Rental housing construction project: an attempt to revise society’s views on property
Rental housing construction will become a part of the projected 6.5 million square meters’ construction in 2013. If successful, this project will substantially re-format the country’s lease market and might change the population’s attitude to property ownership as a mandatory attribute of success.
On September 11th, 2012 during the presentation of the economic performance in 2012 report, the lack of accessibility of rented accommodation for needy citizens was raised.
At the end of 2011, private housing made up 86.7% of the overall country’s housing. Many new apartments built as social housing are rented out and used as a source of additional income. There are numerous manipulations with the housing construction using soft and concessional loans. At the same time, a civilized long-term lease market is virtually nonexistent. The housing shortage is not disappearing.
One of the solutions for this housing problem is‘rental housing’ construction. By 2015 3000 rental apartments are projected to be built in Minsk. The project will be funded from the budget, via issuing Minsk City Executive Committee bonds (approximately BYR 1 trillion) and from other sources.
Benefits from the project are clear and it could have been implemented a long time ago. As a result the lease market will get a major new player who could reduce the rental costs and will make the relations between the tenant and the landlord civilized, instead of the chaos that exists at the moment. Long-term lease contracts will become a pledge of confidence for tenants and will be a good example to other landlords. The state, even using the financial resources at preferential rates, will eventually get back indexed rent, which, unlike soft loans, will not be ‘lost’ during the devaluation.
Property ownership, with the introduction of long-term lease, will cease to be a goal in itself and the population will redistribute its savings accumulated for property acquisition to invest in other assets and on current consumption. The long-term lease will help to resolve the internal labour migration issue, and labour mobility will be greatly enhanced.
Therefore, despite some shortcomings, i.e. additional emission credits, the rental housing construction project will have long-term positive effects and will start changing people’s attitude from needing to purchase property to using the benefits of the long-term lease.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.