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Housing and Utilities. What Will Be Done?

September 06, 16:42 UTC+3
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Key conclusions

More than 40 billion rubles have been set aside for improving the Far Eastern Federal District.

“Today, for the first time, we are allocating such a large amount of funds. The total amount of funds, taking into account co-financing by subjects of the Russian Federation for improving and developing urban space, is about 42 billion rubles <...> This year in Vladivostok, more than 149 million rubles have been allocated for beautification projects, including 87 million rubles from the federal budget,” explained Mikhail Men, Minister of Construction, Housing, and Utilities of the Russian Federation.

The Far East is developing ahead of schedule

"In the first half of 2017 alone, the volume of production increased by more than 3%. That's 1.5 times higher than the average for all of Russia. This same trend can be seen in investment. The index of investment growth is 120%. This is 4 times higher than the average for all of Russia <...> Construction is up 117% in the first half of 2017. Meanwhile, the average in Russia is 1.6%," indicated Sergei Kachaev, Deputy Minister for the Development of the Russian Far East.

110,000 new jobs will be created in the Far Eastern Federal District

“These investments will provide about 110,000 new jobs through 2025. 68,000 jobs have already been established through investor agreements. Over the next 7 to 8 years, in accordance to the concept of the demographic policy of the Far East, workers should be coming to the region," said Sergei Kachaev.

Challenges

Housing: shortages and high costs

“There are several trends in the housing sector that complicate finding a solution for the problem.  For example, the cost of housing in the Far East is one of the highest - 1.4 times higher than the Russian average.  In Vladivostok, the average cost of housing is 95,000 rubles per square meter. Vladivostok ranks fourth among all cities in Russia <…> There is 1.5 times less housing being built there than in Russia on average,” Sergei Kachaev explained.

“I will touch on the cost of housing. The situation is certainly not an easy one, and, in our opinion as well as in the opinion of experts and analysts, the prices are artificially high,” said Mikhail Men.

Lack of plans for developing Vladivostok

“Having seen most of the construction projects yesterday, we see that there is no systematic work with plans for developing the territory of the city. High-rise development dominates - without forming neighborhoods, without clear rules for how high buildings should be, without rules for how land can be used and developed,” said Alexander Plutnik, General Director of the Agency for Housing Mortgage Lending (AHML)

Difficulty in obtaining construction sites in Vladivostok

“The example of Vladivostok lets us know how difficult it is to obtain a construction site for a housing project due to various restrictions, special territories, and zones <...> This delays the development of housing construction,” Sergei Kachaev explained.

Solutions

Involving citizens in making decisions

“The most important and new aspect of this project is involving citizens in the decision-making process.  We haven't had any experience with this in any sector.  We have already begun to summarize the first results and the main points will be reported at the end of the year. But today we are confident when we say that in the vast majority of subjects [of the Russian Federation], including the Far East, this kind of work is taking place,” Mikhail Men said.

Dissolving monopolies on the Far East construction market and developing the mortgage industry

“Since January 1, 2017, what we call Far East divisions are supposed to appear in 27 state programs. These special sections are supposed to include events and concentrate resources for solving housing and utility problems. The first thing necessary in our view is to take measures to get rid of local monopolies and promote competition on both the housing construction and the construction materials markets <...> The second thing we see as important is the development of the mortgage industry,” Sergei Kachaev said.

“When it comes to mortgage rates, here, of course, special programs are possible with the businesses that are coming to the territory with extended development plans,” Alexander Plutnik said.

Involving Japanese partners in Vladivostok's urban development

“Vladivostok is a very beautiful city that has a lot of potential which we would like to develop in order to make this city an international center,” said Takeshi Nakawake, Executive Vice President, Head of Corporate Department, and Head of Global Marketing Center at Nikken Sekkei Ltd.

“The purpose of our Russian-Japanese group for urban space is to maximize knowledge and competency in order to implement this as best as possible into the Russian reality,” explained Andrey Chibis, Deputy Minister of Construction, Housing, and Utilities of the Russian Federation.

“This is a chance which has been given to the Far East. Specifically, forming a comfortable urban space not only by means of improving housing and utilities, but also simply by means of construction. That's why Vladivostok can be the center of a new urban experiment,” said Alexey Murato, Partner at KB "Strelka".

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