City Hall Sees Future in Rentals

City Hall has plans to turn a profit from renting out municipal apartments.

Leonid Krasnyansky, head of the city's department for construction investment programs, said last week that the city is considering construction of a group of 50 to 70 dokhodnyie doma, or buildings with apartments to let, over the next few years.

The first tenants move into the project's pilot building -- at 10 Bolshoi Nikolovorobinsky Pereulok -- at the end of this year. After the financial results of the pilot project have been tallied in December 2003, City Hall will make a decision on whether or not the program to build dokhodnyie doma, which would be rented out with no option to buy, should be continued, Krasnyansky said at a news conference.

State unitary enterprise Moszhilkompleks would be responsible for leasing the apartments and nonresidential space, as well as the general management and servicing of the block. The apartments would be rented out fully fitted and furnished.

The Bolshoi Nikolovorobinsky building will include space for four offices and 47 luxury apartments. It will have six two-room apartments, at $3,500 per month and 84 square meters each; 19 three-room apartments, at $4,000 per month for between 101 and 123 square meters; and 21 four-room apartments at $6,000 per month for between 143 and 175 square meters.

The block will also include a single six-room apartment at 299 square meters costing $12,000 per month. The block comes with an underground two-level parking lot for 50 vehicles with a car wash, round-the-clock security and a variety of additional services from booking tickets to grocery delivery.

According to Krasnyansky, if the project works out, the next apartment building will not necessarily also be a luxury block. "The mayor made it very clear that he doesn't want only this kind of block in the center of the city,' he said.

Part of the program will be aimed at low-income tenants. It is proposed that the apartments will be leased out at a price slightly lower than the going market rate.

The city's dokhodnyie doma project was two years in the making. To permit the program to go ahead, changes had to be made by presidential decree to federal legislation banning the privatization of a rented apartment. Some city officials wished to transfer management of the blocks to private hands.

"If you look at the figures then the average one-room apartment in a new block costs $30,000," said Konstantin Popov, chairman of the board of Inkom-Nedvizhimost.

"It costs $300 to rent per month or $3,600 per year. After payment of taxes and usage costs only $2,000 remains from this figure. So the project will break even after 15 years. If City Hall is happy with profitability of 7 percent annually, then this is fine," he said.

He said this kind of program makes sense for resolving social or political problems. While other major cities run these kinds of programs, they are in no way commercial projects, he said.