like halls, stairways, and public corridors;
“usable space,” which is the total inner area of the apartment; and “living space,”
which is the apartment less kitchen, bathroom, and corridors. The net effect of
using living space as the criterion for the allocation of units or for registration on a
waiting list is to remove major quality dimensions from decisions. The housing services from, say, 5 square meters of living space with a private kitchen are not the
same as 5 square meters of living space with a communal kitchen. Yet this is what
has been happening in St. Petersburg, where communal apartments are still
common. For statistical purposes, 1 square meter of living space can be converted
to 1.45 square meters of usable space.
Why Do the Soviets Need Housing Markets?
885
The length of waiting lists for housing in various cities reflects both
chronic shortages and distortions in regional investment. These
waiting lists also reflect the control of population movement
through use of an internal residency permit, the propiska, which is
discussed later on.
Low quality of housing. Quality of housing is critical because people
consume the daily flow of services produced by existing housing
stock; they do not consume square meters of buildings. Inadequate
maintenance is pervasive, and as a result, the housing stock is deteriorating steadily. The rent control system has not changed since
1928: 13.2 kopecks per square meter of living area per month are
charged, with some minor adjustment for building quality (such as
elevator, garbage chutes, etc.) and for floor space above the norm;
but there is no adjustment for location and quality of neighborhood.
This system produces rents that cover much less than 40 percent of
the cost of very low maintenance levels. Today, most of the Soviet
people have no notion of the true economic cost of the housing
resources they use. It is quite likely that the government does not
know either. Until 1989, financial and physical norms were officially
dictated for the entire territory by the economics department of the
Committee for Housing Maintenance and the Communal Economy
in Moscow, based on statistical reports from the field. Some estimate that rents would have to be raised six or eight times current
levels to achieve genuine full economic cost recovery. Statistics on
water connections, hot water, electricity, bathrooms, toilets, and district central heating are misleading. Supply interruptions are very
common. Hot water may be cut off for several weeks in entire districts, especially during the summer. A major problem for housing
maintenance is created by rents that remain frozen at 1928 levels
despite two major price liberalizations in January and April 1992.
Clearly, rents will have to be raised quickly; however, this is politically very difficult in 1992 given the rapid fall in real cash wages
caused by very high inflation.
Regressive or random subsidies. Soviet production and rent subsidies are linked to apartment units and not to the socioeconomic
characteristics of households. As a result, the larger the apartment
unit, the more subsidized a household is. Contrary to the egalitarian claims of the Soviet system, housing is a major source of
inequality in the former USSR. Because of the large role played by
in-kind income, the main inequalities do not come from cash wages.
There is statistical evidence of a strong correlation between socioeconomic status and access to housing. Despite so many distortions,
the structural parameters of housing demand are very similar to
those of market economies (Alexeev 1987, 1988). On the supply side,
886
Bertrand Renaud
the present financing mechanisms for apartment units allow a significant proportion of funding to subsidize inefficiencies in production. The deadweight losses of the present system to the economy
can be very large indeed.
Monopolistic building industry and obsolete designs. The largest
share of new housing consists of widely disliked high-rise apartments. They have been produced by citywide housing kombinats
using obsolete, capital- and energy-intensive large-panel industrial
techniques. Enjoying a monopoly position in an environment of
shortage, these kombinats are totally unresponsive to the preferences of the population. The composition of the output in terms of
unit types does not match the changing composition of the urban
population. The rate of design innovation is very low: fewer than
two new types of apartments per decade. The quality of newly finished units is poor: upon delivery, recipients of a new unit usually
must spend about 10 percent over production costs to bring their
unit to a decent level. These days, due to severe shortages of industrial parts or infrastructure, housing kombinats have been known to
deliver buildings in which the water supply does not always reach
past the 7th or 8th floor in buildings with 9, 12, or 22 floors. The
type of investor has an important impact on quality: enterprise- or
cooperative-financed housing is of better quality than state-financed
housing.
Marginalized private sector. Tenure categories in the USSR differ
significantly from those in market economies. Similar-sounding
labels apply to very different situations. Individual housing, a
restrictive form of private ownership, has been marginalized to the
economic, social, and geographical fringes of Soviet society. New
individual housing production was officially prohibited in cities with
over 100,000 inhabitants until 1987. Both dwelling and infrastructure quality are lowest for individual housing. The exact opposite
occurs in market economies. In the popular Russian view, urban
individual housing means slum. Its quality is poor—two-thirds of
these units do not even have running water. In 1989, the share of
individual housing in the USSR was 21.4 percent of urban housing
and 70 percent of rural housing.
The 12th Plan period (1986–1990) allowed individual housing construction to have a significant role for the first time in several
decades. Gorbachev supported the production of individual housing,
which had long been actively discouraged in all urban areas for
ideological or bureaucratic reasons. In 1991, the volume of individual housing construction was 10 percent of total construction in
terms of floor space, but the quality of this housing remains considerably below that of state housing. One major reason for this
Why Do the Soviets Need Housing Markets?
887
difference in quality is that most new individual housing is built on
either unserviced or poorly serviced land. Because until recently
land could not be sold or leased, it was allocated by local governments, and they derived little financial or political benefit from
encouraging individual housing. Local governments have no
direct-cost recovery mechanism in the traditional housing system
for on-site or off-site infrastructure, and therefore no means to
service individual housing. The Russian figures for housing production for 1990 and 1991 are shown in table 5.
Table 5. Housing Production by Type
Types of Housing
1990
1991
(Millions of Square Meters)
Individual housing
Cooperative housing
State housing
5.5
2.9
52.1
4.7
2.4
41.2
Total production
60.5
48.3
An unpopular issue: inefficient and unfair housing allocation mechanisms. Few problems cause more public tension today in the
republics of the former Soviet Union than the inefficient and unfair
mechanisms for housing allocation. Food shortages are also a major
cause for concern, but they are relatively new. The housing allocation system, which is deeply resented, has been in force for decades.
Never perfectly fair or effective, it has become increasingly corrupt
with time. The housing allocation problem has two interactive
dimensions: (1) waiting lists and (2) the propiska. To understand the
contents of various reform proposals, it is very important to understand that a family’s current housing conditions may determine its
access to better housing in the future and are a major impediment
to labor mobility across cities. The bureaucratic allocation system is
a major obstacle to household and labor market adjustments.
Waiting lists. Waiting lists are a permanent feature of Soviet
life—almost a national obsession. Several are managed separately
but not independently: municipal waiting lists, cooperative waiting
lists, enterprise waiting lists. Inscription onto a housing waiting list
is not automatic. It is based on need and related to affiliation with a
specific work unit. Household income is not a consideration. The
most important indicator of need is the misleading standard of
square meters of living space per capita. Its maximum value for
inscription on waiting lists may range from 5 to 7 square meters. As
already noted, this need criterion deliberately eliminates critical
aspects of housing quality, such as shared facilities in communal
888
Bertrand Renaud
apartments, location and neighborhood, and socioeconomic and ecological quality. Under the living space criterion, residents of communal apartments are seriously penalized. Cheating or manipulation
is frequent in this bureaucratic system. Some people are more equal
than others, and resentment of the preferred treatment given to the
nomenklatura (those in privileged positions) runs deep.
In Moscow, 15.4 percent of the entire population was on municipal
and cooperative waiting lists in June 1990. The computerized management of these lists is very complex. The Moscow government has
identified 56 different categories of households and 120 different
paths to achieve access to housing. The waiting period is officially
up to ten years, but older applicants may be dropped from the list
and registered again under a more recent date.
Residency permits: the propiska system. The propiska system of
internal passports has been used extensively in the past as an
instrument of “labor discipline” and of “population distribution
policy and spatial planning.” It is a source of inequity and economic
inefficiency. During the postwar period, rural residents have been
subjected to the equivalent of socialist serfdom by being denied a
propiska to move to cities. The population of highly favored cities,
such as Moscow, has been stabilized through this passport system.
During the days of pervasive shortages of consumer goods, a local
propiska has often been required for shopping. Temporary residency
permits of a few months’ duration are issued to meet short-term
needs in sectors experiencing serious labor shortages, but such
permits do not give rights to housing.
Proposals to abolish the propiska are under consideration, and such
a step would have a direct impact on housing waiting lists and the
housing system in general. The bureaucratic allocation system is a
major impediment to household mobility and to labor market
adjustments. Convoluted and expensive systems of housing
exchange involving several units (often up to seven) have developed.
They are tolerated but not legal, and therefore remain subject to
arbitrary administrative decisions without recourse. In most cities,
employers (even ministries) are not allowed to expand their staffs
freely. Generally, they are allowed staff substitutions. By early
1992, the propiska had not yet been abolished in Russia because of
housing shortages, in spite of parliament’s desire to do so. To
finance itself, the Moscow government has begun holding public
auctions to sell residency permits. Prices are published in the press.
Free privatization of units has been proposed, with compensation to
those on the waiting lists in the form of a free plot of suburban land.
Why Do the Soviets Need Housing Markets?
889
Waiting lists and the socially guaranteed minimum for reforms.
Important dimensions of market-oriented housing reforms will be
the economic liabilities accumulated by the government because of
waiting lists, and the important principle of a socially guaranteed
housing minimum. This principle represents the outstanding right
to housing incorporated in the waiting lists and must be considered
when developing a privatization plan for the transfer of property
ownership to families, whether for free or for a price. The Moscow
privatization decision, decreed on June 29, 1990, is an example of
such consideration. The socially guaranteed minimum is included in
the July 1991 Housing Privatization Law of the Russian Federation.
It is best illustrated by the minimum living space per capita of 5 to
7 square meters. In current discussions of housing privatization, it
is often proposed that rent increases and housing privatization be
implemented on the basis of a two-part tariff: the guaranteed
amount of living space would be given free of charge or at a nominal
cost. Anything above that minimum amount would be made available to the household at a price that reflects the true economic cost
of the space. The economic magnitude of this guarantee is quite
large. Waiting lists have expanded during the perestroika period
from 12.6 million in 1986 (i.e., 22 percent of the total Soviet household population) to 14.6 million in 1990 (24 percent of the total). The
share of waiting pensioners is 27 percent of their total number.
Why housing reforms are necessary to successful overall
economic reforms
Housing reforms in the former Soviet Union are central to successful structural economic reforms. They are a high priority for four
reasons: (1) to correct macroeconomic imbalances, (2) to stablilize
the economy, (3) to increase enterprise efficiency and facilitate labor
market reforms, and (4) to achieve greater equity and social stability. A glaring paradox of the Soviet housing system is its large-scale
asset misallocation and the consequent loss of efficiency: the state
owns the physical assets, and the households have the liquidity and
savings. During their lifetime, households accumulate increasing
amounts of savings that they cannot store in the form of housing,
while the state cannot find enough resources to produce attractive
units.
Correction of macroeconomic imbalances and of housing’s contribution to economic decline. The poor performance of socialist housing
systems originates in the view of housing as a social issue rather
than a major economic sector. Due to decades of poor capital cost