Housing panacea
Price of apartments also includes construction risks
In the current economic conditions obtaining housing is still a remote prospect, if not a pipe dream, for many Ukrainians. The gap between income and exorbitant prices per square meter is shocking. Still, people continue to hope. But today they can only hope for a miracle. The question is whether the state will ever create one.
No one can answer this question, although attempts have been made in the past and continue today. The Ministry of Regional Development and Construction has promised to submit a new plan to the Cabinet of Ministers in November 2007, which is designed to resolve the complex housing situation. It is a revised version of the concept “Providing People with Housing in 2009-12.”
According to deputy minister Anatolii Berkuta, the new document contains five options for solving the housing problem. The first one calls for encouraging mortgage crediting, which means the state promises to lend an individual funds for the first down payment. In other words, 30 percent of the housing cost is to go to the state budget via the State Mortgage Fund or another financial institution.
The second option provides for a “system of housing construction savings.” In plain English this means that an individual accumulates the down payment in a special deposit bank account over a certain period of time, and the state later repays him 20 percent of the collected amount as a “bonus.”
The third option envisions a mechanism for certain categories of people, whereby the state and the individual jointly fund the housing construction according to the 50-50 or 30-70 pattern.
The next option is called the “mechanism of refundable and non- refundable subsidies.” Berkuta says this was proposed by parliament members. In this case, housing construction bonds are the source of funding. “The only problem today is to prevent fraud and pass a law that will allow these kinds of bonds to circulate on the market,” the deputy minister says. “Some agencies support this idea, others do not. But if we go this way, we will be able to secure UAH 20 billion for housing construction, with 18 billion coming back to the budget.” While this mechanism has a more or less reliable source of financing, the first three will need budgetary funds.
Topping the housing pentagon are state-sponsored housing funding and credit mechanisms for certain categories of individuals. According to the deputy minister, there are plans to allot UAH 2.4 billion from this year’s budget for this purpose. These funds will be used to build 13,500 new apartments. On the other hand, given this amount of funds, the proposed funding mechanisms will make it possible to double the construction results. “We must follow each of these paths,” Berkuta says. He believes, however, that the first two approaches are the most acceptable ones.
After the revised concept has been approved by the Cabinet, the ministry will try to draw up the necessary legal instruments in the first six months of 2008, which will determine the criteria for people to acquire housing according to these patterns.
Berkuta says that an important point in the proposed concept is the “supply of housing at an averaged value,” which today means “3,400 hryvnias per square meter and 3,800 in Kyiv.” The deputy minister stressed that it might be even cheaper to build “low-cost apartments.” This can be done if the state furnishes land where no structures are to be torn down, as well as land without a difficult geological structure. It is also possible, in Berkuta’s view, to reduce deductions for the engineering and transport infrastructure when building low-cost houses.
So officials are seeking their own formula of a housing panacea. Incidentally, the risk cost that construction companies include in the overall estimate represents one- third of the price of a finished structure. We think the ministry could try and reduce these risks that come mostly from the central and municipal authorities.
INCIDENTALLY
On July 18 the Cabinet of Ministers approved the concept of the Bridge Construction Code. Its purpose is to establish and systematize bridge-construction standard-setting instruments, improve bridge-construction planning, and to resolve a number of problems, such as the powers of central and local executive bodies, principles governing the planning of the development and construction of plots of land, and the content of bridge-construction documentation. The code is supposed to promote transparency in bridge- building decisions adopted by central and local executive bodies, as well as to create conditions for effective international cooperation in bridge construction.
