financing capital repairs and energy efficiency improvements in … · 2012-09-10 · energy...
Post on 14-Aug-2020
1 Views
Preview:
TRANSCRIPT
Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
KEY CONCLUSIONS AND RECOMMENDATIONS
International Finance Corporation36 build. 1 Bolshaya Molchanovka StreetMoscow, 121069, RussiaTel: +7 (495) 411 7555Fax: +7 (495) 411 7556ifc.orgwww.ifc.org/eca
2012
In partnership with
EBRD Moscow OfficeDucat Place III, 6 Gasheka Street, 125047 MocowTel: +7 495 787 1111Fax: +7 495 787 1122http://www.ebrd.com/russian/pages/country/russia.shtml
European Bankfor Reconstructionand Development
European Bankfor Reconstructionand Development
Financing Capital Repairs and Energy Efficiency Improvements
in Russian Multi-family Apartment Buildings
Key Conclusions and Recommendations
International Finance Corporation
European Bank for Reconstruction and Development
Moscow
2012
Table of Contents
1 Core Objective and Approach
2 Key Findings
3 Current Status of Russia’s Housing Stock
4 International Experience in Financing Capital Repairs and Energy
Efficiency Improvements in Multi-family Apartment Buildings
5 Structural Analysis of Available Models for the Financing of Capital
Repair and Energy Efficiency Improvements in Multi-family
Apartment Buildings
6 Mechanism for Financing Capital Repair and Energy Efficiency Improvements in Multi-family
Apartment Buildings
7 Making the Necessary Changes to the Legal and Regulatory
Framework
APPENDIX A: Outline of Key Models
APPENDIX B: Financing the Capital Repair of Multi-
family Apartment Buildings in Russia – Comparison of Potential Models
IFC, a member of the World Bank Group, creates opportunity for people to
escape poverty and improve their lives. We foster sustainable economic
growth in developing countries by supporting private-sector development,
mobilizing private capital, and providing advisory and risk mitigation services
to businesses and governments.
The conclusions and judgments contained in this report should not be
attributed to, and do not necessarily represent the views of, IFC or its Board
of Directors or the World Bank or its Executive Directors, or the countries they
represent. IFC and the World Bank do not guarantee the accuracy of the data
in this publication and accept no responsibility for any consequences of their
use.
The material in this work is protected by copyright. Copying and/or
transmitting portions or all of this work may be a violation of applicable law. IFC
encourages dissemination of this publication and hereby grants permission
to the user of this work to copy portions of it for the user’s personal, non-
commercial use. Any other copying or use of this work requires the express
written permission of IFC.
Copyright © 2012 International Finance Corporation
2121 Pennsylvania Ave. NW, Washington, DC 20433
United States of America
A member of the World Bank Group
The EBRD is an international financial institution that supports projects from
central Europe to central Asia. Investing primarily in private-sector clients
whose needs cannot fully be met by the market, the Bank fosters transition
towards open and democratic market economies. In all its operations the
EBRD follows the highest standards of corporate governance and sustainable
development.
Copyright © 2012 European Bank for Reconstruction and Development
All rights reserved. No part of this publication may be reproduced or
transmitted in any form or by any means including photocopying and
recording, without the written permission of the copyright holder. Such written
permission must also be obtained before any part of this publication is stored
in a retrieval system of any nature. Applications for such permission should be
addressed to: permissions@ebrd.com.
One Exchange Square
London EC2A 2JN United Kingdom
Published in Russia Alex Publishers (Sole Proprietor A. Polikanin), Moscowalexpublishers.ru
3
3
6
8
11
12
16
18
20
Key Conclusions and Recommendations 3
1. Core Objective and Approach
International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD), with the support of a group of Russian and international consultants led by the Institute for Urban Economics and ZAO “SENRI” (a Moscow-based energy-effi ciency solutions and investment company), have conducted this joint research on potential mechanisms for the fi nancing of capital repair and energy effi ciency improvements in multi-family apartment buildings in the Russian Federation1. Th is document summarizes the results of that research and outlines key fi ndings and recommendations on establishing a sustainable system for fi nancing the capital repair and energy-effi cient modernization of Russia’s multiple-occupancy housing stock2.
Th is report is the result of research conducted in several stages, as follows:1. Analysis of international best practice in the organization and fi nancing of capital repair and energy-effi cient
modernization in multi-family apartment buildings, and recommendations on their application in Russia. 2. Analysis of the current status and condition of Russia’s multiple-occupancy housing stock. 3. Development of mechanisms for the fi nancing of capital repair and energy effi ciency improvements in residential
buildings, and mechanisms for governmental support. 4. Cost–benefi t analysis of various approaches to the organization and fi nancing of capital repair and energy effi ciency
improvements to Russia’s multiple-occupancy housing stock. 5. Recommendations on the introduction of legal and regulatory reforms essential to facilitate the adoption of those
potential fi nancing structures analysis suggests are likely to lead to the best outcomes.
Th e results of this research are analyzed in the following reports.
1. Analysis of international best practice in organizing and fi nancing capital repairs and energy effi ciency modernizations of multi-family buildings in Central and Eastern Europe3.
2. Analysis of the current state of the housing stock in Russia.3. Mechanisms for the fi nancing of capital repair and energy-effi cient improvement of multi-family apartment
buildings in Russia, and mechanisms for government support.4. A comparative analysis of the costs and eff ects of the implementation of six models for fi nancing capital repairs and
energy effi ciency improvements in multi-family residential buildings in Russia.5. Required changes and additions to the regulatory framework for implementing the developed model for fi nancing
capital repairs and energy effi ciency improvements in multi-family residential buildings in Russia4.
1 Th e opinions and positions expressed in this document are those of IFC and EBRD and should not necessarily be taken as representing the conclusions and/or recommendations of external consultants.
2 Th e authors of this report understand that the Government of the Russian Federation is currently reviewing its approach to the organization and fi nancing of the capital repair of the country’s housing stock on a basis somewhat diff erent to that commonly understood to constitute international best practice. Such an approach might, nonetheless, provide a workable solution, and we would not wish to make any comment on this. We also hope that the results of this research might also prove useful in fi nding a solution to the organization and fi nancing of capital refurbishment projects in Russia.
3 IFC (2011), Analysis of international best practice in organizing and fi nancing capital repairs and energy effi ciency modernizations of multi-family buildings in Central and Eastern Europe. Available at: http://www1.ifc.org/wps/wcm/connect/region__ext_content/regions/europe+middle+east+and+north+africa/ifc+in+europe+and+central+asia/publications/analysis+of+international+best+practice+in+organizing+and+fi nancing+capital+repairs+and+energy+effi ciency+modernizations+of+multi-family+buildings+in+ceu+%28russian%29.
4 Each of these reports is available at: http://www.ebrd.com/pages/sector/energyeffi ciency/documents.shtml.
4 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
2. Key Findings
1. Th e capital refurbishment and repair of multi-family apartment buildings in Russia is an urgent priority. Approximately 60 percent of the country’s multi-family apartment buildings are now deemed to be in urgent need of capital repair as defi ned under current legislation and urban planning regulations. Estimates of the annual cost of such capital repairs in Russia to 2035 range from RUB220 billion (assuming superfi cial correction of accumulated problems) to RUB1 trillion (assuming the implementation of thoroughgoing repair and the utilization of energy-saving technologies and materials).
2. Russia’s multiple-occupancy housing faces a longstanding need for energy-effi cient modernization. In this document the terms “energy-effi cient modernization of/energy effi ciency improvements in multi-family apartment buildings” refer to the capital repair and reconstruction of existing multiple-occupancy accommodation, undertaken with the objective of improving the energy effi ciency of the building in its entirety, as well as improving the comfort of the accommodation therein5.
3. Russia’s residential sector is the country’s second largest total consumer of energy and, as such, has the greatest potential for better energy effi ciency. Government intervention in the form of energy effi ciency policies and programs could help residential property owners reduce energy consumption (and, consequently, their household expenses) quite considerably: better energy effi ciency resulting from the introduction and implementation of energy-effi cient products and initiatives could help property owners in the Russian Federation reduce total expenditure on public utilities by an average RUB187,000 per year.
4. Th e energy-effi cient modernization of multiple-occupancy housing is most eff ective when undertaken as part of a wider program of capital refurbishment and repair – and, by the same token, through the implementation of further energy effi ciency initiatives in previously renovated apartment blocks. For this reason it is vital that any centralized system for the fulfi llment of state policy in energy effi ciency and resources management (specifi cally through promoting large-scale capital repair and energy effi ciency modernization in multi-family apartment buildings) also be supported by clear mechanisms to facilitate the fi nancing of such a system through government funding at the federal and regional levels.
5. Better energy effi ciency in the residential sector is also of direct interest to regional and local government insofar as lowering energy consumption can reduce the need for additional capacity in power generation and supply: improving energy effi ciency oft en proves more cost eff ective than construction of new facilities, and is far faster to implement.
6. International experience suggests that sustainable policy in the repair and modernization of housing stock is contingent upon government establishing precise aims and objectives, in the context of a systematic long-term strategy. Problems and issues pertaining to the maintenance and repair of multi-family apartment buildings must be regulated on the basis of close adherence to the principles of private property and the rule of law. Government
5 Russian legislation does not currently provide for a precise defi nition of the term “modernisation of buildings and structures (infrastructure),” and provides only for “capital refurbishment or reconstruction.” At the same time, in practice, regulation governing the fi nancing of capital repairs (under the Housing and Utilities Reform Fund and in other circumstances) is governed by terminology already adopted under various policy guidelines and regulatory and technical documents: “[the] objectives of raising the energy effi ciency of multiple-occupancy buildings, the establishment of favorable living conditions for residents, the use of contemporary materials and equipment – all constitute an understanding of the modernization of buildings through capital repair.” Provided the layout of individual residences are not altered, certain adaptations of common parts may be undertaken for the purposes of energy effi ciency renovation, including: the construction of access facilities for stairways, lift s, and rubbish chutes; the replacement of certain load-bearing structures (including walls, stairs, overhead protection (roofs) and exterior cladding); replacement of roofi ng and tiles; the installation of building insulation and soundproofi ng; the installation, re-equipment or improvement of building infrastructure facilities; and the reconstruction of external supply networks (excluding major (trunk) supply lines).
Key Conclusions and Recommendations 5
intervention in the management of private property should be limited to health and safety regulation and to initiatives to promote greater autonomy for property owners in improving the physical conditions (as well as the energy effi ciency) of their collective property.
7. International experience suggests that the most eff ective means of ensuring the sustainable fi nancing of capital repairs in multi-family apartment buildings is predicated (as an absolute minimum) on the following three elements.
a) Regular contributions (on a compulsory basis, by all apartment owners) into a dedicated fund for maintenance and repair (the “collective building repair fund”) – an essential prerequisite in every multi-family apartment building.
b) Credit facilities extended by commercial banks to Homeowners’ Associations, Housing Cooperatives, or Housing Management Companies, facilitated through residents’ regular payment of contributions for the repair and maintenance of their building, held in a dedicated account or collective building repair fund for that purpose.
c) Financial support from government in the co-fi nancing of capital repair projects and the provision of state guarantees to banks through dedicated state fi nancial development institutions (guarantee agencies, specialized state banks, investment funds, and so on).
8. In order to gain access to debt fi nance for capital repair and energy effi ciency improvements residents’ associations (Homeowners’ Associations, Housing Cooperatives) must be given viable legal status, must have the right to raise fi nance on behalf of all residents collectively, and must have the right to enforce collection from those residents failing to meet their obligations in contributing to the cost of such refurbishment or repair.
9. Current legislation in Russia governing the treatment of multi-family apartment buildings as immovable property is currently under-developed. A strong and transparent ownership system can be achieved only when each and every resident within a multi-family apartment building is obliged to become a member of a Homeowners’ Association or other form of collective residents’ association.
10. Th e following principles should be taken into account in allocating state resources for capital repair in multi-family apartment buildings:
a) Governmental support must be of a kind likely to encourage residents to undertake the repair of the entire multi-family apartment building, and not just of their own individual apartments.
b) Better energy effi ciency must be clearly designated as a priority in any capital repair project co-fi nanced through budgetary (i.e., governmental) sources.
c) Th e level of such governmental support should be directly tied to the extent of energy effi ciency improvements (and subsequent energy savings) to be achieved.
d) Any decision on the extent of any capital repair to be undertaken in a multi-family apartment building must be taken by the relevant Homeowners’ Association (or other collective organization representing individual property owners) within such building, or by the Housing Management Company or other management agency to which such authority has been delegated.
e) Responsibility for the control of funds collected from property owners within a multi-family apartment building rests with the Homeowners’ Association (or other agency (e.g., a Housing Management Company) to which the Homeowners’ Association has delegated such authority).
f) Responsibility for the control of funds received from governmental (budgetary) sources rests with the Homeowners’ Association (or other agency (e.g., a Housing Management Company) to which the Homeowners’ Association has delegated such authority).
6 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
g) Th e most eff ective use of state support from regional government is as follows: i. in subsidizing owners’ expenditure on capital repair and energy effi ciency improvements; and ii. through the provision of guarantees to reduce commercial risks in the extension of credit facilities
or fi nance to residents’ associations, and in the establishment of appropriate guarantee agencies (and investment funds) to facilitate this.
11. Not all property owners may be willing to fulfi ll their obligations in participating in the fi nancing of capital repairs, and it may be necessary to enforce these. Th is also applies to those apartment owners who, while willing to meet their obligations, are unable to do so for various reasons, including insuffi cient funds. In both cases the matter must be resolved through the adoption of eff ective mechanisms: in the one case through enforcement and, in the other, through the development of sustainable mechanisms for social support and the development of social housing.
12. Th e development of a sustainable environment for the fi nancing of capital repairs and energy effi ciency improvements in multiple-occupancy housing is contingent on the comprehensive reform of current civil and property law, as well as other legislation and regulation.
13. Th ere is a compelling case for taking a holistic approach to addressing the diverse issues associated with fi nancing capital repairs in the residential sector, in particular regarding:
a) the development of legal institutions governing the management of private property in multi-family apartment buildings (Homeowners’ Associations, etc.);
b) the development of mechanisms to facilitate collective self-government in multi-family apartment buildings, as well as the development of personal liability of apartment owners; and
c) the development of social support mechanisms for socially vulnerable populations and at-risk groups.
Key Conclusions and Recommendations 7
3. Current Status of Russia’s Housing Stock
The total housing stock of the Russian Federation comprises 19,650,000 buildings, with total floor space of 3,177 million square meters – 72 percent of which is located in urban conurbations6. The sector is predominated by multi-family apartment buildings, of which there are 3.2 million, with total floor space of 2,237 million square meters. The majority of apartments in multi-family apartment buildings are privately owned (see Figures 3.1 and 3.2, below).
Source: Institute for Urban Economics (2011), “Analysis of the Current Status of Russia’s Housing Stock.”
• Th e need for modernization is enormous: some 58–60 percent of the country’s total multi-family apartment buildings are in need of extensive capital repair, rising to 93–95 percent in those apartment blocks with an average age of not less than 25 years.
• Major investment will be essential for the renovation of the country’s multiple-occupancy residential sector. Estimates of the annual cost of such capital repairs in Russia to 2035 range from RUB220 billion (assuming superfi cial correction of accumulated problems) to RUB1 trillion (assuming the implementation of thoroughgoing repair and the utilization of energy-saving technologies and materials).
• Data from joint programs co-financed under the auspices of the Housing and Utilities Reform Fund shows the average cost of modernization to be RUB813 per square meter in 20097, increasing to RUB837 in 2010, and RUB833 in 20118: which rather suggests the conduct of selective repairs only, limited to the repair of lifts, roofing, and exterior cladding (facades).
6 Indicators on housing market characteristics referred to in this section are sourced from data collated through surveys conducted by the Federal State Statistics Service of the Russian Federation: Form No. 1 (Zhilfond), “Housing Stock Data”; From No. 4 (Zhilfond), “Data on the Provision of Residential Accommodation”; and Form No. 1-KR “Data on Capital Repairs to Housing Stock.”
7 Housing and Utilities Reform Fund of the Russian Federation (2010), “Annual Report 2009: Protocol of April 22.” Available at: http://www.fondgkh.ru/data/877/605/1234/OTCHET_2010_190510.pdf.
8 Housing and Utilities Reform Fund of the Russian Federation (2012) “Information on approved and pending applications for fi nancial assistance from the Fund,” March 7. Available at: http://www.fondgkh.ru/result/result/control/index.html.
Figure 3.1: Ownership Structure of Russia’s Housing
Stock (Total Floor Space)
Figure 3.2: Status of Russia’s Housing
Stock (Total Floor Space)
Municipally owned houses
1%
Privately owned
houses 29%
Municpially owned apartments
17%
Privately owned apartments
53%
Individual (detached)
houses30%
Multi-family apartment buildings
70%
8 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
• Energy effi ciency is generally low throughout the Russian residential sector. Nonetheless, eff ective capital repair and modernization of existing housing stock could improve energy effi ciency two-fold (see Figure 3.3, below). Potential energy savings throughout the Russian residential sector could, on average, match or exceed 40 per cent of current heating consumption, 37 percent of current electricity consumption, 30 percent of natural gas usage, and 25 percent of water consumption.
Source: McKinsey & Company (2009), Pathways to an energy and carbon efficient Russia.
• Th e availability of meters for monitoring energy consumption in Russia remains comparatively low. As at 2010, the availability of meters in multi-family apartment buildings was as follows:
- Th e proportion of multi-family apartment buildings with any form of metering device for the monitoring of total-building consumption averaged 27.6 percent, of which 26.9 percent had devices for monitoring of heating consumption; 24 percent consumption of cold water; 28.8 percent consumption of hot water; 28.8 percent electricity usage; and 10.1 percent consumption of gas.
- Th e availability of meters monitoring consumption in individual apartments was as follows: one percent of apartments had meters monitoring heating consumption; 22 percent cold water usage; 19 percent hot water usage; 80 percent electricity usage; and fi ve percent consumption of gas.
Th e absence of such metering facilities means it is diffi cult to encourage consumers to adopt energy-saving initiatives or behaviors.
Figure 3.3: Energy Consumption for Heating – Existing Housing Stock
Key Conclusions and Recommendations 9
4. International Experience in Financing Capital Repairs and Energy Efficiency Improvements in Multi-family Apartment Buildings
Research undertaken for this report also included an analysis of capital repairs and energy effi ciency improvements in multi-family apartment buildings in six other countries – Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia9,10. Th is analysis showed the fi nancing and organization of capital repairs in multi-family apartment buildings, and subsequent facilitation of long-term fi nancing for this, to be based on three core sources, as follows.
• Funds from property owners in multi-family apartment buildings, held in a single central fund for the repair of such specifi c apartment building (as is the case in Estonia, Hungary, Poland, and Slovakia).
• Finance facilities (loans) extended by commercial banks to Homeowners’ Associations and/or Housing Management Companies (as is, again, the case in Estonia, Hungary, Latvia, Poland and Slovakia).
• Budgetary support (government funding) Homeowners’ Associations, Housing Cooperatives and other residents’ representative organizations to support major capital repair projects leading to a signifi cant improvement in energy effi ciency (as is the case in all six of the European countries analyzed).
Th e successful functioning of this system is also contingent upon the following factors.
• Th e collective responsibility of all property owners for the proper repair and maintenance of their building – provided for under legislation in force in each of the above-mentioned countries. Dedicated state or municipal agencies are responsible for monitoring and controlling the maintenance and repair (i.e., the overall state) of such buildings, and can force delinquent owners to comply with legal requirements in this respect.
• Th e formation of a dedicated fi nancial resource (the “collective building repair fund”) in all multi-family apartment buildings – an obligatory requirement in several countries (including Estonia, Poland, and Slovakia), and a requirement on the part of those banks extending fi nance facilities to Homeowners’ Associations and Housing Management Companies in Hungary and Latvia.
• Th e compulsory formation of (and participation in) collective organizations for the management, maintenance and repair of multi-family apartment buildings (Homeowners’ Associations and Cooperatives), as is the case in Estonia, Hungary, Latvia, Poland, and Slovakia).
• Th e adoption of decision-making processes based on simple majority voting (and on full participation by all property owners), as is the case in Poland and Slovakia.
• Charges for heating and other utilities determined on the basis of metered consumption.
9 Th ese countries were selected on the basis of several common characteristics, including: the existence of legislation governing representative residents’ organizations; the existence of national and municipal government programs providing fi nancial support for the promotion of energy effi ciency improvements and repair in multi-family apartment buildings; and the existence of certain historical characteristics similar to those in Russia – e.g., a predominance of multi-family apartment buildings, a high degree of dereliction and decay, mass post-socialist privatization, and so on.
10 IFC (2011), “Analysis of international best practice in organizing and fi nancing capital repairs and energy effi ciency improvements of multi-family apartment buildings in Central and Eastern Europe.” Available at: http://www1.ifc.org/wps/wcm/connect/Publications_EXT_Content/IFC_External_Publication_Site/Publications_Listing_Page?languagesubjectsregions=%2C%2CIFC_EXT_Design%2FEurope+and+Central+Asia&languages=All+Languages&subjects=All+Subjects®ions=IFC_EXT_Design%2FEurope+and+Central+Asia.
10 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
• Th e existence of fi nancial incentives for apartment owners in multi-family apartment buildings, and access to credit facilities: the most common strategies for risk reduction and greater access to fi nance being as follows:
1) Given the greater risks involved in extending fi nancing facilities to residents’ organizations (collective owners’ associations) in the initial stages of their development, the existence of instruments to reduce credit risk allow commercial banks to develop fi nancial instruments (products) appropriate for residential repair and modernization. Th e management of such risks can be facilitated through various means: through state guarantees (Estonia); through the formation of a “State Guarantee and Development Bank” (Slovakia); through World Bank guarantees (Lithuania), through Building Society saving plans and partial guarantees from IFC (Hungary). All of these structures involve the provision of partial guarantees to commercial banks for credit facilities extended (as a rule, on a reimbursable basis) to residents’ organizations11.
2) Facilitating access to fi nance for residential repair and modernization, and improving its aff ordability for Homeowners’ Associations and/or other residents’ organizations. In Slovakia a Homeowners’ Association can obtain a subsidized loan for energy effi ciency improvements in a multi-family apartment building from the State Fund for Housing Development. In Poland a Homeowners’ Association can receive a grant from the State Energy Effi ciency and Renovation Fund for the partial repayment of loans received for the purposes of modernizing multi-family apartment buildings. Moreover, the size of such loans is tied to the level of energy effi ciency achieved (up to a maximum of 20 percent of any such facility) and transferred directly to the lending bank for discharge of the loan upon completion of the project.
• Public awareness campaigns are also important insofar as these can help promote attitudinal change in encouraging owners to become less dependent on government and to assume greater responsibility for the maintenance and repair of their own property. Poland, Slovakia, and Estonia have all developed eff ective public awareness campaigns, to that end.
11 A similar scheme currently being implemented in many regions throughout Russia involves the establishment of guarantee funds for small and medium-sized businesses. Such funds provide guarantees for credit facilities extended to small businesses and, in some instances, also provide advisory services to entrepreneurs.
Key Conclusions and Recommendations 11
5. Structural Analysis of Available Models for the Financing of Capital Repair and Energy Efficiency Improvements in Multi-family Apartment Buildings
Examination of international best practice in the organization and fi nancing of capital repairs and energy effi ciency improvements in multi-family apartment buildings reveals a number of common structural elements, including:
a) the importance of clear and consistent state policy; b) the importance of central (federal), regional, and municipal government – in terms of both regulation and
direct fi nancial involvement; c) the importance of an eff ective regulatory environment – and, specifi cally, the need for a viable balance between
regulation (and, where necessary, enforcement), versus civil rights and the need for market stimulation; d) the need for dedicated government institutions to promote and support government policy; e) the need for appropriate forms of fi nancial and fi scal (tax) incentives on the part of government to incentivize
property owners to undertake modernization and repair, and the need for mechanisms and strategies to encourage investment and engagement in the sector on the part of commercial banks;
f) the need for a clear legal delineation of the obligations and responsibilities of property owners, and mechanisms to facilitate the collective management of maintenance, modernization, and repair; and
g) the importance of access to fi nance (credit facilities) for owners (i.e., collective residents’ associations) to fund the repair and modernization of their apartment building on an aff ordable basis.
Several models, combining various of the features outlined above, were analyzed in terms of their applicability in Russia. Th ese models are outlined in more detail in Appendix A.
12 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
6. Mechanism for Financing Capital Repair and Energy Efficiency Improvements in Multi-family Apartment Buildings
Analysis suggests that the most viable model for a sustainable fi nancing solution for capital repair and energy effi ciency improvements in residential buildings in Russia might, in the medium term, be one involving a combination of the elements outlined above – the “Integrated Model,” as illustrated in Figure 6.1, below.
Th e key characteristic of this model is the presence of three sources of funding for the fi nancing of capital repairs and energy effi ciency improvements of multi-family apartment buildings: 1. property owners’ own funds, generated through contributions to the mandatory collective building repair fund; 2. fi nance facilities (credit fi nance/loans) from commercial banks; and 3. governmental (state) support. In the medium term this particular model could lead to the possibility of the capital repair of Russia’s housing stock being financed without co-financing from budgetary resources at various levels – with the exception of those social groups that will always be dependent on financial assistance from the state for the maintenance of private property. It also follows that the development of a market for such facilities (and the increasing availability of credit histories and other data in the discharge of such facilities by collective residents’ organizations) will lead to a reduction in the need for governmental support as an essential element in multiple-occupancy capital repair and energy efficiency projects (again, apart from those social groups that will always be in need of such state support).
The “Integrated Model” exhibits the following key characteristics (outlined in more detail in Appendix A)12. • Th e mandatory establishment of a collective fund for capital refurbishment and repair in each individual multi-
family apartment building (the “collective building repair fund”).
• Requirements regarding the minimal value for such funds, and the setting of monthly payments thereto, may be determined by regional/municipal government as a condition for receipt of state support (subsidies) or the receipt of guarantees from a state guarantee agency, at the behest of property owners.
• Assets accumulated in such collective fund are deemed to belong to all members of the appropriate representative residents’ organization (Homeowners’ Association, Housing Cooperative, etc.) in common, and are collected and held in a nominal account of such organization13.
• Conditions pertaining to the extension of credit facilities by commercial banks. - Any decision (resolution) on the procurement of credit facilities for capital repairs and/or energy
effi ciency improvements in a multi-family apartment building is adopted on the basis of a majority vote of the General Meeting (the collective representative body of all property owners) on the basis of a proposal
12 Th e proposed model does not include cases where the design features of an apartment building or the degree of deterioration make further repair or modernization impractical or economically ineffi cient, or where more than 50 percent of property owners are unable to meet their obligations in paying for such maintenance and repair.
13 A “nominee” (or “special nominal”) account is one in which the named holder holds the assets in such account on behalf of another or on behalf of a collective group or organization (the “benefi ciary”) for the conduct of operations using monetary resources not solely or exclusively owned by such named holder. Such accounts (i.e., not under the direct control or ownership of the account holder) are, in Russia, in an early stage of development and exist only to the extent of being discussed in the context of the new Civil Code of the Russian Federation – a piece of legislation itself currently undergoing further development.
Key Conclusions and Recommendations 13
Figure 6.1: “Integrated Model”
covering the scope, duration, and cost of such works, prepared by the relevant authority managing such multi-family apartment building (the Homeowners’ Association or other residents’ collective organization).
- Th e “debtor” or recipient of such credit facilities is deemed to be the entity responsible for the management of such multi-family apartment building (the Homeowners’ Association or other representative organization) acting on the basis of a decision adopted by the General Meeting.
- Th e disbursement of credit facilities for capital repair is determined on the basis of the repayments to be made by individual property owners; the level of such payments being determined by the General Meeting of the relevant representative organization in such building.
- Credit extended is not secured against immovable property of any kind – i.e., it is not secured against a Homeowners’ Association, Housing Management Company, or other representative organization as the collective owner of such multi-family apartment building, nor does any liability arise on the part of individual property owners (such credit being secured against receivables (i.e., property owners’ future payments) into the collective building repair fund).
- At the request of the bank, a guarantee or surety may be extended at charge, through a state guarantee agency, to cover part of the total credit extended.
• Payments received from property owners, as well as funds received through government support, may be used not just for capital refurbishment and repair (reconstruction) but also for energy effi ciency improvements and modernization.
• Government support initiatives to promote major capital repair and energy effi ciency improvement projects, and the development of bank loans as an essential means of fi nancing these measures:
Regional government
Housing Inspectorate
BANK
Nominal Bank Account
Eq
uity
par
ticip
atio
n in
st
art-
up
cap
ital
Funding of comprehensive subsidies for capital repairs
Subsidies to support comprehensive capital repairs
Su
bsi
die
s to
low
-in
com
e o
wn
ers
En
forc
ed
re
pai
rs
Guarantee
Credit
Payments to obligatory fund for building repairs
Co
ntr
ol
Application for guarantee
Governmental responsibilities
Mandatory payments for repairs
Budgetary funds
Bank credit facilities/loans
Financing of capital repairs
Financing of capital repairs
Federal government
MunicipalityCourt
Paobforrep
F
HOAHMC
Gu
A
GUARANTEE AGENCY
(federal or regional level)
Source: Adapted from Institute for Urban Economics (2011), “Mechanisms for the Financing of Capital Repairs and Energy Efficiency Improvements to Multi-family Apartment Buildings in Russia and Mechanisms for State Support.”
14 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
- Th e total funds available for the subsidizing of capital repairs in the relevant territory are determined under budgetary planning at the federal, regional, or municipal level and are included in such budgets’ schedules of protected expenditures (the budgetary term during which such subsidies are to be extended being determined under legislation at the appropriate level of government).
- Conditions pertaining to the provision of budgetary subsidies to residents’ associations for capital repairs and energy effi ciency improvements in multi-family apartment buildings are determined at the level of the constituent federal entity (or municipality) in accordance with local needs and priorities – i.e., depending on the level of reconstruction/capital repairs needed to local housing stock, the extent of energy effi ciency improvements necessary in multi-family apartment buildings, projected budgetary revenues, and the fi nancial solvency of the local population.Subsidies to mitigate the cost of large-scale capital repairs and energy effi ciency improvement projects.
- Special subsidies to low-income property owners to cover the costs of capital refurbishment.- Establishment and funding (capitalization) of specialized development agencies (e.g., federal and/or regional
guarantee agencies, investment funds and so on) to guarantee security (i.e., repayment) for lenders and to promote access to fi nance for the purposes of capital repairs and energy effi ciency improvements in multi-family apartment buildings.
• Property owners are independently responsible for adopting any decision on the commencement of payments into the collective building repair fund for the implementation of capital repairs or energy effi ciency improvements in accordance with building safety requirements and established parameters for energy effi ciency as and when necessary, and also subject to the availability of government support and/or bank fi nancing.
• Regulatory agencies (e.g., the local housing inspectorate etc.) are required to conduct regular inspections of multi-family apartment buildings depending on the age of a building (i.e., the length of time in which it has been in use) and other criteria. In the event that a building does not meet appropriate safety criteria, and in the event that owners fail to reach a decision on raising fi nance for repair, a legal judgment may be obtained compelling owners to commence payments into the collective building repair fund to the extent necessary to bring such building into a state of repair at least consistent with minimum legal requirements. Th e issue of the further intervention of state agencies in matters relating to private property and the conduct of repairs thereto is very delicate, and can be resolved in various ways, ranging from the enforcement of repairs (funded through the municipal or local authority budget with costs subsequently recovered from property owners (secured through a charge on the property in question)) to the compulsory evacuation of residents from a derelict building, with or without relocation to social-sector accommodation: another important issue in this context is the question of the valuation and subsequent use of such derelict building and the land occupied thereby.
Results generated under mathematical modeling of the eff ectiveness of the above model are based on the assumption that, as a result of various organizational initiatives and incentives, all property owners in multi-family apartment buildings in need of capital refurbishment or energy effi ciency improvements will adopt the necessary decisions and will eff ect regular payments into the collective building repair fund in the same amount as would be required under legislation establishing mandatory payments by virtue of law. On that basis, for the purpose of this analysis it is assumed that total fi nance raised through voluntary payments will be equal to the amount anticipated under mandatory payments14.
Qualitative analysis of the model indicates the following.
• Capital repairs extending to 170–180 million square meters of fl oor space per year could be achieved by 2035, 14 Th e «Integrated Model» mechanism proposed in this document is broadly based on proposals from the Institute for Urban Economics, but
diff ers insofar as the “Integrated Model” does not assume mandatory payments from property owners: the Institute for Urban Economics’ model does assume mandatory payments.
Key Conclusions and Recommendations 15
amounting to total coverage of 2,900–3,500 million square meters in the period 2012–35.
• During this period (i.e., to 2035) it will also be possible to ensure the continued expansion of those repair projects requiring the most intensive (and costly) overhaul (the proportion of which is expected to grow to between 1.8 and 2.7 percent of total fl oor space per year), to ensure coverage of 53–80 million square meters by that date. In total, the period from 2012 through 2035 is expected to see the capital repair of 84 percent of Russia’s oldest multi-family apartment buildings (i.e., those buildings currently more than 40 years old), as well as the capital repair of 70 percent of apartment buildings constructed 25 or more years ago.
• Th e market for bank lending in this sector (i.e., for the purpose of capital repairs and energy effi ciency improvements) is also expected to increase signifi cantly, from RUB120–140 billion in 2020 to RUB150–310 billion in 2035, once necessary initiatives to facilitate greater access to fi nance have been implemented. A total RUB3,200–4,000 billion of bank loans are expected to be extended for the purposes of the repair of multi-family apartment buildings in Russia from 2012 through 2035.
• Specialist evaluations suggest that the initial phase of the implementation of the Integrated Model, in which government support is critically important, is likely to last approximately fi ve years – aft er which point any reduction in state support is likely to have only limited impact.
• Government subsidies, as a proportion of total fi nancing for capital repair projects, are likely to peak at 21 percent in 2015, aft er which they are expected to reduce to zero by 2026. Government subsidies for capital repair projects from 2012 through 2026 are expected to total RUB280–290 billion (excluding social security costs and expenditures related to the maintenance of guarantee agencies and other development institutions).
Research also revealed a range of legislative and institutional barriers to the implementation of the proposed Integrated Model: these are likely to require specifi c legal reforms, outlined in section 7, below.
16 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
7. Making the Necessary Changes to the Legal and Regulatory Framework
Th ree key problems hinder investment into the modernization of multi-family apartment buildings and the successful implementation of the Integrated Model as outlined above: 1. Insuffi cient public engagement – i.e., insuffi cient engagement of property owners in multi-family apartment
buildings in the adoption of decisions regarding the management of their property and/or in the fi nancing of repairs to the common parts of such buildings.
2. Th e absence of clearly defi ned terms for state support and incentives to encourage owners to contribute to the capital repair and energy effi ciency improvement of multiple-occupancy housing stock.
3. Th e absence of viable security provisions and guarantees for investments (and credit facilities extended) in this sector.
Th e main decisions which need to be addressed at the federal level in order to implement and initiate mechanisms for the fi nancing of capital repairs and energy effi ciency improvement projects in multi-family apartment buildings (as outlined under the proposed Integrated Model) include the following. • A statutory resolution on the mandatory formation of a collective building repair fund in every multi-family
apartment building, and the security of owners’ contributions thereto. Th is would require amendment and revision of the Housing Code, the Civil Code, the Law on Banks and Banking Activities, the Code on Administrative Infringements, and a range of other secondary legislation and regulation.
Such a resolution would remove a key barrier regarding insuffi cient engagement on the part of property owners in taking control of the management of their property and/or in the fi nancing of repairs to the common parts of such buildings, and would encourage the timely adoption of decisions regarding he capital repair and/or energy effi ciency improvement of multi-family apartment buildings.
• Th e setting of minimum requirements governing the collective building repair fund of a building, and the determination of monthly contributions to its establishment and replenishment as a statutory requirement for all property owners applying for state support for the fulfi llment of capital repair or energy effi ciency improvement projects. Th is will require amendments to the Housing Code.
• Th e introduction of legislation and regulation to allow the level of budgetary (state) resources for the support of capital repair and energy effi ciency improvement projects to be included in the schedule of protected expenditures in government budgets at all levels (i.e., federal, regional and municipal) to the extent of any period of time permissible by law. Th is will require reform of current budgetary legislation.
• Th e establishment of clear and transparent regulation governing the granting of state subsidies to residents’ organizations, on competitive terms. Th is will, in particular, require the adoption of legislation on the kind of state support to be off ered to property owners for the implementation of capital repair and energy effi ciency improvement projects in multi-family apartment buildings – either through the provision of budgetary subsidies (grants) to meet part of the cost of such projects, or through the inclusion of low-income families’ costs (i.e., contributions to the collective building repair fund) under any housing support program. Th is will require regulation governing the provision of such subsidies to property owners, as well as amendments to the Housing Code.
• Th e introduction of legislation allowing payments received in the form of subsidies for capital repair and/or energy effi ciency improvement projects to be exempt from tax, and allowing concessions to be extended to personal tax payers (in the form of deductible allowances/reimbursement of costs in respect of such projects), to the extent permissible under current legislation. Th is will require reform of the Tax Code:
Key Conclusions and Recommendations 17
Such initiatives would eliminate the barrier of insuffi ciency of state subsidies and incentives to encourage public engagement in and contributions to capital repair and energy effi ciency projects in the residential sector, as well as allowing property owners to undertake appropriate fi nancial planning for such projects.
• Th e introduction of regulation to reduce lending risks (i.e., addressing the security and reliability of borrowers). It is proposed to extend the principle of “subsidiary liability” of the property owners within a multi-family apartment building toward the creditors of any Homeowners’ Association or Housing Management Company fi nancing such capital repair or energy effi ciency improvement project(s) prorated to the amounts past due by respective property owners for capital repairs. Th is will require amendments to the Civil Code.
• Adoption at the federal or regional levels (i.e., at the level of the constituent entities of the Russian Federation) of regulation governing the provision of state support to promote the extension of bank loans (credit facilities) for capital repair and energy effi ciency improvement projects in multi-family apartment buildings. Such legislation should clearly defi ne and delineate the core objectives and responsibilities – as well as the operation – of federal and/or regional guarantee agencies and/or investment funds established to that end. Th is will require amendments to the Housing Code and to legislation governing the provision of state and municipal guarantees:
Th ese initiatives will eliminate the barrier of the absence of viable security provisions and guarantees for any credit facilities (loans) extended by commercial banks thus attracted to the sector, and will improve access to fi nance (as well as reducing the cost of such facilities) for Homeowners’ Associations, Housing Management Companies or other collective residents’ organizations engaging in capital repairs or energy effi ciency improvements.
18 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Figure A1.1: “Mutual Financing” Model
Appendix A: Outline of Key Models
Regional government
BANK
Bank account
of the Regional
Fund
Monthly/annual plans for capital repairsCreates
Funds collected for building
repairs
Option 2
Financing of capital repairs
HOAHMC
Separate bank
account
Option 1Financing of capital repairs
Governmental responsibilities
Mandatory payments
Financing of capital repairs
Options for fulfillment under this Model
Mandatory payments for repairs
f
FFunds collected
Regional Fund
HOA HMC
BANK
Regional Fund
Se
lect
s th
rou
gh
co
mp
etit
ion
Loan
s Su
bsi
die
s
Cre
dits Mandatory payments
for repairs
Mandatory payments for repairs
Trust management contract
Financing of capital repairs
Financing of capital repairs
Trust management contract
Regional program
M
T
F
F
T
TRUST
MANAGER
(bank or any other legally compliant organization)
Governmental responsibilities
Mandatory payments
Budgetary funds
Loans from Regional Fund and bank credit facilities
Financing of capital repairs
Figure A1.2: “Trust Management” Model
ital repairs
HOAHMC
M hl / l l
Municipality
Regional government
Mandatory payments for repairs
Key Conclusions and Recommendations 19
Figure A1.3: “Voluntary Payments” Model
Figure A1.4: “Depreciation Charges” Model
BANK
Separate bank account
HOA HMC
Credit
Financing of capital repairs
Voluntary payments towards the financing of capital repairs
Su
bsi
diz
e in
tere
st
rate
s o
n lo
ans/
cre
dit
faci
litie
s
Creates
Sta
te g
uar
ante
es G
ran
ts a
nd
su
bsi
die
s
Governmental responsibilities
Payments for repairs
Budgetary funds
Bank credit facilities/loans
Financing of capital repairs
Creates
State
s
Dedicated state agency
it es
Regional or municipal budgets
BANK
Entity responsible for maintenance/management of property held in common
(HMC, HOA)
Supporting fund/issuer of securities
Financing of capital
refurbishment/repair
Loan payment
Loan backed by securities
Mandatory depreciation
charges
Pu
rch
ase
of s
ecu
ritie
s
Governmental responsibilities
Mandatory payments
Bank credit facilities/loans
Financing of capital repairs
Purchase of securities
Source: Adapted from Institute for Urban Economics (2011), “Mechanisms for the Financing of Capital Repairs and Energy Efficiency Improvements to Multi-family Apartment Buildings in Russia and Mechanisms for State Support.”
20 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment BuildingsA
pp
en
dix
B: F
inan
cin
g th
e C
apita
l Re
pai
r o
f Mu
lti-f
amily
Ap
artm
en
t Bu
ildin
gs
in R
uss
ia –
Co
mp
aris
on
of P
ote
ntia
l Mo
de
lsF
INA
NC
ING
TH
E C
AP
ITA
L R
EP
AIR
OF
MU
LTI-
FA
MIL
Y A
PA
RT
ME
NT
BU
ILD
ING
S IN
RU
SS
IA –
CO
MP
AR
ISO
N O
F P
OT
EN
TIA
L M
OD
ELS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
1. M
utu
al
Fin
anci
ng
M
od
el.
Man
dat
ory
mo
nth
ly p
aym
en
ts.
Tim
ely
co
mm
en
cem
en
t of w
ork
s,
pai
d fo
r th
rou
gh
re
sou
rce
s h
eld
in
Re
gio
nal
Fu
nd
(s).
If a
maj
ori
ty o
f ow
ne
rs in
a m
ulti
-fa
mily
ap
artm
en
t bu
ildin
g a
do
pt
a d
eci
sio
n o
n th
e in
de
pe
nd
en
t co
llect
ion
of f
un
ds
for
cap
ital
rep
air
the
n th
e a
ntic
ipat
ed
ext
en
t o
f cap
ital r
ep
air
to b
e fi
nan
ced
th
rou
gh
the
Re
gio
nal
Fu
nd
may
be
re
du
ced
.
Low
leve
l of f
ed
era
l go
vern
me
nt
invo
lve
me
nt.
Leve
l of m
on
thly
pay
me
nts
d
ete
rmin
ed
by
mu
nic
ipal
ity.
Hig
h v
olu
me
s o
f re
pai
rs d
uri
ng
th
e in
itial
sta
ge
s o
f th
is m
od
el.
Ne
ith
er
the
“R
eg
ion
al
Fu
nd
” o
pti
on
(O
pti
on
1,
Fig
ure
A1
.1)
no
r th
e “
Ind
ivid
ua
l F
ina
nc
ing
” o
pti
on
(O
pti
on
2,
Fig
ure
A1
.1;
se
e a
lso
fir
st
co
lum
n,
be
low
) e
nvi
sa
ge
s a
cle
ar
ba
sis
fo
r th
e p
rovi
sio
n o
f re
gio
na
l o
r m
un
icip
al
bu
dg
eta
ry
su
pp
ort
; a
su
bs
eq
ue
nt
lac
k o
f im
me
dia
tely
ava
ila
ble
fu
nd
s a
s a
re
su
lt o
f th
is c
ou
ld r
es
ult
in
th
e v
olu
me
s a
nd
/or
ext
en
t o
f c
ap
ita
l re
pa
ir p
roje
cts
be
ing
re
du
ce
d.
Low
leve
l of b
ud
ge
tary
su
pp
ort
at
all
leve
ls.
Th
e p
refe
rre
d o
ptio
n fo
r th
e
dis
trib
utio
n/u
se o
f co
llect
ed
fu
nd
s is
Op
tion
1: t
ran
sfe
r in
to a
“R
eg
ion
al F
un
d”
un
de
r m
anag
em
en
t of r
eg
ion
al
go
vern
me
nt (
the
ap
pro
pri
ate
co
nst
itue
nt e
ntit
y o
f th
e R
uss
ian
F
ed
era
tion
) –
i.e
., th
e “
Re
gio
nal
F
un
d”
op
tion
.
Ap
pe
ars
to b
e a
qu
ick
and
u
nifo
rm s
olu
tion
for
all t
ype
s o
f m
ulti
-fam
ily a
par
tme
nt b
uild
ing
s.
Ne
ith
er
the
“R
eg
ion
al
Fu
nd
” n
or
the
“In
div
idu
al
Fin
an
cin
g”
op
tio
ns
cle
arl
y e
nvi
sa
ge
th
e
pa
rtic
ipa
tio
n o
f fi
na
nc
ial
ins
titu
tio
ns
/co
mm
erc
ial
len
de
rs i
n t
he
fin
an
cin
g
of
ca
pit
al
rep
air
pro
jec
ts
in m
ult
i-fa
mil
y a
pa
rtm
en
t b
uil
din
gs
; a
su
bs
eq
ue
nt
lac
k o
f im
me
dia
tely
ava
ila
ble
fu
nd
s a
s a
re
su
lt o
f th
is c
ou
ld r
es
ult
in
th
e v
olu
me
s a
nd
/or
ext
en
t o
f c
ap
ita
l re
pa
ir p
roje
cts
be
ing
re
du
ce
d.
Low
leve
l of f
inan
cial
-se
cto
r in
volv
em
en
t.
Key Conclusions and Recommendations 21
Fu
nd
s so
urc
ed
fro
m v
ario
us
mu
lti-
fam
ily a
par
tme
nt b
uild
ing
s w
ithin
a
mu
nic
ipal
ity a
nd
co
llect
ed
with
in
a R
eg
ion
al F
un
d a
re u
sed
for
the
re
pai
r o
f a r
ang
e o
f oth
er
mu
lti-
fam
ily a
par
tme
nt b
uild
ing
s w
ithin
th
e s
ame
are
a (i
.e.,
the
sam
e
mu
nic
ipal
ity).
Th
is m
od
el a
pp
ear
s to
pre
sen
t an
eas
y so
lutio
n fo
r th
ose
o
wn
ers
un
will
ing
or
un
able
to
reac
h a
co
llect
ive
de
cisi
on
on
the
re
no
vatio
n o
f a b
uild
ing
.
Loca
l go
vern
me
nt a
ge
nci
es
pla
y to
o g
reat
a r
ole
in th
is p
roce
ss:
a) c
apita
l re
pai
r p
roje
cts
are
u
nd
ert
ake
n in
acc
ord
ance
with
lo
cal g
ove
rnm
en
t ob
ject
ive
s,
and
no
t th
ose
of o
wn
ers
th
em
selv
es;
b)
the
sco
pe
of s
uch
p
roje
cts
is a
gai
n d
ete
rmin
ed
b
y lo
cal g
ove
rnm
en
t; c
) lo
cal
go
vern
me
nt i
s al
so r
esp
on
sib
le
for
the
ap
po
intm
en
t of s
up
plie
rs
and
co
ntr
acto
rs; a
nd
d)
the
ro
le
and
en
gag
em
en
t of o
wn
ers
in
man
age
me
nt a
nd
cap
ital r
ep
air
is
red
uce
d: a
ll o
f wh
ich
giv
es
rise
to
gre
ate
r ri
sk o
f co
rru
ptio
n.
Low
leve
l of r
esi
de
nt/
ow
ne
r p
artic
ipat
ion
.
Cap
ital r
ep
air
to b
e u
nd
ert
ake
n
on
the
bas
is o
f mo
nth
ly/a
nn
ual
p
lan
s as
ap
pro
ved
by
loca
l g
ove
rnm
en
t (p
rio
ritiz
ed
on
the
b
asis
of r
eso
urc
es
colle
cte
d in
the
ap
plic
able
Re
gio
nal
Fu
nd
).
Do
es
no
t re
qu
ire th
e a
do
ptio
n
of a
dd
itio
nal
leg
isla
tion
or
reg
ula
tion
at t
he
fed
era
l le
vel.
Th
is m
od
el d
oe
s n
ot p
rio
ritiz
e
be
tte
r q
ual
ity o
f life
or
en
erg
y e
ffic
ien
cy im
pro
vem
en
ts in
m
ulti
-fam
ily a
par
tme
nt b
uild
ing
s:
the
re is
a h
igh
ris
k th
at c
rite
ria
de
term
inin
g th
e s
ucc
ess
ful
imp
lem
en
tatio
n o
f a s
yste
m fo
r ca
pita
l re
pai
rs w
ill b
e d
ete
rmin
ed
o
n th
e b
asis
of t
he
tota
l nu
mb
er
of
bu
ildin
gs/
tota
l flo
or
spac
e, r
ath
er
than
re
sid
en
ts’ n
ee
ds
or
be
tte
r e
ne
rgy
eff
icie
ncy
.
Hig
h d
ep
en
de
nce
on
the
co
llect
ion
of c
on
trib
utio
ns
to
colle
ctiv
e b
uild
ing
re
pai
r fu
nd
s.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
22 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Ow
ne
rs in
mu
lti-f
amily
ap
artm
en
t b
uild
ing
s h
ave
the
rig
ht (
thro
ug
h a
d
eci
sio
n o
f th
e G
en
era
l Me
etin
g)
to m
anag
e th
e c
olle
ctio
n a
nd
e
xpe
nd
iture
of t
he
re
sou
rce
s o
f th
eir
ow
n c
olle
ctiv
e b
uild
ing
re
pai
r fu
nd
ind
ep
en
de
ntly
(th
e
“In
div
idu
al F
inan
cin
g”
op
tion
, O
ptio
n 2
in F
igu
re A
1.1
, ab
ove
) ra
the
r th
an tr
ansf
err
ing
the
ir
man
dat
ory
co
ntr
ibu
tion
s to
an
y re
gio
nal
co
llect
ive
sys
tem
of
Re
gio
nal
Fu
nd
s.
Th
ere
is n
o g
uar
ante
e th
at o
wn
ers
’ ch
oo
sin
g th
e “
Ind
ep
en
de
nt
Fin
anci
ng
” o
ver
the
“R
eg
ion
al
Fu
nd
” o
ptio
n w
ill r
ece
ive
eq
ual
tr
eat
me
nt i
n th
e a
lloca
tion
of
go
vern
me
nt s
up
po
rt (
bu
dg
eta
ry
fun
ds)
.
Hig
h r
isk
of i
nst
abili
ty (
“pyr
amid
st
ruct
ure
”) w
itho
ut c
on
sist
en
t an
d s
ust
ain
able
su
pp
ort
fro
m
finan
cial
inst
itutio
ns
and
/or
go
vern
me
nt.
Co
nsi
de
rab
le p
ote
ntia
l fo
r co
rru
ptio
n.
2. T
rust
M
anag
em
en
t M
od
el.
Pro
pe
rty
ow
ne
rs m
ake
man
dat
ory
m
on
thly
co
ntr
ibu
tion
s fo
r th
e
finan
cin
g o
f cap
ital r
ep
airs
un
til
the
co
llect
ive
bu
ildin
g r
ep
air
fun
d
reac
he
s a
leve
l de
term
ine
d b
y re
gio
nal
go
vern
me
nt.
Exp
en
ditu
re o
n c
apita
l re
pai
rs
can
no
t occ
ur
with
ou
t th
e
con
sen
t of t
ho
se o
wn
ers
pay
ing
fo
r su
ch r
ep
airs
.
Pro
pe
rty
ow
ne
rs h
ave
no
in
volv
em
en
t in
the
ad
op
tion
o
f de
cisi
on
s g
ove
rnin
g th
e
ext
en
t of a
ny
cap
ital r
ep
air
(or
en
erg
y e
ffic
ien
cy)
pro
ject
to b
e
un
de
rtak
en
, its
du
ratio
n a
nd
/o
r co
st: r
esp
on
sib
ility
for
the
m
anag
em
en
t an
d p
ote
ntia
l e
xpe
nd
iture
of a
ny
fun
ds
rais
ed
b
y o
wn
ers
re
sts
with
the
“Tr
ust
M
anag
er”
(e
lect
ed
by
reg
ion
al
go
vern
me
nt)
rat
he
r th
an w
ith
pro
pe
rty
ow
ne
rs th
em
selv
es.
Low
leve
l of f
ed
era
l go
vern
me
nt
invo
lve
me
nt.
Th
e m
inim
um
am
ou
nt o
f su
ch
man
dat
ory
mo
nth
ly p
aym
en
ts
for
cap
ital r
ep
air
are
de
term
ine
d
un
de
r re
gio
nal
an
d m
un
icip
al
leg
isla
tion
.
Th
e in
volv
em
en
t of c
om
me
rcia
l b
anks
in th
e e
xte
nsi
on
of c
red
it fa
cilit
ies
for
cap
ital r
ep
airs
is
pre
sup
po
sed
.
Pro
ble
ms
aris
ing
fro
m d
eci
sio
n
mak
ing
on
cap
ital r
ep
airs
may
re
sult
in th
e v
olu
me
of s
uch
re
pai
rs
be
ing
re
stri
cte
d.
Su
stai
nab
le b
ud
ge
tary
su
pp
ort
at
the
re
gio
nal
leve
l (su
bje
ct to
av
aila
bili
ty o
f fu
nd
s).
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Key Conclusions and Recommendations 23
A “
Tru
st M
anag
er,”
ap
po
inte
d
by
reg
ion
al g
ove
rnm
en
t, is
re
spo
nsi
ble
for
the
man
age
me
nt
of e
ach
ind
ivid
ual
ow
ne
r’s
be
ne
ficia
ry in
tere
sts
in a
mu
lti-
fam
ily a
par
tme
nt b
uild
ing
, up
on
si
gn
ing
of a
n a
pp
rop
riat
e tr
ust
ag
ree
me
nt f
or
a p
eri
od
no
t e
xce
ed
ing
10
ye
ars.
Th
e s
tate
gu
aran
tee
s fin
anci
al
reso
urc
es
accu
mu
late
d b
y p
rop
ert
y o
wn
ers
for
cap
ital
rep
air.
Th
e p
rovi
sio
n o
f fin
ance
faci
litie
s th
rou
gh
go
vern
me
nt (
bu
dg
eta
ry)
sou
rce
s w
ill m
ake
co
mm
erc
ial
loan
s (c
om
me
rcia
l ban
kin
g
faci
litie
s) fa
r le
ss a
ttra
ctiv
e to
o
wn
ers
.
Low
leve
l of r
esi
de
nt/
ow
ne
r p
artic
ipat
ion
.
Dis
po
sal a
nd
man
age
me
nt o
f co
llect
ive
bu
ildin
g r
ep
air
fun
ds:
- M
and
ato
ry c
on
trib
utio
ns
are
p
aid
to th
e “
Tru
st M
anag
er,”
w
ho
is o
blig
ed
to m
ain
tain
fu
ll an
d a
pp
rop
riat
e r
eco
rds,
b
roke
n d
ow
n to
sh
ow
ind
ivid
ual
ac
cou
nts
for
ind
ivid
ual
ow
ne
rs
in th
e r
ele
van
t mu
lti-f
amily
ap
artm
en
t bu
ildin
g;
- F
un
ds
colle
cte
d fr
om
ind
ivid
ual
o
wn
ers
in a
mu
lti-f
amily
ap
artm
en
t bu
ildin
g m
ay o
nly
be
sp
en
t or
dis
bu
rse
d (
by
the
“Tr
ust
M
anag
er”
) o
n th
e c
apita
l re
pai
r o
f su
ch s
pe
cific
mu
lti-f
amily
ap
artm
en
t bu
ildin
g ;
- In
the
eve
nt o
f in
suff
icie
nt f
un
ds
be
ing
rai
sed
by
ow
ne
rs, t
he
“T
rust
Man
age
r” m
ay a
pp
ly
for
cre
dit
at a
n a
pp
rop
riat
e
com
me
rcia
l ban
k.
Acc
ess
to s
tate
(b
ud
ge
tary
) su
pp
ort
for
cap
ital r
ep
air.
Inst
itutio
nal
ch
ang
es
to e
nab
le
com
me
rcia
l ban
ks to
ext
en
d
cre
dit
faci
litie
s fo
r ca
pita
l re
pai
r p
roje
cts
(i.e
., r
ela
ting
to lo
an
colla
tera
lizat
ion
an
d s
ecu
rity
) ar
e
no
t an
ticip
ate
d.
Low
leve
l of p
artic
ipat
ion
on
the
p
art o
f co
mm
erc
ial b
anks
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
24 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Th
e fi
nan
cin
g o
f cap
ital r
ep
airs
is
un
de
rtak
en
on
the
bas
is o
f a
de
cisi
on
take
n b
y th
e G
en
era
l M
ee
ting
(o
f th
e H
om
eo
wn
ers
’ A
sso
ciat
ion
or
oth
er
app
rop
riat
e
rep
rese
nta
tive
re
sid
en
ts’
org
aniz
atio
n)
on
the
bas
is o
f a
man
dat
ory
tech
nic
al in
spe
ctio
n
(re
qu
ired
to b
e c
on
du
cte
d o
nce
e
very
five
ye
ars)
or,
wh
ere
ow
ne
rs
hav
e fa
iled
to a
do
pt s
uch
de
cisi
on
, at
the
inst
ruct
ion
of a
n a
uth
ori
zed
st
ate
ag
en
cy.
Go
vern
me
nt s
up
po
rt m
ay b
e
ext
en
de
d in
the
form
of b
ud
ge
tary
su
bsi
die
s o
r as
loan
s e
xte
nd
ed
th
rou
gh
the
Re
gio
nal
Fu
nd
(a
de
dic
ate
d fa
cilit
y fin
ance
d th
rou
gh
th
e r
eg
ion
al b
ud
ge
t an
d p
rovi
de
d
for
un
de
r th
e a
pp
rop
riat
e r
eg
ion
al
pro
gra
m).
No
ne
ed
for
add
itio
nal
leg
al o
r re
gu
lato
ry r
efo
rm a
t th
e fe
de
ral
leve
l (su
bje
ct to
the
pro
visi
on
s o
f th
e n
ew
Civ
il C
od
e).
Hig
h le
vel o
f de
pe
nd
en
ce o
n
finan
cial
su
pp
ort
fro
m r
eg
ion
al
bu
dg
ets
.
Co
nsi
de
rab
le p
ote
ntia
l fo
r co
rru
ptio
n.
3. V
olu
nta
ry
Pay
me
nts
M
od
el.
Th
is m
od
el d
oe
s n
ot e
nvi
sag
e th
e
leg
al e
nfo
rce
me
nt o
f man
dat
ory
p
aym
en
ts fo
r ca
pita
l re
pai
rs;
rath
er,
such
pay
me
nts
may
on
ly b
e
colle
cte
d fo
llow
ing
the
ad
op
tion
o
f an
ap
pro
pri
ate
re
solu
tion
by
the
Ho
me
ow
ne
rs’ A
sso
ciat
ion
or
oth
er
rep
rese
nta
tive
re
sid
en
ts’
org
aniz
atio
n.
No
man
dat
ory
pay
me
nts
are
re
qu
ired
for
cap
ital r
ep
airs
; fin
anci
al r
eso
urc
es
for
rep
airs
b
ein
g r
aise
d o
nly
on
the
ad
op
tion
o
f an
ap
pro
pri
ate
re
solu
tion
by
the
Ge
ne
ral M
ee
ting
.
Ris
k o
f a s
har
p d
ecl
ine
in th
e
volu
me
of c
apita
l re
pai
rs in
in
itial
sta
ge
s d
ue
to a
bse
nce
o
f re
qu
irem
en
ts fo
r m
and
ato
ry
con
trib
utio
ns,
as
we
ll as
re
sid
en
ts’
po
ssib
le in
diff
ere
nce
– p
oss
ible
in
cre
ase
in th
e n
um
be
r o
f de
relic
t m
ulti
-fam
ily a
par
tme
nt b
uild
ing
s,
as a
re
sult.
Maj
or
leg
al r
efo
rm r
eq
uire
d
initi
ally
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Key Conclusions and Recommendations 25
Ow
ne
rs’ i
n a
mu
lti-f
amily
ap
artm
en
t bu
ildin
g, s
ub
ject
to
the
ad
op
tion
of a
n a
pp
rop
riat
e
reso
lutio
n b
y th
e G
en
era
l Me
etin
g,
auth
ori
ze th
e H
om
eo
wn
ers
’ A
sso
ciat
ion
or
Ho
usi
ng
M
anag
em
en
t Co
mp
any
to o
pe
n
a se
par
ate
ban
k ac
cou
nt f
or
the
co
llect
ion
of r
eg
ula
r p
aym
en
ts
rece
ive
d fr
om
pro
pe
rty
ow
ne
rs.
Ind
ep
en
de
nce
of p
rop
ert
y o
wn
ers
in a
ll d
eci
sio
n m
akin
g;
de
velo
pm
en
t of c
olle
ctiv
e
resp
on
sib
ility
in th
e o
wn
ers
hip
an
d m
anag
em
en
t of s
uch
mu
lti-
fam
ily a
par
tme
nt b
uild
ing
.
Sig
nifi
can
t ch
ang
es
to le
gis
latio
n
and
re
gu
latio
n a
re u
nav
oid
able
u
nd
er
this
mo
de
l.
Low
leve
l of r
eg
ula
tion
/g
ove
rnm
en
t in
volv
em
en
t.
Mo
nie
s h
eld
in s
uch
acc
ou
nt m
ay
be
dis
po
sed
of o
nly
in a
cco
rdan
ce
with
an
ap
pro
pri
ate
re
solu
tion
by
the
Ge
ne
ral M
ee
ting
.
Th
e u
se o
f mu
ltip
le s
ou
rce
s o
f fin
ance
on
the
par
t of p
rop
ert
y o
wn
ers
– in
clu
din
g c
red
it fin
ance
fa
cilit
ies
(lo
ans)
an
d g
ove
rnm
en
t su
bsi
die
s.
Un
avo
idab
ility
of g
ove
rnm
en
tal
sup
po
rt (
thro
ug
h th
e fe
de
ral
bu
dg
et)
for
the
low
est
-in
com
e
reg
ion
s.
Rai
sin
g o
f fin
ance
thro
ug
h
com
me
rcia
l ban
k cr
ed
it fa
cilit
ies:
- T
he
pro
cure
me
nt o
f an
y cr
ed
it fa
cilit
y m
ust
be
en
do
rse
d b
y th
e
Ge
ne
ral M
ee
ting
;-
Th
e b
orr
ow
er
is d
ee
me
d to
be
th
e H
om
eo
wn
ers
’ Ass
oci
atio
n,
oth
er
rep
rese
nta
tive
re
sid
en
ts’
org
aniz
atio
n, o
r H
ou
sin
g
Man
age
me
nt C
om
pan
y.
Str
ate
gic
go
vern
me
nta
l su
pp
ort
in
imp
rovi
ng
en
erg
y e
ffic
ien
cy in
m
ulti
ple
-occ
up
ancy
ho
usi
ng
.
Hig
h le
vel o
f su
pp
ort
re
qu
ired
th
rou
gh
re
gio
nal
bu
dg
ets
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
26 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Po
ten
tial s
up
po
rt s
trat
eg
ies:
-
Su
bsi
diz
ing
inte
rest
rat
es
on
cr
ed
it fa
cilit
ies
ext
en
de
d fo
r ca
pita
l re
pai
rs ;
- E
xte
nsi
on
of s
ub
sid
ies
to H
ou
sin
g M
anag
em
en
t C
om
pan
ies
and
/or
Ho
me
ow
ne
rs’ A
sso
ciat
ion
s (i
n th
e o
rde
r o
f 15
–2
0 p
erc
en
t o
f th
e to
tal c
ost
of t
he
cap
ital
rep
airs
en
visa
ge
d)
to o
ffse
t th
e
cost
of t
ech
nic
al in
spe
ctio
ns/
surv
eys
, th
e fi
nal
izat
ion
an
d a
pp
rova
l of p
roje
ct
do
cum
en
tatio
n, o
r as
a d
ow
n
pay
me
nt o
n a
ny
cre
dit
faci
lity
;-
Est
ablis
hm
en
t of a
de
dic
ate
d
stat
e a
ge
ncy
for
the
pro
visi
on
of
gu
aran
tee
s to
loca
l ban
ks;
Hig
h le
vel o
f act
ivity
on
the
par
t o
f ow
ne
rs.
- P
rovi
sio
n o
f su
bsi
die
s to
p
en
sio
ne
rs, y
ou
ng
fam
ilie
s an
d/
or
fam
ilie
s w
ith m
any
child
ren
(e
.g.,
for
the
inst
alla
tion
of
me
ters
or
rep
lace
me
nt o
f h
eat
ing
eq
uip
me
nt)
.
Hig
h le
vel o
f en
gag
em
en
t on
th
e p
art o
f co
mm
erc
ial b
anks
/fin
anci
al in
stitu
tion
s.
Low
ris
k o
f co
rru
ptio
n a
risi
ng
.
Th
is m
od
el i
s lik
ely
to b
e s
low
to
de
velo
p in
the
initi
al s
tag
es,
bu
t w
ill a
llow
sta
ble
an
d s
ust
ain
able
g
row
th th
ere
afte
r.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Key Conclusions and Recommendations 27
On
ce e
stab
lish
ed
, th
is m
od
el i
s n
ot d
ep
en
de
nt o
n g
ove
rnm
en
t su
pp
ort
.
4. D
ep
reci
atio
n
Ch
arg
es
Mo
de
l.A
do
ptio
n o
f le
gis
latio
n g
ove
rnin
g:
- T
he
de
pre
ciat
ion
(am
ort
izat
ion
) o
f co
mm
on
par
ts o
f a m
ulti
-fa
mily
ap
artm
en
t bu
ildin
g h
eld
as
join
t pro
pe
rty
by
ow
ne
rs in
su
ch m
ulti
-fam
ily a
par
tme
nt
bu
ildin
g ;
- Im
po
sitio
n o
f man
dat
ory
mo
nth
ly
de
pre
ciat
ion
(am
ort
izat
ion
) ch
arg
es
agai
nst
su
ch o
wn
ers
of
pro
pe
rty
he
ld in
co
mm
on
.
Th
is in
itiat
ive
re
pre
sen
ts a
n
atte
mp
t to
acc
ou
nt f
or
fed
era
l/m
un
icip
al li
abili
ties
for
cap
ital
rep
airs
no
t un
de
rtak
en
as
at
the
tim
e s
uch
pro
pe
rtie
s w
ere
p
riva
tize
d.
Tran
sfe
r o
f re
spo
nsi
bili
ty fo
r ca
pita
l re
pai
rs in
mu
lti-f
amily
ap
artm
en
t bu
ildin
gs
fro
m
apar
tme
nt o
wn
ers
to H
ou
sin
g
Man
age
me
nt C
om
pan
ies.
Low
leve
l of g
ove
rnm
en
t in
volv
em
en
t at a
ll le
vels
.
Th
e a
sse
t ho
lde
r* o
f su
ch p
rop
ert
y h
eld
in c
om
mo
n s
hal
l be
de
em
ed
to
be
the
org
aniz
atio
n r
esp
on
sib
le
for
ove
rall
man
age
me
nt o
f su
ch
pro
pe
rty,
e.g
., th
e H
om
eo
wn
ers
’ A
sso
ciat
ion
, Ho
usi
ng
M
anag
em
en
t Co
mp
any,
Ho
usi
ng
C
oo
pe
rativ
e, o
r si
mila
r co
llect
ive
re
pre
sen
tativ
e o
rgan
izat
ion
.
A c
on
stan
t an
d o
ng
oin
g s
ou
rce
o
f re
ven
ue
s fr
om
the
mo
me
nt o
f its
imp
lem
en
tatio
n.
Eco
no
mic
an
d le
gal
inju
stic
e in
th
e in
tro
du
ctio
n o
f de
pre
ciat
ion
(a
mo
rtiz
atio
n)
char
ge
s.
Low
invo
lve
me
nt o
f sta
te
bu
dg
ets
, at a
ll le
vels
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
*No
te: P
urs
uan
t to
cu
rre
nt l
eg
isla
tion
, pro
pe
rty
he
ld in
co
mm
on
by
ind
ivid
ual
ow
ne
rs w
ithin
a m
ulti
-fam
ily a
par
tme
nt
bu
ildin
g is
no
t su
bje
ct to
the
sam
e p
rin
cip
les
of j
ou
rnal
-en
try
bo
okk
ee
pin
g a
pp
licab
le to
the
leg
al e
ntit
y re
spo
nsi
ble
fo
r m
anag
ing
su
ch b
uild
ing
. Th
e te
rm “
asse
t-h
old
er”
is th
ere
fore
use
d fo
r co
nve
nie
nce
in th
is m
od
el.
28 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Th
e le
vel (
amo
un
t) o
f su
ch
man
dat
ory
mo
nth
ly d
ep
reci
atio
n
(am
ort
izat
ion
) ch
arg
e is
d
ete
rmin
ed
by
the
ab
ove
o
rgan
izat
ion
s o
n th
e b
asis
of
a p
rop
ert
y’s
cad
astr
al v
alu
e
and
ap
plic
able
de
pre
ciat
ion
(a
mo
rtiz
atio
n)
rate
s.
Inad
eq
uat
e fi
nan
cial
re
sou
rce
s fo
r th
e c
apita
l re
furb
ish
me
nt
of b
uild
ing
s in
po
or
ph
ysic
al
con
diti
on
(in
co
ntr
ast t
o th
e
surp
lus
reve
nu
e th
at w
ill r
esu
lt fr
om
the
re
pai
r o
f ne
w h
ou
sin
g
or
bu
ildin
gs
in g
oo
d c
on
diti
on
) as
a r
esu
lt o
f th
e r
esp
ect
ive
d
ep
reci
atio
n (
amo
rtiz
atio
n)
allo
we
d in
eac
h c
ase
.
Hig
h le
vel o
f in
volv
em
en
t on
th
e p
art o
f le
nd
ers
/fin
anci
al
inst
itutio
ns.
Su
ch c
adas
tral
val
ue
to b
e e
qu
al
to th
e d
ep
reci
ate
d r
ep
lace
me
nt
cost
.
It r
em
ain
s u
ncl
ear
wh
ich
en
tity
will
b
e r
esp
on
sib
le fo
r th
e fo
rmat
ion
, m
anag
em
en
t an
d c
apita
lizat
ion
of
the
Re
gio
nal
Fu
nd
s (i
.e.,
issu
ance
o
f se
curi
ties
on
its
be
hal
f).
Hig
h le
vel o
f in
volv
em
en
t on
the
p
art o
f pro
pe
rty
ow
ne
rs.
Su
ch m
and
ato
ry d
ep
reci
atio
n
(am
ort
izat
ion
) ch
arg
es
to b
e
pay
able
to th
e a
pp
rop
riat
e
org
aniz
atio
n (
as a
bo
ve)
for
the
m
ain
ten
ance
of s
uch
mu
lti-f
amily
ap
artm
en
t bu
ildin
g.
It r
em
ain
s u
ncl
ear
wh
ich
en
tity
will
b
e r
esp
on
sib
le fo
r d
ete
rmin
ing
the
e
xte
nt o
f an
y ca
pita
l re
furb
ish
me
nt
and
/or
its d
ura
tion
.
Hig
h le
vel o
f in
volv
em
en
t on
the
p
art o
f Ho
usi
ng
Man
age
me
nt
Co
mp
anie
s.
Th
e to
tal a
mo
un
t of a
mo
rtiz
atio
n
char
ge
s re
ceiv
ed
fro
m p
rop
ert
y o
wn
ers
mu
st b
e u
sed
by
the
o
rgan
izat
ion
re
spo
nsi
ble
for
the
m
anag
em
en
t of s
uch
mu
lti-f
amily
ap
artm
en
t bu
ildin
g s
ole
ly fo
r th
e
pu
rch
ase
of s
ecu
ritie
s is
sue
d b
y th
e R
eg
ion
al F
un
d fo
r th
e s
up
po
rt
of t
he
co
llect
ive
ow
ne
rs o
f su
ch
pro
pe
rty.
Sig
nifi
can
t ch
ang
es
to le
gis
latio
n
and
re
gu
latio
n a
re u
nav
oid
able
u
nd
er
this
mo
de
l.
Hig
h r
isk
of f
rau
d o
n th
e p
art
of H
ou
sin
g M
anag
em
en
t C
om
pan
ies.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Key Conclusions and Recommendations 29
Se
curi
ties
pu
rch
ase
d b
y an
o
rgan
izat
ion
re
spo
nsi
ble
for
the
m
anag
em
en
t of a
mu
lti-f
amily
ap
artm
en
t bu
ildin
g m
ay b
e s
old
o
r u
sed
as
colla
tera
l to
se
cure
a
cre
dit
faci
lity
to fi
nan
ce th
e
cap
ital r
ep
air
or
en
erg
y-e
ffic
ien
t m
od
ern
izat
ion
of s
uch
bu
ildin
g.
Hig
h r
isk
of f
rau
d o
n th
e p
art
of f
inan
cial
inst
itutio
ns
and
/or
issu
ers
of s
ecu
ritie
s.
5. I
nte
gra
ted
M
od
el.
Man
dat
ory
est
ablis
hm
en
t of a
co
llect
ive
bu
ildin
g r
ep
air
fun
d
for
cap
ital r
efu
rbis
hm
en
t an
d/o
r e
ne
rgy
eff
icie
ncy
mo
de
rniz
atio
n
of a
mu
lti-f
amily
ap
artm
en
t b
uild
ing
, an
d th
e o
pe
nin
g o
f a
corr
esp
on
din
g n
om
inal
ban
k ac
cou
nt.
Ind
ep
en
de
nce
of p
rop
ert
y o
wn
ers
in a
ll d
eci
sio
n m
akin
g;
pro
mo
tion
of c
olle
ctiv
e
resp
on
sib
ility
am
on
g o
wn
ers
in
mu
lti-f
amily
ap
artm
en
t bu
ildin
gs.
Th
e e
ffe
ctiv
e im
ple
me
nta
tion
o
f th
is m
od
el i
s co
ntin
ge
nt
up
on
ext
en
sive
leg
isla
tive
an
d
reg
ula
tory
re
form
to r
em
ove
va
rio
us
bar
rie
rs to
its
ado
ptio
n.
Hig
h le
vel o
f le
gal
re
form
re
qu
ired
in in
itial
sta
ge
s.
In th
ose
mu
lti-f
amily
ap
artm
en
t bu
ildin
gs
in w
hic
h
no
Ho
me
ow
ne
rs’ A
sso
ciat
ion
h
as b
ee
n d
uly
est
ablis
he
d, t
he
G
en
era
l Me
etin
g s
hal
l hav
e
the
rig
ht t
o a
pp
oin
t an
y e
ntit
y (i
ncl
ud
ing
a H
ou
sin
g M
anag
em
en
t C
om
pan
y) to
op
en
an
acc
ou
nt
in th
eir
(co
llect
ive
) in
tere
st fo
r th
e p
urp
ose
of m
anag
ing
the
co
llect
ive
bu
ildin
g r
ep
air
fun
d, a
nd
to
take
de
cisi
on
s o
n p
roce
du
res
for
the
man
age
me
nt o
f su
ch
acco
un
t.
Po
ten
tially
exp
on
en
tial g
row
th
in th
e e
xte
nt o
f cap
ital r
ep
air
pro
ject
s u
nd
ert
ake
n, a
s a
resu
lt o
f gre
ate
r cr
ed
it fa
cilit
ies
incr
eas
ing
ly b
ein
g m
ade
av
aila
ble
in th
is s
ect
or.
Imp
lem
en
tatio
n o
f th
is m
od
el w
ill
req
uire
a c
on
sid
era
ble
pe
rio
d o
f tim
e.
Mo
de
rate
leve
l of r
eg
ula
tory
/g
ove
rnm
en
tal i
nvo
lve
me
nt
en
visa
ge
d in
re
spe
ct o
f b
ud
ge
tary
su
pp
ort
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
30 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Th
e m
inim
um
am
ou
nt t
o b
e h
eld
in
su
ch c
olle
ctiv
e b
uild
ing
re
pai
r fu
nd
sh
all b
e d
ete
rmin
ed
by
reg
ion
al g
ove
rnm
en
t on
ly a
s a
con
diti
on
for
the
re
ceip
t of s
tate
b
ud
ge
tary
su
pp
ort
(e
.g.,
su
bsi
die
s o
r g
uar
ante
es)
.
Th
e u
se o
f sta
te s
ub
sid
ies
to
pro
mo
te e
ne
rgy
eff
icie
ncy
im
pro
vem
en
ts in
the
larg
e-s
cale
re
pai
r o
f mu
lti-f
amily
ap
artm
en
t b
uild
ing
s.
It is
po
ssib
le th
at th
e v
olu
me
(s
cop
e)
of c
apita
l re
pai
r p
roje
cts
will
de
clin
e c
om
par
ed
to th
e
pe
rio
d o
f op
era
tion
of t
he
Ho
usi
ng
an
d U
tiliti
es
Re
form
Fu
nd
.
Go
vern
me
nt s
up
po
rt (
thro
ug
h
the
fed
era
l bu
dg
et)
will
be
u
nav
oid
able
in s
up
po
rtin
g lo
w-
inco
me
an
d/o
r d
isad
van
tag
ed
re
gio
ns.
En
forc
em
en
t of m
and
ato
ry
pay
me
nt o
f co
ntr
ibu
tion
s to
su
ch
colle
ctiv
e b
uild
ing
re
pai
r fu
nd
by
cou
rt o
rde
r at
the
inst
igat
ion
of t
he
H
ou
sin
g In
spe
cto
rate
in th
e e
ven
t th
at th
e c
on
du
ct o
f su
ch r
ep
air
is n
ece
ssar
y d
ue
to th
e e
xtre
me
d
ere
lictio
n o
f su
ch b
uild
ing
an
d/
or
wh
ere
the
po
or
mai
nte
nan
ce o
f su
ch b
uild
ing
re
nd
ers
it a
saf
ety
ri
sk, a
nd
wh
ere
ow
ne
rs h
ave
no
t in
de
pe
nd
en
tly a
do
pte
d a
tim
ely
re
solu
tion
on
the
fin
anci
ng
of
ne
cess
ary
refu
rbis
hm
en
t or
rep
air,
or
on
en
gag
ing
with
re
gio
nal
in
itiat
ive
s fo
r g
ove
rnm
en
t-su
pp
ort
ed
cap
ital r
ep
air
and
m
od
ern
izat
ion
of m
ulti
-fam
ily
apar
tme
nt b
uild
ing
s.
Th
e e
xist
en
ce o
f me
chan
ism
s to
al
low
the
ad
op
tion
of r
eso
lutio
ns
on
cap
ital r
ep
air
at th
e d
irect
ion
o
f sta
te in
spe
ctio
n a
ge
nci
es
in e
me
rge
ncy
situ
atio
ns
(in
th
e e
ven
t of a
bu
ildin
g b
ein
g in
b
reac
h o
f saf
ety
sta
nd
ard
s).
Sig
nifi
can
t le
vel o
f go
vern
me
nt
sup
po
rt in
initi
al s
tag
es.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Key Conclusions and Recommendations 31
An
y in
cre
ase
in th
e v
alu
e o
f th
e
colle
ctiv
e b
uild
ing
re
pai
r fu
nd
b
eyo
nd
the
sta
tuto
ry m
inim
um
sh
all b
e a
t th
e s
ole
dis
cre
tion
(i
.e.,
follo
win
g th
e a
do
ptio
n o
f a
reso
lutio
n)
of t
he
Ge
ne
ral M
ee
ting
.
Re
solu
tion
of t
he
pro
ble
m o
f lo
w-i
nco
me
ow
ne
rs th
rou
gh
the
p
rovi
sio
n o
f tar
ge
ted
su
bsi
die
s fo
r th
e im
ple
me
nta
tion
of c
apita
l re
furb
ish
me
nt a
nd
re
pai
r.
Mo
de
rate
leve
l of s
up
po
rt
en
visa
ge
d fr
om
re
gio
nal
b
ud
ge
ts.
Pay
me
nts
will
co
ntin
ue
to b
e
mad
e u
ntil
su
ch ti
me
as
the
val
ue
o
f th
e c
olle
ctiv
e b
uild
ing
re
pai
r fu
nd
re
ach
es
the
min
imu
m le
vel
ne
cess
ary
for
the
re
ceip
t of s
tate
su
pp
ort
or
gu
aran
tee
s th
rou
gh
the
st
ate
gu
aran
tee
ag
en
cy/f
un
d.
Hig
h le
vel o
f in
volv
em
en
t on
the
p
art o
f pro
pe
rty
ow
ne
rs.
Re
sou
rce
s (a
sse
ts)
he
ld in
th
e c
olle
ctiv
e b
uild
ing
re
pai
r fu
nd
sh
all b
e d
ee
me
d to
be
fin
anci
al r
eso
urc
es
he
ld b
y al
l p
rop
ert
y o
wn
ers
in c
om
mo
n;
such
re
sou
rce
s to
be
he
ld in
the
d
esi
gn
ate
d (
“no
min
al”)
ban
k ac
cou
nt o
f th
e H
om
eo
wn
ers
’ A
sso
ciat
ion
or
Ho
usi
ng
M
anag
em
en
t Co
mp
any.
Hig
h le
vel o
f in
volv
em
en
t on
th
e p
art o
f fin
anci
al in
stitu
tion
s/le
nd
ers
.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
32 Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
Me
asu
res
to e
nco
ura
ge
an
d
pro
mo
te b
ank
len
din
g:
- Lo
ans
ext
en
de
d to
Ho
me
ow
ne
rs’
Ass
oci
atio
ns
and
/or
Ho
usi
ng
M
anag
em
en
t Co
mp
anie
s (a
s th
e
bo
rro
we
r)
- C
red
it fa
cilit
ies/
loan
s e
xte
nd
ed
fo
r th
e c
apita
l re
pai
r o
f mu
lti-
fam
ily a
par
tme
nt b
uild
ing
s to
b
e s
ecu
red
ag
ain
st a
sse
ts h
eld
in
the
co
llect
ive
bu
ildin
g r
ep
air
fun
d a
nd
/or
agai
nst
re
ceiv
able
s ar
isin
g fr
om
pro
pe
rty
ow
ne
rs’
reg
ula
r m
and
ato
ry p
aym
en
ts
the
reto
;
- S
ecu
rity
of s
uch
loan
s fa
cilit
ate
d
thro
ug
h th
e p
rovi
sio
n o
f g
uar
ante
es
ext
en
de
d b
y fe
de
ral/
reg
ion
al g
uar
ante
e a
ge
nci
es.
Low
ris
k o
f co
rru
ptio
n a
risi
ng
.
Me
asu
res
to p
rom
ote
an
d
sup
po
rt th
e im
ple
me
nta
tion
of
larg
e-s
cale
cap
ital r
ep
air
and
e
ne
rgy
eff
icie
ncy
imp
rove
me
nts
p
roje
cts
in m
ulti
-fam
ily a
par
tme
nt
bu
ildin
gs:
-
Su
bsi
die
s d
irect
ed
at s
up
po
rtin
g
larg
e-s
cale
re
pai
r p
roje
cts
;-
Low
-in
com
e fa
mili
es
to r
ece
ive
su
bsi
die
s fo
r th
e c
ost
of c
apita
l re
furb
ish
me
nt a
nd
re
pai
r.
Th
is m
od
el i
s lik
ely
to s
ee
a
slo
w s
tart
, alb
eit
with
sta
ble
an
d
sust
ain
able
gro
wth
the
reaf
ter.
On
ce e
stab
lish
ed
this
mo
de
l w
ill s
ee
a s
har
p r
ed
uct
ion
in th
e
ne
ed
for
stat
e s
up
po
rt.
FIN
AN
CIN
G T
HE
CA
PIT
AL
RE
PA
IR O
F M
ULT
I-F
AM
ILY
AP
AR
TM
EN
T B
UIL
DIN
GS
IN R
US
SIA
– C
OM
PA
RIS
ON
OF
PO
TE
NT
IAL
MO
DE
LS
Ke
y C
ha
rac
teri
sti
cs
Ad
va
nta
ge
s/B
en
efi
tsD
isa
dv
an
tag
es
/S
ho
rtc
om
ing
s
Ke
y F
ea
ture
s –
Co
mp
os
itio
n
an
d I
nte
rre
lati
on
sh
ips
Financing Capital Repairs and Energy Efficiency Improvements in Russian Multi-family Apartment Buildings
KEY CONCLUSIONS AND RECOMMENDATIONS
International Finance Corporation36 build. 1 Bolshaya Molchanovka StreetMoscow, 121069, RussiaTel: +7 (495) 411 7555Fax: +7 (495) 411 7556www.ifc.org/eca
2012
In partnership with
EBRD Moscow OfficeDucat Place III, 6 Gasheka Street, 125047 MocowTel: +7 495 787 1111Fax: +7 495 787 1122http://www.ebrd.com/russian/pages/country/russia.shtml
European Bankfor Reconstructionand Development
European Bankfor Reconstructionand Development
top related