REFORM OF THE HOUSING AND UTILITIES SECTOR IN RUSSIA

By Mikhail Zherebyatev

The people protest, the monopolies remain in place, and the government blames the local authorities for everything. The recent rally in Voronezh to protest against the hike in prices for communal services was possibly the largest antigovernment demonstration since Russia’s first president, Boris Yeltsin, left the political arena. NTV’s prominent anchorman Leonid Parfenov went further than most in his assessment of the event, describing Voronezh as the “Russian Venezuela.” (The Voronezh rally coincided with the coup and countercoup in that country, which were accompanied by mass civilian demonstrations.)

From early March the Voronezh city authorities cut back the subsidies for communal services, inviting consumers to pay out of their own pocket for as much as 90 percent of the so-called “real cost of communal services,” instead of the previous 35 percent. Meanwhile, nobody can actually say what the “real cost” of these services is: Energy-saving technology is underdeveloped, and the pricing structure is set by monopolies. On the one side are the energy suppliers, and on the other the housing departments serving the utilities sector, which since Soviet times have combined the functions of client and contractor.

The events in Voronezh were entirely predictable. First, this increase in tariffs is a requirement set by the federal authorities. We should remember that for incumbent executive bodies at all levels, 2002 is the last year when unpopular decisions can be taken before the next round of federal elections. Elections to the lower house of the Russian parliament will be held in December 2003, followed in March 2004 by presidential elections. Second, the opportunities for softening the blow in the regions have been exhausted. Under pressure from Governor Vladimir Kulakov in 2002, the funds left at the city’s disposal were reduced considerably. The governor’s plan is that Voronezh, which is one of the few municipal “donors” in Voronezh Oblast, should help other more depressed areas in the region. And, third, in March the local monopoly, Voronezhenergo, increased electricity prices (the gas board had done the same one month prior to this). As a result, the cost of heating alone shot up from 1.42 rubles per person per square meter to 6.00 rubles. Thus, according to the new regulations, citizens are expected to shell out more than 800 rubles for a one-bedroom apartment, not including light and telephones, and over 1000 rubles for a two-bedroom apartment (at today’s exchange rate 945 rubles is equal to 30 dollars). This, when the incomes of most working people in the city range between 2000 and 2500 rubles. The biggest pensions are just over 1600 rubles.

According to the findings of nationwide sociological surveys carried out over the last decade by leading Russian sociological institutions, Voronezh is one of the places where the population is not particularly disposed to protest. However, on April 11 it seemed that the people of Voronezh–who usually prefer not to become embroiled in open conflict with the authorities, but to get their own way by other means–suddenly changed their nature overnight. When over 25,000 people are calling for a boycott of the new utility charges, clamoring for the mayor to resign, raging against the energy monopolies and the government, and are ready to storm the governor’s residence, this is a pretty serious state of affairs, especially bearing in mind that the demo was called simply to “let off steam,” as it were. Technically, the initiative for the rally came from the local branch of the Russian Federation of Independent Trade Unions (FNPR)–the successor to the trade unions of Soviet times.

Regional branches of the FNPR base their relations with the authorities on the principle that whoever holds power calls the tune. Neither the mayor nor the governor intended to account for themselves before the people that day. The head of Voronezh Oblast, Vladimir Kulakov, who ran the local FSB until December 2000, claimed at a press conference two days before the rally that he was right behind the people, and on the day itself he headed out of town to investigate who or what was stopping small businesses from flourishing in rural areas. Mayor Aleksandr Kovalev, who had served as Russia’s trade representative in Kiev before being elected to run Voronezh, was also out of town that day. Prior to this the mayor had on several occasions said words to the effect that the price increase was unpopular but necessary. (It was he who signed the decree to raise housing and utility prices.) What was the alternative, when the city was caught in a vise–by the oblast, which bolsters the regional budget by divesting the city of part of its income; by the federal power structures, which came up with the blueprint for restructuring the housing and utilities sector; and by the energy monopolies, which set the starting prices which are used as a basis for the tariffs ordinary consumers have to pay for housing and utilities. If the heads of municipalities fail to meet the deadline for switching to the new payment system, as laid down in the governmental decree outlining the timeframe for reform of the housing and utilities sector, the Russian government is threatening to withhold federal budget funding for local housing and utility services. This means that the less well off will not get their subsidies, and, as a consequence, municipal budget revenues will suffer.

According to the Russian government’s decree on reforming the housing and utilities sector, by 2003 the public is supposed to bear 100 percent of the so-called “real cost of communal services.” This means that municipalities will cease to subsidize the utilities from their own coffers. (In Soviet times, industry covered most of the cost of communal services; in the post-Soviet decade it was the municipalities.) Meanwhile, through the established federal system of housing subsidies, the state promises to cover some of the communal expenses of the poorest section of the population. According to government estimates, a maximum of 8-10 percent of Russians may claim housing benefit (subsidies). Russia’s minister for construction Anvar Shamuzafarov arrived at the same figure for Voronezh when he came to find out what was happening on the ground. However, the local authorities estimate that in Voronezh alone there are at least twice as many candidates for benefits as the minister for construction believes, because in neighboring regions–Lipetsk and Belgorod Oblasts–people on higher incomes receive subsidies, while prices for staple foodstuffs and consumer goods are similar to those in Voronezh.

The governmental decree defines those who can apply for housing benefit. These are families where more than 22 percent of their joint income goes on utility payments; and individuals whose income is lower than the monthly minimum subsistence level. The value of this subsistence level is calculated by the regional authorities themselves. In Voronezh oblast it is 974 rubles (just over US$30). This subsistence level, on which calculations of subsidies are supposed to be based, has long been hopelessly out of date in Voronezh, as members of the local oblast and city Dumas have been arguing recently. At the end of last year, the oblast executive body drew up its own draft of a new law on the subsistence level, proposing to raise it to 1300-1400 rubles. But at the beginning of this year the executive declined to push this bill any further, claiming that it was impossible to guarantee different payments to new categories of underprivileged citizens. Prior to the gubernatorial elections in 2000, about one-third of Voronezh Oblast’s 2.5 million inhabitants fell into this bracket.

People’s record of paying for communal services over the last month is an indirect indication of the buying power of the local population. Only 31 percent of Voronezh residents paid the new tariffs for housing and communal services; previously practically everybody used to pay. The local authorities were even forced to reduce prices temporarily, and to announce that payments could be deferred until September. Furthermore, there will be no charge for heating during the summer. The Voronezh mayor’s office decided to go for the 90 percent target at the second attempt, when the heating comes on again in October.

Both Mayor Aleksandr Kovalev and the head of the local branch of the energy monopoly RAO EES, Nikolai Reshetov, predict a fresh crisis when the heating is switched on, because by that time thermal energy and electricity prices are expected to rise further.

The official version of what happened in Voronezh, to which the Russian government is clinging desperately, is that the local authorities did not take the trouble to inform the public about the subsidies. This is what is being claimed in chorus by Vice Premier Valentina Matvienko, who manages the social bloc in the government, Construction Minister Anvar Shamuzafarov, and the presidential envoy to the Central Federal okrug Georgy Poltavchenko. Indeed, in a city with a population of one million, by the end of April subsidies had been granted to just over 20,000 people–and only 12,000 before the rally. Local human rights activist Vyacheslav Bityutsky believes that this is because people realize that the reforms simply boil down to an increase in prices. Even those who are genuinely on very low incomes are not entitled to any subsidies under the proposed system, which is why the people of Voronezh are in no hurry to apply for them.

As of today, only twelve towns in Russia have introduced the target set by the government of 90 percent of the costs of communal services being met by the public. In the light of the recent events in Voronezh, the Russian government has made it clear that it has no intention of backing down on this. Meanwhile, a chain reaction has been sparked in Russia’s cities. Ten days later, a similar rally was held in Arkhangelsk, albeit with a smaller number of demonstrators. In Kursk an audit revealed an illegitimate hike in prices for heating. As a result, the authorities there were compelled to reduce the tariffs and announce a refund to people who had been overcharged.

Mikhail Zherebyatev is a specialist with the International Institute for Humanitarian and Political Research in Moscow.