Apartment Tax Catches Medvedev's Attention

Investors be warned: If you own more than one apartment, the tax man could soon have another reason to come knocking at your door.

A recent proposal by one of the country's largest business lobbies to hit owners of multiple apartments with a tax to discourage real estate speculation has caught the ear of Deputy Prime Minister Dmitry Medvedev.

Boris Titov, head of Delovaya Rossiya, late last month proposed increasing taxes on people who own more than one apartment in an effort to stem speculation, which he sees as the cause of high apartment prices.

"We need meaningful action to dampen interest in investing in real estate," Titov said in an interview last week. "Fifty percent of Moscow's apartments are totally empty, the result of speculation on the market."

Market analysts disagree with Titov's numbers, however.

"If we take new construction in the past year, the number may be close to 20 to 30 percent," said Oleg Repchenko, a real estate analyst who runs the IRN.ru web site. He added that the number of empty apartments across Moscow as a whole was less than 1 percent.

The tax, Titov said, would not only lower apartment prices by discouraging "inefficient" real estate investment, but also spur investment in other sectors of the economy, from production to stock markets. He offered no explanation of how it would work, saying he was waiting for the Kremlin's go-ahead before drafting a bill to submit to parliament.

"From an economic point of view, the tax is wrongheaded," Repchenko said. "People buy apartments for their children, their elderly parents, and that money stimulates the economy."

"This law would be a return to the Soviet past," when apartments were either handed out by order of the state or built by cooperatives, he said.

Medvedev, who has been charged with implementing the Kremlin's plan to increase the amount of affordable housing nationwide -- one of President Vladimir Putin's four top-priority national projects -- said in a meeting with Titov at the end of September that he supported the proposal, Delovaya Rossiya reported on its web site.

Apartment prices have recently been growing at about 1 percent per week. Prices have doubled in the past year.

Putin said last week that a number of legislative changes, including new tax laws, would be required if the affordable housing program were to succeed.

Titov, for his part, said any law could be tailored so that a family with two apartments would not be be affected. He did not specify how many apartments a person could own without having to pay the proposed tax.