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. Last Updated: 07/27/2016

City to End Housing Subsidies

The Soviet-era privilege of nearly free housing will soon end if the Moscow city government follows through on plans to sharply raise rents and utilities from Jan. 1.

The price hikes are part of a Russian government plan to stop subsidizing housing costs nationwide by 1998, when the average Russian family is expected to spend up to 20 percent of its income on utilities and housing maintenance. The plans follow recent moves to end subsidies for bread and baby foods.

Russia must stop providing subsidies if it hopes to control inflation and bring its groaning budget deficit into line. Nadezhda Kosareva, a consultant with the Urban Institute, based in Washington, DC, said that last year the Moscow city government spent 14 percent of its budget on subsidies for utilities and housing maintenance.

An official with the Moscow city engineering department, who requested anonymity, said that a draft decree passed this week would hike the cost of heating to the average Muscovite from 81 rubles to over 800 rubles (68 cents) per month. The standard maintenance fee would jump from 16 kopecks to 24 rubles and the general telephone fee would rise from 300 to 900 rubles.

The decree must still be approved by the soon-to-be-elected city Duma.

A family of three, living in an average-size two-room apartment, will pay over 8, 000 rubles a month for utilities and housing maintenance in January, as compared to 800 to 1, 000 rubles in October, the official said.

The Moscow government, however, will continue to subsidize families that would have to spend more than 10 percent of their income on utilities and maintenance costs, the official said.

According to the plan, Russians will pay 15 percent of the costs of utilities and maintenance in 1994, a sharp increase from the current 2 percent. Renter's share of the costs has fallen to 2 percent from last year's 3. 4 percent as utility and maintenance charges have failed to keep pace with the rising cost of energy.

Raymond Struyk, director of a joint shelter cooperation project between the U. S. Agency for International Development and the Urban Institute, said that the average Western family spends 25 percent of its total income on utilities and housing maintenance.

Russian families, he said, should be able to afford to spend 20 percent of their income on such costs in a few years.

"After the economy goes through this hard period, real wages will go up", he said, adding that Russians will receive more cash instead of government-sponsored benefits.

But Struyk said that the plan was still not entirely clear and that the government might make some changes along the way. Izvestia reported on Thursday that Mayor Yury Luzhkov had called for a review of the draft decree.

Struyk said that city management agencies might be overestimating the costs of maintenance and utilities. Under a joint project between the Moscow government and the U. S. Agency for International Development, he said, several private firms have proved that it is possible to manage apartment complexes on a very low budget.