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. Last Updated: 07/27/2016

By 5 Votes, Duma Nixes Housing Reform Bill

In a vote that took the Kremlin by surprise, the usually obedient State Duma on Wednesday narrowly rejected a government-drafted bill to reform the housing sector by phasing out subsidies for electricity, water and gas.

The vote, which came in the bill's first reading, casts into doubt the 2003 federal budget, which the Duma passed in the third reading last Friday. The draft budget earmarks 17.7 billion rubles in subsidies for low-income households, with the assumption that the rest of the population will start paying more of their housing costs.

Alexei Gorshkov, the head of the government's information department, expressed shock at the vote of 221-163 with eight abstentions -- five votes short of passing.

"We thought that we could count on the lawmakers because all the issues that could bother the deputies were ironed out in the document submitted to the State Duma," Gorshkov was quoted by RIA Novosti as saying.

He said the government would try to convince the Duma to consider the legislation again in the nearest future.

"The results of the vote -- in particular the shortfall of only five votes -- shows that there is a chance of reaching a mutual understanding," he said.

Deputy Andrei Isayev of the pro-Kremlin Fatherland-All Russia said the Duma will probably consider when to hold a new vote on the reform Friday, the Rosbalt news agency reported.

He said the rejection of the bill had caught the four centrist factions off guard.

Deputy Sergei Mitrokhin of the liberal Yabloko faction, which voted against the bill, said pre-election jitters had probably caused some pro-Kremlin lawmakers to break ranks.

"It looks like some members of the 'big four' factions did not obey the government like they normally do but were thinking about upcoming elections in their districts," Mitrokhin said in a statement.

Gorshkov warned that putting off the reform might harm the economy. "Delays dictated by the pre-election situation are not reasonable," he said.

Andrei Loginov, the government's representative to the Duma, said the Cabinet will have to decide what to do about the draft 2003 budget.

The housing sector involves a large number of services, including maintenance, water, electricity, heating, garbage disposal, sewage, gas and access to television and radio antennae.

More than 65 percent of the sector's aging infrastructure is in need of urgent repair, and 6 percent needs to be replaced every year. Analysts estimate that the sector is underfinanced by $2 billion annually.

The government-proposed reform would switch the current system of indiscriminately subsidizing the whole sector to providing special subsidies only to low-income groups who cannot afford to pay for communal services in full.

Analysts had expected the reform to come up for a first hearing only after Duma elections late next year. However, after the date for the first reading was set, they predicted the legislation would easily pass.

"If [President Vladimir] Putin had clearly expressed his will that the bill be passed, it would have been approved by the Duma without any problem," said Alexei Moiseyev, an economist at Renaissance Capital.