Post-Socialist Cities in Flux

Grigoriy Kostinskiy. Handbook of Urban Studies. Editor: Ronan Paddison. Sage Publications. 2001.

The transformation of socio-economic life which began in post-socialist countries at the end of the 1980s manifested itself first of all in the cities. Indeed, the cities were the initiators of many of the changes that were to follow. The bigger the city, the higher its administrative, financial, economic and cultural status, the more radical the changes have been. Such a situation could be anticipated, where the cities, being involved both in the national and increasingly in the global economy, are particularly exposed to externally induced changes, besides being themselves the principal location through which change is mediated.

Of course, in the different countries of the former socialist bloc, whose territorial reach stretches from Central Europe to the Pacific, the depth of urban transformation is far from being identical. In this chapter the emphasis will be on the cities of Russia, whose socialist roots are much deeper than in Central and Eastern Europe. This helps explain why the extent of the transformation of the Russian and the other CIS cities lags behind that of the cities of Central and Eastern Europe. As for the rural areas of Russia (and the other CIS countries), the state-farm and the kolkhoz economy in fact still dominates, and have been practically untouched by transformation.

The current transitional processes involve a fundamental re-evaluation of the territorial economy—both cities and regions—with respect to the location, functioning and reorganization of productive activity (Hamilton, 1995). The transition has marked the trend towards the ‘commodification’ of places, which are exposed not only to economic, but also to social, cultural and ecological re-evaluation. Places must undergo a strict reassessment, answering the question as to how they can function as the loci for effective production within the framework of the local, regional, national and international economic systems. In such a reassessment the comparative advantages and shortcomings of cities become clear. Market forces check the efficiency of the former functional interrelations and the division of labour formed under socialism, as well as generating new functions, and business connections.

In the socialist economy the non-economic factors of production—political, ideological, symbolic, social, military, technical—had enormous, if not over-riding importance. Their purpose was to demonstrate the superiority of communism over capitalism. This favoured the totality and ‘gigantism’ in the organization of space and physical planning, as well as emphasizing the significance of symbolic meaning, something in which the city, by definition, played a particularly important role. Planning was based on rigid, normative understandings, fixed for each type of settlement (French, 1995).

At first, the collapse of the planned centralized economy caused chaos. The depth of the chaos reflected the reality that the transition period was likely to be longer rather than otherwise; change, in the sense of the collapse of the ‘old’ and the introduction of new political institutions and of market mechanisms would not be achieved in the short-term. Indeed, a decade after the collapse the ‘old’, Russia remains firmly in transition.

The transition period began with liberalization of consumer prices, deregulation and the de-etati-zation of the economy. Following their introduction the more ‘undesirable’ companions of the transition period appeared: the break-up of old economic ties between enterprises which ensured the conditions of trading, unemployment, black markets and a decline in the living standards of the majority of the population. True, in parallel with this the saturation of the consumer market has occurred. If, under socialism, consumer markets suffered chronic shortages and lacked choice, now consumers are not starved of opportunities: now it is possible to get practically everything for money.

The basic stages of a transition period are:

  • A pre-transition (with a running down of the economy within the framework of the old system during which there were modest attempts at its restructuring);
  • A crisis (in which the destruction of the old economic structures outstripped the formation of new ones);
  • A post-crisis (in which processes of reconstruction and regulation begin to prevail) (Nefedova and Treivish, 1994).

The dismantling of state ownership and control together with the simultaneous development of the institutions of a market economy and the privatization of property and land in the commercial and housing sectors qualitatively strengthen the process of commodification. As the level of market exchange and commodification grew, new attitudes to urban locales and new principles of location began to emerge in the cities.

At the macro-level, that is at the level of a national settlement system, socialist countries did not differ significantly from those of the advanced capitalist countries. It was hardly possible to speak of any specifically ‘socialist’ hierarchy of settlements, a special rank-size order, or of any peculiarity of the leading socialist cities in terms of their primacy. The distinction between socialist and capitalist cities manifested itself rather at a local level, that is at the level of the city or the urban agglomeration. The specificity of cities in socialist countries was displayed not on a macro—and not even on a meso—scale, but at the micro-level, notably in peculiarities of intra-urban structure, in the character of their urban centres, suburban zones and in their housing formations (Musil, 1993).

Characteristics of the Socialist City

Factors Influencing Urban Development under Socialism

The specificity of cities of the former socialist countries can be better understood if we distinguish between two groups of factors. The first group includes those factors linked to the systemic properties of socialism, the centralization of power, central planning, the distributive system and the underdevelopment of a civil society. The second group unites the specific factors, connected with cultural and historical peculiarities of the separate countries, with the peculiarities of urban policy and traditions of municipal government. Looking at the present transformation of the urban fabric, we must pay attention first of all to socio-economic factors. Thus, it is necessary to take into consideration that ‘soft’ elements of economy (for example, the reorientation of people towards enterpreneurial activities) change faster than do more rigid factors, such as the urban infrastructure. Adaptation to the market economy proceeds faster in those sectors of the economy that demand lower investment outlays and where the basics of entrepreneurialism have already developed (Domanski, 1994).

As has been argued (Musil, 1993), several major factors influenced the development of socialist cities:

  • The non-existence of the market in land and the introduction of fixed land prices, so that for users—firms and enterprises—location within a city was almost irrelevant as an economic parameter.
  • Centralized management and the regulation of the housing sector (control of flat exchanges, purchasing of houses, sub-letting) by local authorities.
  • Nationalization of the exogeneous and endo-geneous urban base, including retail trade and services; policies for their consolidation were based on the benefits of economies of scale and managerial convenience.
  • The general promotion of public interests over personal, and of interests of a higher level territorial unit (the state) over those of a lower level (sub-state) unit.

While these factors persisted throughout the socialist period, they were especially important during the initial stages of the socialist construction, characterized by the rapid progress of industrialization. Priority was given first of all to heavy industry, rather than to housing construction and the development of urban infrastructure. Only from about 1960 did a new stage in urban development begin: significantly greater attention was given to housing construction and to the development of services. The policy of mass housing construction resulted in radical changes in the shape and character of cities in the socialist countries: on the urban fringes (and in small cities, often in the centre) vast estates of standardized multi-storey houses appeared. In the socialist cities such residential districts are much more extensive than similar areas in the advanced capitalist countries. Such mass construction helped reduce the socio-spatial differentiation of the socialist cities. Yet such differentiation did exist, by virtue of distinctions in differences in income, by the development of cooperative housing (for the better-off households), and because of the occurrence of quasi-markets, and in particular the black market.

The Specificity of the Russian City

While the general concept of a ‘socialist city’ as applied to all socialist countries is convenient, it is necessary to take into account the specificity of cities in each of these countries. Typically ‘socialist’ cities were characterized by:

  • State control over of urban land use.
  • Complete absence of private property in land.
  • State control over the housing economy (financing, realization of development, distribution of housing stock and its management).
  • Wasteful land use, resulting from absence of land rent under socialism.
  • Centralized organization of services and supply.
  • The underdevelopment of services and locating of urban amenities quite regardless of the structure and volume of market demand.
  • The domination of public over private transport.
  • The exclusive importance of ideological symbols in the urban environment, including the monumental architectural style of public buildings, underlining the emphasis placed on the special importance of the urban centre.

Russian cities differ from those not only in the countries of Western Europe, but also of Central and Eastern Europe (the Czech Republic, Hungary, Poland, Slovenia, Croatia, Slovakia). A dominant feature of Russian cities is the absence of a civil society and of local participatory structures. This should not be attributed only to the notorious ‘70 years of socialism’. In Russian life little scope was given to any form of urban self-management before the October revolution. Thus, in the 1870s voting rights were severely restricted, being given only to one-third of home-owners.

Notions of civic duty, including participation, which in liberal democracies are an integral component of municipal political life, have not been a feature of the Russian mentality. The idea of self-management remains the exception even for the active minority of the cultural elite, who continue to place their reliance on the local politician (Glazychev, 1995).

In Russian cities any local self-organization of citizens is extremely weak. The 1960s, with the cooperative housing movement, represented the last burst of self-organization. At the present day, even in a Moscow of 9 million there are no more than two dozen local self-management structures of city-dwellers in the form of public councils (committees). Denied any rights for decades, the citizen is intimidated by the official authorities, is passive, but at the same time sceptical of change. Residents of multi-flat blocks are unable to manage them in a proper state. Neighbourhood committees, where they do exist, are only in an embryonic state, their influence on local official authorities minimal. Yet it is through the neighbourhood communities in which groups of population organized by place of residence may arise to ensure direct mass democracy. A strong civil society for Russia and other CIS countries is still a remote prospect.

New Factors Characterizing the Transition Period

The transformation of the spatial organization of cities has resulted from three main processes:

  • The spontaneous development of private business and the increase in the number of small and medium enterprises;
  • The diminishing role of the state both as a regulator of socio-political life and owner of economic enterprises;
  • The development of urban government (at both city and intra-city levels), whose purposes differ from those of previous oblast and state authorities.

The emergence of the market economy in the post-socialist countries has given an obvious impetus to the development of both the commercial and housing sectors of the urban economy. Typically the industrial sector has been in deep decline. In comparison with the end of the 1980s the level of industrial output and the importance of industry in the urban economy has decreased sharply; the appearance of new industrial plants is now an extraordinary event. This ‘compression’ of industry has been accompanied by branch restructuring. Some consumer industries—food processing for example—have, however, gained in importance.

Changes in the nature of the property market have resulted in a substantial increase in the number of new entrepreneurial agents whose activities have contributed to the apparent transformation of the spatial pattern of socio-economic life. These changes, most obvious in the central parts of cities, are connected particularly to the structure of retail trade and the development of conspicuous consumption. New office developments also characterize the centres of the bigger cities, altering in turn the city’s demographic structure. The elderly and low-income households, traditionally more important in the city centre, have been displaced to more peripheral areas.

Small elegant private mansions and multistorey rented houses, constructed in the pre-revolutionary period have been the object of considerable conversion. The former are used especially as offices (particularly as banks), the latter as luxury apartments. To live in the centre in a spacious apartment in a ‘respectable’ house is regarded as a status symbol of the ‘new rich’. These large apartments, which in Soviet time were communal flats, have become a battleground for competing housing agencies which have made considerable profits through resettling the tenants and selling the vacated and renovated flats to the ‘new rich’ in the urban economy (Kostinskiy, 1994).

Commodification and rising costs of housing, diversification of housing types, widening differences in income and the expected introduction of a land market all promise further significant change in the housing sector.

The Commercial Sector

The overwhelming majority of Russian cities, while traditionally ‘overburdened’ by industry, at the same time suffered from a serious shortage of services, retail trade outlets and infrastructure for entrepreneurial activity. Recent patterns of change in societal needs and progress along the path to a market economy urgently require the formation of such an entrepreneurial network as a necessary condition for the structural reorganization of the urban economic complex.

Changes in Retail Trade and Services

Improvements in retailing were apparent earlier and more clearly than in other spheres of economic activity. The reasons are evident: retail trade does not require large amounts of start-up capital (in comparison with manufacturing, for instance) and does not have to face the rigours of foreign competition. At the same time, under socialism this sector was recognized as being permanently under-invested, producing chronic shortages of consumer goods—consumer demand could never be satisfied. Now, with eradication of the consumer shortage problem the retail sector has developed very rapidly.

Retail trade in the socialist city was concentrated predominantly in the centre, which under the condition of the permanent commodity ‘famine’ drew shoppers not only from the urban fringes, but also from suburbs and surrounding rural areas. As distinct from the suburbs of Western cities, the outer areas of the socialist cities lacked big shopping centres orientated to ‘motorized’ customers. The spatial allocation of retail enterprises and services under socialism was determined not by free market forces, but by the decisions of urban administrators (gatekeepers, in effect), who determined where to locate a ‘trade point’. While this allocation was not completely indifferent to the needs of buyers, in practice it was buyers who needed to adjust their trip behaviour to the spatial networks of shops, and not vice versa.

The transformation has been both quantitative and qualitative, where in the retail sector first, the number of ‘trade points’ has grown sharply, and secondly, the quality of retail enterprises has risen remarkably. The most spectacular increase in the volume of retailing has been seen in the city centres and in a few ‘outlier’ establishments along the main avenues. As a result, low-order shops selling mundane goods have been quickly superseded in the city centres, where competition for space was intense, by ‘up-market’ shops, outlets that were simply not present in the socialist era.

The market transition began early in 1992 with the legalization of street trading. This kind of activity brought traders rapid (albeit, rather modest) returns. At first, trading was open to all, with no necessity for traders to hold a licence. Hawkers clustered outside large shops, department stores, metro, bus and railway stations or other crowded places. They sold their goods directly on the sidewalks—from boxes, and (less frequently) folding tables. The numbers engaged in street trading reached such dimensions that within a few months the urban authorities were compelled to regulate the process. First, the traders were obliged to have a licence, and secondly, trading was prohibited from certain places. Traders were forced to leave the CBD, in particular locations adjoining important official buildings. This extraordinary flowering of private sector retail trading in the post-socialist city proved short-lived.

As a second stage, traders operating along the sidewalks have been replaced by lines of booths or kiosks. Originally these kiosks were unspecialized and tended to offer the same set of consumer goods (drinks, packed foodstuffs, cigarettes, cosmetics, haberdashery). Kiosks came in all shapes and sizes, lacked electricity and refrigerators and, in general, were poorly adapted for trade. Then, as the urban authorities began to impose increasingly rigid controls, these original kiosks were replaced by others of a more attractive design and more standard format. Eventually better-equipped retail stands and trading mini-complexes began to appear. The number of kiosks is now falling, their role being taken firstly by these stands and subsequently by formal shops (Riley and Niżnik, 1994). Booths and stands were born of necessity, substitutes for normal shops which were lacking initially. The shortage of premises in the existing trade stock gave rise not to the construction of new shops (for initially businessmen simply had no money or time for new construction), but to the simple subdivision of existing premises at minimal cost to its refurbishment.

One specific development within the wholesale and retail trade in the current transition period has been the emergence of food and clothes markets outside the central parts of the cities -closer to the dormitory zones and main transport arteries. Urban authorities have allocated these markets empty sites in busy areas near railway, metro or intercity bus stations, and large stadii.

Privatizing Retail and Service Property

At the very beginning of the process of privatization and reform retail property was offered to potential retailers at discounted prices, much below their market value. But now in Moscow premises are sold at close to the true market price. Ninety-five per cent of potential buyers are not ready to redeem rented non-residential premises. These properties are redeemed only by those enterprises with good prospects. Emphasis has gradually shifted to competitive (auction) sales and investment contracts.

Municipal governments regulated privatization, setting auction starting prices for properties put up for sale based on their spatial location inside the city. They established a system of bid-rent pricing based on their urban location, and differentiated according to the type of shop or service enterprise (Riley and Niżnik, 1994). The aim of such a system was to retain certain socially important types of retailing and services.

Nevertheless, following privatization many of the former state-owned retail properties despite state regulation, changed their profile; and subsequent changes of (private) ownership resulted in further changes of profile. Very frequently such changes were unavoidable, as many kinds of services had simply been unavailable in socialist cities (currency exchange bureaux, tourist bureaux, casinos, etc.).

With the desperately limited supply of shopping outlets, retailers renting premises often let part of them to other enterprises. Frequently a former ‘socialist’ shop in the process of privatization would be partitioned into several smaller outlets. For example, the owner of a food shop might sub-let a part of its floor area to a shop selling, say, shoes or books. Only the construction of a light partition was necessary to divide the premises, but at times even this was regarded as unnecessary. The (sub-)leasing of premises to small private retailers is very widespread—this being the easiest source of profit for re-employing the use of the bigger, formerly state-owned retail outlets.

The retailing sector has undergone radical changes in its spatial pattern. Lower order retailing, such as, for example, vegetable or grocery shops, has been pushed out from the centre, while simultaneously higher order outlets are concentrating there as only they are capable of paying the high rents demanded for attractive sites. As a result, the city centre has become a more specialized trade area than before.

An even more acute shortage of premises has been experienced in the case of professional services, for whom booths and retail stands are not an option. A solution was found in the renting out of office space first in the premises of official state organizations and departments, and later in buildings belonging to the private and mixed sector. For example, ‘budgetary’ research institutes or the repositories of culture (museums, libraries etc.), finding themselves in straitened economic circumstances, would be compelled to let a part of their premises as offices to the new ‘capitalist’ sector. Even within the entertainment sphere, where state subsidy always appeared to be essential, a change of profile can be seen. For example, cinemas designed in the 1960s and in the 1970s with spacious glass halls have proved to be very adaptable as automobile and furniture showrooms.

Renting and sub-renting, evading state and municipal financial bodies, is a perfect field for financial abuse and corruption. A survey has shown that the Moscow Committee on Property officially rented out only 14 million square metres of non-residential premises of the 50 million it controlled. The remaining 36 million square metres have been the subject of illegal transactions, evading the control of the Committee.

Housing Sector

Housing Provision and its Quality

Housing provision in Russia and the countries of Eastern Europe is poor by Western standards: the floor area per person averages 18-20 square metres, whereas in the countries of Western Europe the norm is 32 square metres (Hegedus et al., 1996). Russia also lags behind its Western neighbours in the quality of the housing stock, its operational characteristics and in the organization of the living environment outside the house. The majority of the housing, in spite of being in many cases of quite recent construction is dilapidated and badly in need of repair.

Usually, the smaller the size of Russian city, the worse is the quality of its housing stock. This tendency is connected with a system of financing which persisted for much of the socialist period whereby funding prioritized the big administrative and industrial centres. As a rule, the small historical towns have amongst the worst housing conditions.

A distinctive feature of the socialist city is the standard character of houses and apartments, with a limited choice of types and styles of residential opportunities. For the overwhelming majority of the population a dwelling represents an apartment in a multi-storey (predominantly of four to nine storeys) building. Multi-storey units built of standard prefabricated concrete panels are characteristic not only in cities, but also in the small towns and suburbs, though in these areas, high-rise blocks do not dominate, their height rarely exceeding five storeys. Individual single and two-storey houses within big cities are comparatively rare and, where they do exist, are situated almost entirely on the fringes of the city (as a legacy of a time when they represented independent rural settlements). Such low-quality houses (usually made of wood and lacking indoor modern conveniences) are characteristic in small and partly for medium-sized towns, where the latter were not touched by intensive industrialization.

The majority of urban families live in two- and (less often) three-room flats in multi-storey blocks. At the starting point of the economic transformation in 1992, 42-45 per cent of the Russian housing stock comprised two-room apartments, 32-34 per cent three-room units and 15-20 per cent one-room flats. Apartments with more than three rooms accounted for only 5 per cent of the housing stock. Human needs certainly far surpass the present level of provision. For instance, a questionnaire conducted in Moscow revealed that to meet housing preferences the composition of available dwellings should be: apartments with no less than four rooms, 30 per cent; with three rooms, 33 per cent; with two rooms, 25 per cent; and with one room, 10 per cent. These figures confirm the rather modest housing claims of city-dwellers, who would be satisfied by expansion of their present dwelling by only one room, implying that the total number of rooms in the apartment should equal the number of the persons in the family plus one.

There is little differentiation of the population by housing provision as in the socialist countries the housing conditions of a family depend on income to an insignificant degree. To a much greater extent quality of housing was determined by one’s place of work and ability to make use of advantageous connections and privileges.

Other things being equal, housing provision is determined by size of family. On the whole, the greater the number of family members, the less is the floor space per capita. Single people and couples without children generally enjoy a higher than average floor area per person. Particularly serious problems arise with large families (that is those that already have five members) and young families, who are frequently compelled to live together with in-laws.

A correlation between housing provision and monthly income per family member is seen only in extreme groups, i.e. the richest and poorest, but even between them the ratio in housing provision (measured in floor area per person) is only 1.5 times while the difference in income is ten-fold (Pchelintsev, 1994).

In the large cities of Russia the quality of housing corresponds to that seen in countries where household income averages $6,000 a year. Owing to a fall in living standards, however, the incomes of Russian households are now much lower (Belkina, 1994) and at current levels Russians on an average income cannot afford even the basic running and maintenance costs of housing. Consequently, the condition of urban housing stock is very poor.

Privatization of Housing

At the beginning of the economic reform process in January 1992 the urban housing stock in Russia was almost entirely in state ownership. In urban areas 79 per cent (and in large cities 90 per cent) belonged to the state—either to local authorities, or state enterprises, ministries and departments. Private ownership of dwellings was common only in villages and small towns. Before the reform a legal housing market was completely absent except for small private houses.

The transformation of the housing sector was to be based on privatization and the creation of a market that would attract citizens’ savings into new construction projects. It was thought that privatization of housing would offer the population at large a sense of participation in the new system of private property ownership, as for most of them their apartment was their sole significant property.

The initial stage of the housing reform process was characterized by two main measures: the appearance of a law on mass housing privatization and the transfer of state housing stock on the balance of local authorities. All occupiers were given the opportunity to take ownership of their dwellings free of charge. This, of course, was of greatest benefit to the most well-off layers of society (French, 1995). A household privatizing its housing unit simultaneously received the right to dispose of it without impediment: to let it or to sell without any restriction. The privatization of housing was also primarily an act of legitimization, which gave citizens the additional assurance that property would not be expropriated by a new power should there be a radical change of sociopolitical regime.

The selling and purchasing of housing has quickly become widespread. Currently it is the existing housing stock which forms the basis of the housing market rather than new construction. The primary market is growing only very slowly.

Under current conditions the citizen does not enjoy particular advantages through possession of private property rights. The positions of a tenant and owner living in the same apartment block do not differ except that the owner of the apartment can freely sell or rent the property.

Those who prefer private ownership of their property are primarily those who intend to pass on a housing unit to successors not currently living with them. Especially interesting is the opportunity afforded by ownership to transfer housing by right of succession. Those who rent an apartment from the state can transfer it by right of succession only to those members of the family who are registered in it. Privatization, on the other hand, enables an apartment to be transferred by right of succession even to those relatives who are not registered in it and is consequently an attractive option for the elderly living in previously rented housing units.

The authorities at first tried to speed up the process of privatization, but it has become obvious that the level of privatization is approaching its ‘natural’ limit (50 per cent in Moscow). While in 1993 600,000 Moscow apartments were privatized, only 100,000 were transferred to private ownership in 1994 and 1995. The process tends to embrace first of all the more expensive apartments and those in the city centre. By 1996 50 per cent of the housing stock in the central administrative district of Moscow was privatized, whereas throughout the city as a whole the level of transfer was 40 per cent. Those with a clear idea what to do with their residence within the housing market proceed to privatization, while those without such confidence are more hesitant to take this step.

Municipal housing has been privatized more easily than that in the control of departments. Large firms and government departments offer resistance to the privatization of the houses they hold, having been reluctant to part with what they consider as their property. As the economic transformation continues increasing numbers of business concerns will probably be convinced that maintaining their own housing stock is too expensive, and will seek to pass it on to the local authorities.

Affordability of Better Housing Conditions

In recent years the cost of construction of housing has risen sharply such that it now approximates levels in those countries where household incomes are no less than $30,000 a year, a figure which is ten times greater than the average income of the Russian family. The prospect of purchasing new housing is thus elusive for the overwhelming majority.

The material condition for solvent demand, as the example of Western countries shows, is the appreciable excess of monthly average earnings over the average cost of construction of 1 square metre of housing and mortgage lending rates of less than 10 per cent.

If in the countries of Western Europe the average price of a new standard flat represents an equivalent of 4-6 years of average net wages, and in Eastern Europe 10 years, in the case of Russia this figure surpasses 20 years (Housing in …, 1996). The situation is aggravated by the virtual absence of any borrowing or tax incentive schemes to finance private home ownership.

So far the housing policy objectively works in favour of the top and bottom social layers—that is, those who are capable now of purchasing a small house or an apartment and those who, lacking the means at all, have the right under the existing rules to receive municipal housing free of charge. This policy takes little account of the interests of the urban majority with average incomes (75-80 per cent of all city dwellers). Such families have some savings, but these are obviously insufficient for purchasing a housing unit. At present, according to a survey of urban households, 80 per cent (mainly belonging to the middle class) see no opportunity to improve their housing conditions. Long-term mortgage lending would help them to solve the problem of purchasing a new residence but mortgages are still practically unknown in Russia: lending institutions do not trust the solvency of the population and, vice versa, the population does not trust the reliability of the banks. In Russia no law on mortgages can yet be devised as the question of land ownership laws has still to be resolved. These problems stem from the fact that for more than 70 years land was owned by the state. During the lifespan of several generations buildings, roads and public spaces were developed without any regard for property rights (Purgailis, 1996).

In the socialist epoch the system of granting free-of-charge municipal housing to the so-called ocheredniks (persons on a waiting list) dominated. Such a privilege was given to the families having less than 5 square metres of floor area per person, and among them priority was given to invalids, war veterans, large families and the inhabitants of communal flats.

Being on a waiting list for a free-of-charge flat was, and still is, a long process: for example, in Moscow in 1996 apartments were being given to families whose names had been on the list since 1982. Approximately 22-26 per cent of Russian urban families are on such waiting lists (although in Moscow, where the housing situation is in general better, the number is lower, at about 13 per cent) (Belkina, 1994). It is noteworthy that majority opinion in Russia still regards housing as something that should be provided free of charge by the state. It should perhaps be no surprise then that even now the most frequently expected way of getting housing is through a waiting list (25-33 per cent), while the second most important opportunity is thought to be an apartment exchange (20 per cent) (Abankina and Zuev, 1994). Today, however, the authorities have few possibilities for granting housing free of charge even to the most impoverished and needy families.

The construction of municipal welfare housing can only be funded by the sale of other housing on the commercial market. In order to provide a Moscow family in need of social assistance with a free-of-charge apartment, it is necessary to sell two or three apartments at the ‘market’ price (although until recently the ratio was almost the exact opposite).

The mechanisms of the normal, commercial way of obtaining housing, orientated to those on average incomes, are gradually developing (a housing bonded loan, savings in combination with loans on favourable terms etc.).

Those on the housing waiting-list (ocheredniks) can accelerate the process of receiving a dwelling if they make a partial investment from their own funds (in addition to subsidy from the urban authorities). In Moscow ocheredniks pay from 30 up to 95 per cent of the cost of an apartment. The size of the grant is calculated in accordance with tables that take account of duration of waiting time and per capita income in the ocheredniks family. The majority of subsidies are of the order of 60 to 70 per cent of the cost of the housing unit.

The authorities are ready to enter into a system of discounts, grants and other mechanisms provided that a certain part of the cost of purchasing housing will be met by the occupants themselves. Currently, the major problem in housing policy is creating an effective level of demand for housing through ‘sparing’ models of the housing credit. Social guarantees were formerly widespread, and thus any radical move away from them provokes a sensitive reaction.

Housing Construction

During the socialist period housing construction was based on budget assignments and plans; thus, problems with financing the work did not arise. Today, when both local and federal budgets are extremely constrained, the question of funding construction work has been pushed to the forefront.

The transition period has been characterized by a sharp reduction in the volume of housing construction. Simultaneous stagnation of the urban population, however, has prevented the problem of lack of housing from reaching crisis proportions. Moreover the standard of housing construction has been rising: new dwellings are more spacious and built to higher specifications.

Currently it is neither plans nor central authorities allocating investment to housing construction which determine its size. Construction is now largely a consequence of consumers’ decisions, based primarily on household incomes (present and prospective). Demand is now the major factor, and a producer’s market has been replaced by that of the investor. For the first time for decades former socialist countries faced a situation of overproduction, that is, an absence of buyers. As newly constructed dwellings failed to find buyers, it became necessary to halt many planned building projects—a phenomenon previously unknown.

The fall in demand for housing is caused by three interrelated factors:

  • General impoverishment of the population, caused by the devaluation of money savings and the decrease of real incomes.
  • Sharp growth in the cost of apartments with the withdrawal of state subsidies in the sphere of housing construction.
  • Commercialization of housing finance with the (virtual) absence of state support of investors.

As a rule of thumb, nowadays the larger the city, the more new housing is constructed in it (in relative figures per thousand inhabitants). The rate of housing construction is closely connected with the incomes of city households.

Housing construction by private investors is growing in importance and private developers have become the main builders. In Moscow in 1995 92 per cent of the new housing stock was built using non-budget means. Even during recession private companies have managed to increase the volume of construction, setting a generally high standard of new urban and suburban housing.

Large industrial and transport enterprises, ministries and organizations have sharply reduced their volume of housing construction. The ‘departmental’ segment, previously very strong, has now been curtailed. The industrial enterprises have no money for running and maintenance costs (central heating, water supply) and capital repairs of the houses belonging to them, and if they can afford it, local authorities are accepting responsibility for departmental housing stock and its associated social infrastructure (kindergartens, clubs, stadii etc.). Those industrial enterprises which built residential accommodation now seek new forms of providing housing for their workers (instalment selling, reducing the price of an apartment depending on length of work experience, selling a certain percentage of apartments at market prices etc.); in any case, the system of completely free-of-charge housing for employees is over.

Housing cooperatives, widespread from the 1960s to the 1980s, have reduced their building programmes in both relative and absolute terms. For instance, in Poland the volume of cooperative housing built in 1994 was one-third of the level of 1992. The reason lies in the fact that this form of construction also was significantly subsidized by the state. In the former USSR cooperative housing was only partially (30 per cent) financed out of income by the residents whereas the basic part of the charges was covered by urban and federal budgets. In Russia by 1994 federal and local subsidies had run low. As a result, support of housing cooperatives by local authorities was maintained practically only in Moscow.

To enter a housing cooperative is thus very difficult, with priority given to preferential groups of the population: first to ocheredniks (if they want to speed up receiving housing), then to those on the housing cooperative waiting list, where priority is given to invalids and war veterans, to the families of killed servicemen and to those born in Moscow.

In 1996 in Moscow 50 per cent of the costs of cooperative housing had to be met by the family, 40 per cent by the city budget and 10 per cent came from selling 10 per cent of apartments in each cooperative society at market prices. Intending residents had to pay 30 per cent of the cost of housing at the outset, prior to commencement of construction, while the remaining 20 per cent had to be repaid during the construction period.

Social Segregation

Social disparities in socialist cities were incomparably smaller than in the cities functioning in the conditions of a market economy. An orientation towards minimization of these disparities was proclaimed as the key purpose of the state socialist policy, conducted at both central and municipal level. Nevertheless, a certain spatial differentiation of population, connected with its social stratification, existed throughout the whole socialist epoch (French, 1995). Earlier, it is true, it had manifested itself at the level of separate houses, with differences in quality of apartments and houses, rather than in differentiation of residential areas.

The process of equalization of socio-economic disparities in the cities, if it occurred at all then, was perhaps seen only in the 1950s and 1960s. In the 1970s it was replaced by an obvious increase of distinctions in the level and quality of life of the urban population. Then an implicit tendency became apparent to the territorial redistribution of population subject to social position rather than well-being. This brought a boom in the construction of houses for privileged groups and the ruling elite, and such apartments were correspondingly strictly allocated (‘distributed’).

This trend correlated with the introduction to the economy in general, and housing construction in particular, first of the pseudo-market and then (with the fall of the communist regimes) of overt market elements, reflecting the growing interest of the ruling elites in providing themselves with material privileges, including housing. The idea of ‘prestigious’ and ‘non-prestigious’ districts and streets once again became popular.

The stratification of urban population by level of income should now lead to their spatial differentiation. A new suburban settlement of private single houses, surrounded by a continuous stone boundary with a projected entrance, serves as a concrete example of an overt spatial segregation by income. The growing tendency to segregation is evidenced, for example, by the fact that the ‘mixing’ of different income groups within an apartment block is very unstable, even ‘explosive’: the rich families will try to leave at the first opportunity. At the moment often one section of apartments in a multi-storey house is sold at market prices, while another is transferred to the contract organization at cost prices, with the remainder transferred to the city and allocated among those on the waiting-list free of charge. As a result one house combines families from various social and income groups. Those who paid from their own pocket are dissatisfied that their poor neighbours do not want and cannot afford additional charges to maintain the entrance and courtyard in a decent condition, are even inclined to vandalism. In their turn, the families that received accommodation free of charge feel a psychological discomfort from seeing the opportunities of a more affluent lifestyle. Not surprisingly, it is difficult to sell apartments in such ‘mixed’ houses, since the buyers do not want to live ‘nobody knows with whom’ (Kaganova and Katkhanova, 1994).

Nevertheless, despite the rapid stratification of society on a material basis, one cannot at present foresee a strong social polarization of the urban space with the formation of extensive areas of poverty and of wealth. Several circumstances support this argument:

  • The process of housing privatization in the cities is already far advanced and for the most part the apartments belong to their previous occupants, the majority of whom are not inclined to sell.
  • The state is unlikely to refuse the different forms of guardianship and social help to the citizen-owners of apartments, who cannot afford to cover the rent and running costs.
  • As the broad masses cannot afford to buy new accommodation, a widespread movement is not expected. It is solvent demand and active housing construction that have created in the Western cities not only socially more or less homogeneous residential areas of various grades, but also a mechanism that ensures a process of movement between socially stratified districts.
  • As the nouveau riche moving to the centre and to the prestigious suburbs comprise people originating from different social layers and from different districts, there is no corresponding obvious ‘clearing’ of certain residential areas.
  • Post-socialist cities lack distinct ‘ethnic’ regions, similar to those seen in large Western cities.

Thus, even the complete freeing of market forces will not bring radical transformation of spatial patterns and social segregation in the post-socialist cities. The structures that have formed over the decades of socialism appear resistant to widespread charge.

Problems of the Land Market

In the socialist city no land market existed and all forms of land use were supervised by state authorities. The absence of a land market meant the absence of an effective mechanism for transition from less economic to more economic means of land use. As a result the residential density does not diminish with distance from the centre to the urban fringe and often even increases. This is the precise opposite to what is seen in Western cities, functioning under the conditions of a market economy. Moreover, the residents of multi-storey blocks located on the fringes of the cities are not rewarded for their long commuting distance by ecologically cleaner and aesthetically more pleasing environments. Plants, factories and warehouses located close to city centres have no economic incentive to withdraw outside the city limits, as land costs them practically nothing. Under the absence of a true land market the factor of land value is not strong enough to compel factories to economize in their land requirements.

Even under privatization, housing construction is still carried out in the absence of a land market. The distributive mechanism of allocating building sites and the logic of socialist city building, which continues to determine the situation in cities, completely ignores the key mechanism of urban land use in the market economy -demand (Kaganova and Katkhanova, 1994).

The major part of multi-storey construction occurs on sites allocated for mass housing construction according to former urban master plans, thus continuing the tendencies of the socialist economy. As for ‘cottage’ type of construction, it is conducted on a casual basis (where the developer can manage to make a bargain with the local authorities).

In the secondary housing market (purchasing existing apartments from their former owners) the location factor is distinctly reflected in price. In the primary housing market (of new apartments) on the other hand, the factor of location works poorly, as the developers are not free in the choice of building sites. Consequently, the buyers of new housing also lack choice. At first practically all new housing was bought up, but later when the most pressing demand was satisfied, developers faced the problem of non-competitiveness: the housing they offered on the urban periphery was of the same quality and price as that much better located and offered by the secondary market.

At present land in Russian cities can still not be bought or sold: it can only be leased. The zoning of urban territory and the rates of land taxation for each zone have been formulated. Nevertheless, in practice the problem of determination of land payments still exists. Land taxation tariffs are clearly understated and are many times lower than in Western cities. As a result city budgets receive much less money than they should. In Moscow in 1994 the receipts from land payments made up just 1.3 per cent of the city revenue (in the revenues of Western cities this share is equivalent to 20-40 per cent).

In the situation of the formation of market relations the authorities are afraid to lose control over urban land. They fear it will be promptly bought out and become a basis of hitherto unprecedented speculation. In addition, a psychological and xenophobic fear of foreign domination through land ownership prevails (Purgailis, 1996). Therefore it is most likely that urban land will be given the legal status of ‘property for usage’. Such an approach envisages that land can be sold devised, exchanged, leased, mortgaged, included as a share in the total assets, but it must belong to the city. The ‘proprietor for usage’ should regularly pay land taxes to the city, unlike the proprietor who buys land in private property and repays its cost at once. In this case the object of purchasing/selling represents fixed capital, located on the site, and there is no division between cost of land and cost of the real estate. In the case of privatization of the object its owner automatically becomes the owner of the land on which the object is located. It is considered that in this case the land remains in state (city) hands and simultaneously does not impinge upon the rights of the land users, giving them opportunities for extracting entrepreneurial income.

Thus, the most urgent and dominant problem of the development of a housing market is the elaboration of a market-orientated municipal land policy. Of course the ideal would be a policy which sets up a mass market of rights in available land. But as the authorities of many cities are not prepared to pursue this kind of policy, initially it would be possible to be content with a reorientation to the ‘centripetal’ concept of urban development and to enter the mechanisms of the account of real territorial demand of developers and buyers of all types of real estate, housing included.

Changes in the City Centre

Especially striking transformations, as already mentioned, have taken place in the centres of post-socialist cities, and the centre of Moscow is an uncontestable leader in these changes. Moscow has not seen such a powerful renovation of its centre for several decades, as during the period of mass housing construction on the periphery (that is, since the late 1950s) the reconstruction of the historical nucleus was neglected.

The transition period has coincided with the termination of the fast population growth of Moscow and other big cities, which provoked urban sprawl. As there is practically no free space for mass construction inside the city, the Moscow authorities now pursue a course of using any inner city unused space (including former recreational space or inconvenient hill slopes) and of reconstructing the existing built-up quarters.

As the socialist cities always experienced severe shortages of the facilities necessary for retailing, and other services, in the transition period they have invaded the urban centre, at times to a spectacular degree. It is these activities that fill the formal and prim central streets with a new sense of vibrancy. In the socialist period the city centre landscape was characterized by low turnover of uses, particularly in the commercial areas. Now, in the post-socialist city there is a high turnover of the tenants of premises in such areas, while the interiors of shops, restaurants etc. are being refurbished.

Following trade and services, the centre is now filled by numerous offices. At first existing buildings were used, but then new purpose-built office accommodation began to appear.

The metropolitan authorities have initiated the process of reconstruction of the urban centre on a wide scale, but the scope of work is restrained by lack of financial resources. Reconstruction of the city centre housing stock requires more than mere cosmetic repair. The refurbishment of seriously dilapidated buildings very often leaves nothing but a facade retained from the previous structure.

In the centre, where land is in limited supply, the built environment (for either housing or economic activities) has become increasingly dense. Single-storeyed constructions which are ‘uneconomic’ and which hinder development, are being demolished. Office accommodation appears in the empty courtyards, and when possible the existing buildings grow upwards: top floors or attics are added.

Any available sites, which are extremely rare in the centre, attract investors, and developers. One widespread practice which has emerged is where private investors, in return for funding construction work, receive from the local authorities the right of a long-term lease on a part of the new premises.

As the city centre is especially attractive for wealthier households, dwellers in the communal flats are being rapidly relocated. Paradoxically, the inhabitants of the centre are now moving to new apartments much more frequently even than during the years of high rates of mass construction.

The focus in commercial housing construction has also shifted from the periphery to the central quarters as those who can afford to buy new accommodation seek to settle away from the urban fringes: they are inclined to purchase more expensive accommodation, typically in prestigious central areas (the cost of an apartment in the old houses in such areas as Moscow varies from $1,000 to $2,000 per square metre). Construction in the centre is profitable for building companies: the infrastructure there is well developed and the return on capital investment is high.


In the former socialist countries the processes of suburbanization did not play such an essential role as in the advanced capitalist countries. Socialist cities as compared with their Western counterparts in general were more compact and more densely populated. There was no mass rehousing of inhabitants from the nucleus of the agglomeration to its suburban zone. Under the conditions of the propiska restriction of settling in large cities proper, the population of their suburban zones grew due to the in-migration from outside agglomerations (that is from rural areas and small towns).

One of the main directions of present day change in the suburban zones is the construction of single- or two-storey dwellings, some with personal plots of land. The ratio between ‘cottage’ and multi-storey construction will change in favour of the former. High-rise construction will be retained only in big cities equipped with the engineering infrastructure needed. Cottage-style dwellings and small houses will be built on free (often reclaimed) sites within the big cities, but mostly in suburban zones. The share of such small house construction should increase even in Moscow, from 10-15 per cent up to 30 per cent.

Suburbanization in Russia is closely connected with the tradition for ‘dacha’ settlements, a dacha being a summer house, seasonally used by city-dwellers as a second home. Up to 20 per cent of families in big cities have such dachas; as a rule they are wooden structures, with a very limited set of conveniences (usually only electricity and running water are available) and a garden. The dacha settlements stretch along the railway networks and (to a lesser degree) along highways, radiating out from the big cities. Such dacha settlements around Moscow spread alongside certain railway radii without breaks for 30 kilometres.

The desire to have a holiday house, and attachment to the garden, is an important feature of Russian life and culture. For many households the dacha provides an opportunity to spend weekends and holidays away from their small urban apartments. In the 1970s and 1980s a large-scale planned allocation (practically free of charge) of small garden sites took place, but such sites were usually only available at some distance from the city. State policy allowed for the erection of only small houses, often in settlements which lacked basic infrastructure, including paved roads which made access difficult.

The dachas, especially those that do possess all conveniences and which are near to the city, can be used as an all-the-year-round home. Under the new economic conditions, where a car and building materials have ceased to be in short supply, these reconstructed summer houses are now becoming permanent dwellings. People now begin to think in terms of relocating to the dacha, leaving the urban apartment to the adult children.

Surveys show that 15-20 per cent of urban dwellers would like buy dachas (mainly, the summer modular houses) or, if they already possess one, then to reconstruct it in order to use it practically all the year round as a second dwelling. The demand for dacha construction, as opposed to urban construction, comes not only from well-to-do families, but also from households with average incomes.

In response to questions concerning their housing preferences, people increasingly name a small house or a single-family cottage. Previously such preferences were the exception. This reorientation of preferences of a significant part of the city population from multi-storey accommodation to houses with a garden coincides with the revision of official city planning policy placing the accent on suburban cottage construction.

A Presidential Decree in 1992 allocated sites in Moscow oblast for the construction of small houses and cottages. The project envisaged the construction by 2000 in the Moscow metropolitan region of 140,000 cottage-style units. Their floor area would total about half of the housing fund already existing in Moscow. However, this over-optimistic plan could not be realized. The construction, for which a few thousands hectares of suburban land were allocated, resulted in a much smaller real housing construction and in a shortage of buyers (by 1994/5 only 80 per cent of housing units had been sold). The causes are well known: the problem of discrepancy between the purchasing power of population and housing affordability, i.e. property price and the lack of mortgage opportunities. The primary demand was quickly satisfied, while the number of new buyers was insufficient.

As housing prices have risen sharply, developers have tried to reduce building costs. It is possible to reduce the cost of construction and at the same time to accelerate the building process by introducing new technology, in particular through ‘modular’ building. These ‘modular cottages’ erected using Western technology are not, to the Russian taste, which shows a preference for brick-built housing as a symbol of reliability and solidity (in 1995 they made up 78 per cent of all constructed cottages).

The developers’ latest policy is to group cottages (not individual, but for several families) in separate settlements each with its own infrastructure close to the satellite cities around Moscow. The price of an apartment in such developments is about $100,000, which is several times less than its equivalent, a single-family house. The blocked form of housing of the ‘town house’ type has also emerged; it is characterized by vertical division, when a block-section belongs to one owner.

General Structural Shifts in the National Settlement Systems

The unique development pattern of cities in the former socialist countries was due not only to the absence of market mechanisms in the economy, but also to the implementation of a specific urban policy. This policy had as its long-term objective the uniform development of settlements and the liquidation of social distinctions in the conditions of life between cities and rural areas. In practice this policy was expressed in the strategy of the controlled growth of urban agglomerations and restraint of population growth of the biggest cities.

The transition period brought a partial change to these main trends which had characterized the development of the settlement systems of the socialist countries over the whole post-war period. The most prominent among recent changes has been the diminution of the overall urban population, with a great number of cities experiencing a population decline. First, the net gain of migrants from rural areas has turned into a net loss. Secondly, since the mid-1980s the natural gain of population has been diminishing and even a natural loss can now be observed. In these conditions the link between size of population and the growth of the city has become less attributable to demographic factors. The growth of a city can now be seen to be affected rather by its particular economic functions, its geographical position, the state of its infrastructure and environmental amenities, and the ‘efficiency’ of its local government activity.

The transition from the centrally planned ‘socialist’ economy to the Western market model stimulated predictions that the structure of the urban settlement would change. One such forecast predicted the amplification of the process of concentration of population in big cities and urban agglomerations accompanied by the relative decline of the small urban centres. This anticipated concentration of population has not been observed (Korcelli, 1995). As a prediction it stemmed from the assumption that barriers constraining the growth of big cities existed in the centrally planned economy and under market conditions these would cease to act. The centralized allocation of investments, a uniform country-wide system of prices and wages, an extensive use of labour force and of natural resources were all factors smoothing interregional disparities in economic development, and this in turn counteracted any spatial concentration of population. Besides, big cities operated a policy of severe restriction of inflow of non-residents by means of strict restrictions in registration (the system of propiska), which was necessary for getting a job as well as housing in the state or cooperative sectors. In Moscow the system of propiska was cancelled only in 1996 but simultaneously a system of registration was instituted. The new form also has the objective of constraining the inflow of non-residents for it requires those who move to the city to pay a considerable sum (formally for the usage of urban social and technical infrastructure).

It is of course true that in many respects the socialist economy favoured the growth of big cities. First of all, this growth was due to the development of the cities’ industrial base, especially that of manufacturing. Secondly, the growth of the big cities was in many respects determined by the intensive focusing of administrative functions in them. And thirdly, the large cities were receiving the lion’s share of investment in infrastructure (again at the expense of the centres of smaller size).

In the short-term the population growth of the larger cities and urban agglomerations should be favoured by the fact that in 1995-2005 the cohort born during the demographic peak of 1975-85 enters the active age (Korcelli, 1995). Changes in the agricultural sector may also result in a flow of migrants from rural areas to the big cities. However, the growth of the larger cities and agglomerations may be counteracted by strong economic factors, in particular the ongoing structural crisis. In general, although between 1995 and 2005 an acceleration of population growth in the larger cities and agglomerations is expected, the absolute population gain is not likely to be significant.

In spite of the fact that in the larger cities and agglomerations the labour markets are more balanced than outside them, it should not be forgotten that over the transition period they have already lost a large number of jobs. Secondly, a further fall in housing construction has resulted from the termination of state subsidies. Finally, the cost of living in the big cities is appreciably higher than in the smaller ones, whereas the consumer goods and services that used to be in such short supply have now become accessible in small cities as well (earlier trips to a big city and even to the capital were necessary).


The political and economic transition in the former socialist countries initiated a transformation in the territorial organization of the region’s cities, in particular of its largest cities. These transformations, however, have not been accompanied by a concentration of population in big cities and urban agglomerations. The main changes have occurred within cities. The more adaptable elements of the built environment, those capable of bringing quick economic returns have been the first to undergo change under the ‘marketization’ and commodification of the city. These elements, often readily visable, have substantially modified cityscapes.

The overwhelming majority of changes in the urban fabric have been connected with the modification of the existing built environment rather than with new construction. Many buildings and premises in an unsatisfactory and dilapidated condition have been subject to renovation.

Marketization was very quickly able to improve the previously neglected retail sector, but could do little in the short term to alleviate an acute housing problem. This burden has now been shifted from the state building sector to the private developers. As this process will be protracted (it will take not less than several decades) and fraught with difficulty, the cities may become areas of growing social pathology. The emphasis in the city authorities’ activity will gradually move from housing to environmental problems and to the improvement of the infrastructure of the city. Environmental factors will exert an increasing influence on the process of redistribution of population within the city.

In the near future the main changes in the spatial land use structure of the post-socialist cities are likely to be:

  • Gentrification of the urban centres, their territorial expansion and greater internal specialization.
  • Under-investment and, therefore, increasing dilapidation of dormitory districts (that is, the quarters characterized by socialist standard mass construction) in the intermediate and outer urban belts as an outcome of the reorientation of investment and construction activity to the centre and to the prestigious suburbs.
  • Suburbanization—the expansion of cities on to adjoining greenfield sites.

In the short term investment will be directed mainly to the emergent and expanding office and retail sectors. Substantial renovation will affect predominantly the more prestigious areas of cities that boast some distinctive historical and/or architectural ‘flavour’. New housing construction will be limited predominantly to the construction of single-family houses and apartments for those in a rather narrow higher-income layer. The differentiation of function by location, affecting first of all city centres, will result from the emergence of an economic phenomenon—new to the post-socialist city differential rent.

At the inter-urban scale increasing polarization is likely. The number of cities experiencing economic decline will increase, but simultaneously the list of cities undergoing economic growth will also increase. Further polarization will be stimulated by the production cycles of the economy, with the trend towards the post-industrial types of development leading to the bankruptcy of many industrial enterprises. Polarization will be especially marked in the group of medium and small ‘one company’ industrial cities.

Thus, post-socialist cities in the future will need to rely to an increasing degree on their own resources, their economic base, and geographical position, where state redistributive policy has already ceased. In its place a scenario of intense competition between cities, struggling for investment, jobs and development, and prestigious projects, is emerging.