Construction of rental housing in regions is severely behind schedule

The pace of public rental housing construction lags behind schedule. Meanwhile, public rental housing is regarded primarily as an additional source of income for local budgets. Rental fees might increase the amount of tenants of non-privatized public housing.

On May 7^th, 2013 Lukashenko said that Belarus had launched a mass construction of rental housing. The statement was perceived as the start of real estate market reform. However the initiative does not aim to address the housing shortage problem, but to generate additional incomes for the regional budgets. In addition, a draft presidential decree on the transfer of non-privatized housing to rental housing is being developed. According to the draft law, state-owned housing will be rented to tenants at rates, regulated by the Council of Ministers.

Minsk city will benefit from this real estate reform the most. It is projected that a one-bedroom apartment at state rate will be leased for USD 100 – 200 (commercial rates are USD 400-700). If introduced, the new rules will increase corruption and will not solve the fundamental problem, i.e. the housing shortage in Minsk.

In the regions, the situation will be somewhat different. Commercial lease rates in the regions are only 1.5 times higher than the projected state rates. Since most of the state rental property will be unequipped and unfurnished, local authorities may receive substantial additional income.

Those needing to improve their housing conditions will be the primary group entitled to rental housing. They will be offered affordable lease costs and guaranteed contracts with the possibility of extension.

The main obstacle to the initiative’s development is the lack of funds to finish rental housing construction. Most of the 2013 construction plans will not be fulfilled. The best construction record is held by Brest, where 2 new state rental houses have been recently commissioned.

Since the state fails to implement construction plans in the regions, but local budgets need to replenish their budgets, it is logical to anticipate that more state-owned non-privatized apartments will be transferred to public rental housing than previously envisaged.