Opening remarks By Galym OrazbakovMinister of Industry and Trade of the Republic of Kazakhstan
Dear Karim Kazhimkanovich! Dear participants!
As of today the issues of housing and public utilities sector (HPU) and its further reforming are really pressing in Kazakhstan, especially given the social aspect of them.
Where are we now?
The total area of housing stock in Kazakhstan is 263.3 mln m². 30.7 mln m² or 11.7% out of this total area requires capital repair. 3.6 mln m² or 1.4% of housing stock is obsolete and subject to demolishment.
Today management principles of HPU sector in Kazakhstan are based on the existing foreign experience; the majority of them are in line with the principles applied in many developed countries in the world.
It could be seen as a big achievement considering that shifting from “soviet” type of HPU sector management to the modern model took less than 10 years and did not cause any serious social tensions.
The first phase of the reform included a major privatization of the housing stock. As a result of this almost entire housing stock is owned by citizens. Responsibility for operation and maintenance of the housing stock was transferred from the state to population. A special ownership type in multistoried building called “condominium” emerged.
The next phase of reforming encompassed measures on restructuring oblast and urban HPU facilities and their transfer to donation-free mode of operation. The most signification measure at that time was staged transition to tariff rates for HPU services covering production costs endured by HPU organizations to deliver these services.
The majority of these enterprises were included in the register of natural monopolies, i.e. tariff regulation function for their services was entrusted to state.
At the same time state took some social protection measures: housing assistance system was introduced for those citizens whose housing and communal expenses exceeded a certain part of total family income.
Actions were taken to create Cooperatives of Apartment Owners (KSK) which became the most popular form of managing condominium objects.
In 1997 the Law “On Housing Relations” was issued. This Law legally regulated almost all relationships in the housing sector: procedure of granting and termination of ownership rights, conditions of renting a living space, rights and obligations of apartment owners, mechanism of relationships between the condominium members, management bodies for condominium objects, categories of communal housing recipients etc.
Comparing current Kazakhstan’s model with international practice one could note the following.
The main national policy direction in the majority of Central and Eastern Europe countries, including CIS, is democratization of management forms for housing stock objects.
Thus according to German experience in HPU sector all owners form a partnership of apartment owners, the supreme decision making body is apartment owners council which appoints apartment blocks’ Governor by the majority’s decision.
Governor is a hired merchant responsible to apartment owners’ community for all emerging or acquiring property damages. His functions include maintenance of premises or other common property, ensuring their safety, including fire safety, accumulating savings for maintaining objects in a good shape, developing annual budget and economic plan of administering community finances.
In Poland management and financing of houses – common property – is done by tenants who establish a community of apartment owners. The community selects its Board members and Board chairman management by voting.
Community members gather once a year. By voting at the meeting the community council approves annual plan, resolves the issues of financing a dwelling house repair and issues a decree.
Community entrusts house management functions to administrator who is selected on a market basis, concludes a contract with administrator and pays for the services.
Main strategic goals of national housing policy in Russia today are: reforming the entire HPU sector services, creation of housing market, reforming the system of social housing subsidies.
After new Housing Code of Russia became effective the biggest of part of national housing stock was privatized. Apart from the right of property disposal, tenants were entrusted with some obligations, including obligation to pay for capital repair of common property.
Housing Code of Russia obliges to choose a method of house management before January 1, 2007. The options are: direct management (each individually manages), based on a contract with management company or by establishing apartment owners partnership.
The common feature of management forms in various countries, including Kazakhstan, is the fact that supreme management body is apartment owners’ general council.
Therefore the HPU system created in Kazakhstan can be overall acknowledged as satisfactory and following main international trends.
However there are some problems. The key problem is financing capital repair of common property in condominium objects and defining ownership of condominium objects.
What is the essence of the problem?
As a result of privatization held in Kazakhstan new owners were buying only their own apartments and did not feel as owners of common property in a residential house.
Apartment privatization contracts specified the areas of apartments that were to be bought back and did not specify a share of common property (entrance halls, stairs, elevators, basements, roof, attics, outside or common house engineering systems and equipment, land plots, including accomplishments and other property of coon use) belonged to apartment owners as tenancy in common.
Such situation causes refuse of obligations by some apartment owners to maintain common property of the apartment blocks.
That is why next stage of HPU reform shall be devoted to resolving this problem.
To define the basic principles of condominium’s ownership it is possible to apply German and French experience. Particularly operations of privatization and purchase of apartments are executed by two contracts: bargain and sale contracts for apartments and premises, and bargain and sale contracts for the share of common property assigned to a certain apartment.
Another HPU sector issue is rehabilitation and reconstruction of multistoried housing stock built in 1960-80-s, which is common for the majority of Central and Eastern Europe countries.
In most of Western Europe countries the repair of apartment blocks is financed using small amounts allocated from national budget in a form of subsidies to poor citizens. While the share of household’s expenses going for communal payments and maintenance of apartment blocks shall not exceed 8-10% of aggregate household income. When actual payments increase the set limits state compensate the difference.
In the Republic of Kazakhstan the share of household’s expenses going for communal payments and maintenance of apartment blocks is approved by the decisions of local representative bodies – Maslikhats, and depending on the region equals to 15-20%. It’s worthy noting that the specified housing allowance was not widely used due to some difficulties in its legalization (paperwork regulations).
In some transition economy countries (Russia, Belorussia, and Lithuania) budget allocated financing for repair and reconstruction of common condominium property. It is due to the fact that when it came to large-scale housing privatization states could not meet their obligations on keeping housing stock in adequate conditions because of the economy crisis.
Similar situation occurred in Kazakhstan. At the time of launching mass privatization of housing stock local governments did not meet the obligations on renovation and capital repair of housing stock (Government Statute of the Republic of Kazakhstan as of May 13, 1996, # 587).
It is also interesting that in the mentioned countries budget financing of common property repair in apartment blocks is allocated only upon meeting the mandatory requirement – preliminary financing of the repair at the expense of apartment owners accounting for 10-25% of the total estimated cost of repair. By this people are gradually taught to feel responsible for common use property.
We think that one of objectives of today’s brainstorming session could be discussion of possible solutions for the specified problems and elaboration of measures on involving tenants in maintenance of common property as well as defining the best scheme of financing capital repair of apartment blocks.
Thank you for your attention.
