Bureaucratic constituencies: Federal government, regional and local administrations

The attitude of the Russian federal government to the policy instruments proposed by Gosstroy was highly positive. With regard to the introduction of mortgage finance and the reduction in provision of social housing, the government throughout the post-Soviet period supported the transfer of responsibility for housing provision from the state to individual households. Such liberal housing policies fitted the direction of the general economic policy pursued by the Russian government. The federal government, for the reasons described before, also supported the agency-based framework for the organisation of the secondary mortgage market.

The only part of the Russian federal government during the 1990s, that is the time of budget scarcity, that was sceptical about the agency model were the Minfin and the Central Bank. The former as many accounts testify was reluctant to allocate funds to the AHML until the early 2000s (Pastukhova and Rogozhina, 2001; Agenstvo, 1999; Butler and O'Leary, 1998; Butler, 1997). The latter never issued the AHML with a banking licence (Russian finance expert, 2009; International finance expert, 2009; Economic Commission for Europe, 2004). However, as the budget deficit was overcome from the early 2000s onwards, the AHML started to receive the budget funds promised to it. Therefore, by and large, the federal government gave its support to the key housing finance instruments proposed by Gosstroy.

Russian regions shared the positive attitude towards mortgage lending, the reduction of social housing construction and an agency-based secondary mortgage market. The regions supported the idea for the introduction of mortgages because this would help attract the population's own funds to housing development and relieve the pressure on regional budgets (Zasedanie Prezidiuma, 2007). Regional and local authorities seemingly also supported the reduction in social housing provision introduced by the Housing Code. Furthermore, since social housing could still be privatised until March 2016, in the second half of the 2000s, local and regional authorities reduced construction of social housing fearing that they may lose it to privatisation (Demina, 2009).

In addition, the idea of a mortgage agency was supported by the regional leaders. As noted, regional versions of the federal AHML were set up throughout the country. According to the federal AHML, 75 regional mortgage-funding facilities operated in the market (Federal'noe Agenstvo, 2009). Regional administrations welcomed the transfers from the federal budgets that they received for the organisation of their mortgage funding operations. Therefore, regional bureaucracies approved the new housing finance framework.

However, as many commentators highlighted, while supporting mortgage policies formally, regional interests also undermined the spirit of the government's key objective in housing finance - the rapid proliferation of mortgages. Regional administrations valued federal budget transfers and found it in their interests to participate via regional agencies and trusted banks in mortgage funding. Unfortunately, the result was that the regional housing finance programmes remained small as they relied with few exceptions on scarce budget resources. At the same time, the persistence of opaque relationships between regional administrations and regional banks led to higher transaction costs as 'these schemes elude analysis, [and] are unable to attract market resources, investments, and commercial bank loans' (Pastukhova and Rogozhina, 2001: 159). A similar problem existed at the level of Russia's economy at large (Robinson, 2009: 437; Rutland, 2008). In addition, other problems at the regional and local levels related to non-transparent procedures for the allocation of land plots for residential construction led to higher housing prices (Zasedanie prezidiuma, 2007).

In sum, the interests of the regional bureaucratic constituencies meant little opposition to Gosstroy's policies. At the same time, a closer look at the actual operation of regional and local housing finance schemes reveals a lack of transparency, which undermined the development of a vibrant market for housing finance and deterred potential investors.

 
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