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Opening remarks at a meeting of the Council for Strategic Development and Priority Projects

President of Russia Vladimir Putin: Good afternoon, colleagues,

Today we will be discussing issues that concern absolutely all people and families in Russia. We will talk about housing, the way our cities will be developed and changed to create a favourable, comfortable and modern living environment and to make new buildings and apartments accessible and of a high quality.

Our construction companies have greatly moved forward over the past few years. As you probably remember, in 2015 we built the largest volume of housing in our history, including the Soviet period – over 85 million square metres. The construction sector continues to hold the bar high.

This result was achieved largely thanks to the development of the mortgage market. This year, banks will have issued over a million mortgage loans worth some 2 trillion rubles, and the current mortgage interest rate has fallen below 10 percent.

I remember that it was only recently that we were dreaming of cutting the mortgage rate back to below 12 percent, and that some people said this would not just be an acceptable target but that it would provoke rapid growth on the construction market. Today the mortgage rate is below 10 percent.

We are completing the programme to relocate people from buildings that were declared to be dilapidated as of early 2012. We will need to think about the dilapidated housing stock as a whole. Overall, 684,000 people will move into new buildings under the relocation programme this year.

However, there are problems remaining in the housing sphere and housing construction. We will discuss them today. At the same time, I believe that we have reached a level and have accumulated the resources that are sufficient for formulating a strategic national goal that I spoke about several times: the goal of enhancing the accessibility of housing for our people in the next few years, especially for young families and for young families with children.

I would like to note that, according to experts, 35 percent of Russian families currently have a real opportunity to improve their living conditions through bank loans. By 2025, there will be 50 percent of such families. According to the Agency for Housing Mortgage Lending, in the early 2000s the figure stood at under 5 percent.

Experts’ assessments show that 110–120 million square metres of housing will need to be built annually. I want to emphasise that people should be able to move not into nondescript blocks of flats, or ant hills as they used to be called, but into comfortable flats with the necessary infrastructure, social and sports facilities, parks and public spaces.

I repeat, it is a system-wide task and its solution will have a huge impact on the demographic situation, people’s quality of life and the country’s economy.

What areas should we focus on? First of all, we need to eliminate bureaucratic obstacles in housing construction, because the system is still too cumbersome despite all the changes and attempts to improve it. There are still not enough land plots for development. Also, not all cities have approved urban development plans.

Between 2012 and 2017 in the Doing Business index, the Dealing with Construction Permits indicator for Russia has changed: we moved from 178^th to the 115^th position. It seems an improvement, but the 115^th place leaves much to be desired. In the top ten regions, developers have to undergo nine procedures and wait for 86 days; in the ten least successful regions it is 16 procedures and 165 days of waiting.

We fall behind as many as 114 countries which can do all this faster. Why are we still in the 115^th place?

I want to draw the attention of the Construction Ministry: it is essential to boost the efforts to develop convenient, transparent construction regulations, eliminate bureaucratic obstacles and excessive oversight – of course, without compromising the quality and reliability of the buildings and the interests of the people who invest their money in housing construction.

The same applies to land allocation. All the necessary instructions have been issued, including on the use of vacant, unused land plots and former industrial zones in the city, many of which are in federal ownership. The Government has all the necessary mechanisms, and I would ask to use them to resolve this matter.

Further. No one needs a race for square metres, so we should not build uncomfortable, poor quality housing. We must build not just a large amount of housing, but also housing that is modern. And here it is important not only to update the standards, but also to find economic incentives for developers to build new residential buildings based on advanced design solutions and technologies, using quality modern materials.

Naturally, we must also ensure that mortgage lending grows and interest rates decline, and continue the development of the mortgage securities market by attracting pension funds, insurance companies and individuals to this market. It is necessary to create guarantees against the appearance of bubbles. I would ask the Government, the Central Bank, and the Mortgage Agency to work closely on this issue.

In fact, we have quite good indicators; there is no cause for concern. Mortgage indebtedness in Russia is 5 percent of GDP (in Western countries it is 40–80 percent), and the volume of mortgage securities is less than 1 percent [of GDP] (in Western countries, it may amount to 40 percent). But this does not mean that we should pay less attention to these issues and think that we will not be affected. It can affect us, if we do not keep financial discipline.

Also, in 2018, a special mortgage lending programme will be launched for families where a second or third child is born. They will be able to count on the state subsidising the interest rate in excess of six percent per year.

Another important task is the formation of a sustainable mechanism for financing housing construction. People who invest their money in housing construction sometimes face high risks. This is a very serious, acute and long-lasting problem, both economic and social.

We agreed at one of the recent meetings that we will gradually transit from the mechanism of shared-equity construction to bank financing of construction projects, when risks will be assumed not by individuals, but by professional market participants.

We need to lay the groundwork for such a transition. It is important not to allow failures, not to find ourselves in a situation where one mechanism has already been abandoned, and the other has not yet been adjusted or created at all.

I have issued the corresponding instructions. And I would like to address those members of the Government who are directly concerned: these instructions were made on your proposal, you drafted them and you did it so that nothing would be forgotten, nothing would be left out and so that everything would work properly. Please, prepare the necessary changes as soon as possible.

[The instruction to the Government] was issued on November 5 and it was supposed to endorse a plan of action to replace the funds of housing equity holders with bank loans and other forms of funding during the next three years. Does this plan exist?

Minister of Construction, Housing and Utilities Mikhail Men: Yes, Mr President, the plan exists. It is already with the Government and will be endorsed in the next few days.

Vladimir Putin: It was supposed to be endorsed by December 15 and we are past it. Please speed this up.

Let me add that people should have different options of resolving their housing problems, for instance, by renting. Needless to say, the rental market must follow civilised, transparent rules.

A year ago, we agreed to launch pilot projects on leasehold buildings. The first leasehold building opened in Moscow this year. More facilities are under construction in the Far East and Tobolsk. We must launch more projects on rental housing and build on this experience.

On a par with housing people need parks, squares, playgrounds and sports grounds and social infrastructure – in a word, everything that forms the image of cities and creates a favourable environment for life.

This plan consists of many successful and interesting projects, including those for small cities. It is necessary to build on these successful projects and introduce them all over the country.

I would like you to think about launching a special programme of professional development for Russian architects. I would like the Ministry of Construction and the Agency for Housing Mortgage Lending to jointly elaborate a mechanism for carrying the said programme using the available resources.

In addition, I think it is important to enhance the status of chief architects. They should have an opportunity to offer and carry out their projects, thereby producing a real influence on the formation of a new, modern and bright image of Russian regions and cities.

Let us get down to work. But before giving the floor to Mr Men, I would like to say a few words about one more subject that is worrying people and was mentioned at the recent news conference. I am referring to the growth of fees for the maintenance of buildings. Unlike utility fees they are not regulated at the federal level. We have spoken about this more than once. It is necessary to put things in order in this area. This should have been done long ago. It is necessary to establish limits on housing fees and, as we agreed, to keep managing companies away from managing financial flows.

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