Model of Increasing the Economic Affordability of Housing When Creating Housing Cooperative

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 955-959

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Model of Increasing the Economic Affordability of

Housing When Creating Housing Cooperative

Aigul A. Guseinova *, Albina N. Afanasyeva

Institute of Philosophy, Social Sciences and Mass Communication, Kazan Federal University, Kremlevskaya str, 18, 420008,

Kazan, Russia

Institute of Economics and Construction Management, Kazan State University of Architecture and Engineering, Zelenaya str., 1,

20043, Kazan, Russia

Received: 13/09/2019

Accepted: 22/11/2019

Published: 20/12/2019

Abstract

The housing problem remains one of the most acute and socially significant, since the possibility of acquiring and improving

housing conditions for citizens becomes difficult and impossible to achieve without state support. In particular, a decrease in

housing affordability is associated with the quality and growth in the cost per square meter of housing, the tax burden and the

annual increase in housing maintenance costs. Nevertheless, the main criterion characterizing the growth of reproduction and

ensuring the comfort of living is the income level of the population. Housing is a social criterion and an indicator of the life quality of

the population, affecting labor productivity, growth in gross domestic product, dynamics of demographic processes, and economic

activity of the population. Undoubtedly, the availability of housing is the main indicator of the economic and social development of

the state. Unfortunately, despite the positive dynamics of the housing affordability indicator, there are a number of problems that

need to be addressed within the framework of the formation of comfortable housing. And also, it is necessary to introduce the

affordability barriers to understand the complexity of creating an affordable housing market. In this article, the authors present a

model for increasing housing affordability, taking into account an accurate assessment of the possibility of its acquisition. In addition,

we offer a solution to this socio-economic problem by supporting the development of housing cooperation, which shall be expressed

in the formation of new legal institutions and instruments that contribute to the guaranteed accumulation of funds by citizens for the

acquisition of real estate.

Keywords: Housing, Affordability, Housing Cooperative, Construction, Barrier, Property, Income

none of the participants can allocate its share in the common

Introduction

property. We should also take into account that the right to

participate in decision-making for all participants in common

property is the same.

Method (from the Greek word) is a way to achieve a goal;

a set of techniques, operations and actions forming the way to

achieve a specific goal corresponding to this method in the

space of measures and actions. In this article, we consider

models of several private methods, using the instrument of

cooperative power. The main way and method to achieve the

goal is the use of incentive (motivational) management in

combination with the command-administrative component of

self-government. We will proceed from the fact that each

cooperative member wants to minimize its costs for the

maintenance and operation of common property in the

household (condominium). This is their need for the desire to

live richer and better use their income and savings (1). We

should take into account that the condominium is owned by

the cooperative and is an indivisible mutual fund, from which

Our goal is to use the motivational method of

management to create motives that encourage the cooperative

members to maintain membership in the cooperative and

implement general decisions of the meeting. This can be

achieved if membership in the cooperative will lead to

significantly lower share costs of the homeowner than the

costs of a person, who does not obey the decisions of the

cooperative meeting. For this purpose, it is necessary to

develop and introduce a special economic content of common

property into the system of internal relations in the

cooperative.

Methods

We used two main methods within the framework of this

Corresponding Author: Aigul A. Guseinova, Kazan Federal

University, Kremlevskaya str, 18, 420008, Kazan, Russia.

Email: agusejno@kpfu.ru

article: modeling and analysis. Modeling made it possible to

identify and evaluate the desired socio-economic patterns of

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 955-959

increasing housing affordability. Models were built through the

analysis and taking into account that they were adequate to

experience. For a qualitative concretization of the elements of the

housing construction cooperative model, we applied scientific

modeling and systematic generalization of its results, confirmed

by experience.

The main theoretical base is reflected in a number of

scientific studies (2-5); however, the practical aspects of the

development of housing cooperatives in modern conditions have

not been actively applied to Russia. The need for this kind of

research is due, first of all, to the fact that housing

affordability and comfort is a socially significant problem.

budget for other categories of residents (1). The greatest

benefits shall be established for the cooperative members that

comply with internal, local acts. The establishment of benefit

differentiation has a “flip side” and is a method of incentive

for maintaining the internal rules of the cooperative,

observing the internal laws of the cooperative and the

importance of the co-owner's role of the common property in

the cooperative. This is not so much about restrictions, but

about benefits that a person living in a cooperative may or

may not have. The stronger the economic and other motives

are, the more effective and efficient the power of the

collective of owners in the territory of a single property

complex belonging to them will be.

Results

The main results obtained within the framework of this

4 Discussion

study were models for the development of the economic

content of common property in the housing construction

cooperative (HCC). Firstly, the following measures were

implemented. We clearly identified the boundaries of the

common property (condominium) and the assignment of the

status of indivisible share fund. It was established that

withdrawal from the cooperative can be carried out on the

initiative of the cooperative member by assigning ownership

of housing to another person in compliance with the rules of

the charter, as well as can also be carried out on the

cooperative's initiative by expelling a participant from the

cooperative in accordance with the applicable law.

4.1 The content of the concept of housing affordability

The purpose of the method used in this article is to

increase housing affordability for citizens.

Method is a certain order of necessary measures and

actions, which allows achieving the desired goal.

First, let us deal with the essence of the concept of

housing affordability. A citizen, who wants to acquire a new,

necessary housing, has three main potentials in market

conditions:

•

current income;

savings;

and secondary housing that does not suit his/her

Upon exclusion from the cooperative, a participant is

subject to eviction from the cooperative and payment of the

share value to him/her in the manner prescribed by law, the

charter, cooperative decisions, and court order (6). Moreover,

according to the decision of the cooperative meeting, the

participant may retain the right to use the apartment

previously owned by him/her on the basis of an agreement

with cooperative. In this case, such a user under a lease

agreement pays for the services of the cooperative at the

market prices that will be established by the agreement. With

due observance of the terms and conditions of such an

agreement, the cooperative members can again accept this

user as the cooperative member. Depending on the rental

price and depending on the price difference for the services

provided by the cooperative to its members and employers,

an “economic motivation” arises aimed at strengthening

discipline in the cooperative and consolidating participants in

common property. Formation of obligations, the violation of

which may lead to the exclusion from the cooperative, and

the nature of the specified "economic motivation", are a

method of using the cooperative power of the collective.

Secondly, the cooperative members can establish

gradation of the value of their internal services by dividing

the people living in the cooperative into different categories:

needs (6).

Similarly, we can talk about the family (household)

potential.

Usually, a citizen shall pay the costs for aquisition of land

plot, creation of necessary urban planning documentation and

construction of residential building in the part related to the

construction of his/her apartment for the construction period.

The term of such payments may be 1-2 years.

After completion of construction and its full payment, the

homeowner goes over to the fixed cost regime associated

with housing maintenance and operation.

The total amount of costs associated with construction

characterizes the share size. The level of fixed costs is

associated with the "elitism" of home ownership (7–9). The

value of the maximum costs necessary for the housing

construction is called the affordability barrier.

If the construction costs are incurred "by installments",

the amount of costs is reduced. Thus, the affordability barrier

(maximum payout per month, quarter) is less in case of

installments.

4.2 A method of increasing the criterion of housing

affordability

The method of increasing housing affordability lies in the

fact that it is taken the methods and actions, due to which the

compliance of the temporary regime of income generation by

a citizen is ensured:

•

homeowners (cooperative members);

family members of homeowners (legally capable,

legally incompetent, observing internal rules and contractual

relations or not observing such rules);

•

affordability barrier;

•

third parties, including tenants, etc.

volume of construction costs.

Different methods can be used to solve each of these

problems. Let us consider the idea of one of these methods on

First, the cost of services for third parties living on the

terms of legal rent is established. For such individuals, the

cost of domestic utilities shall be consistent with market

prices. Then, benefits are introduced from the cooperative's

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 955-959

the example of the Republic of Tatarstan. We are interested

in how to assess and regulate the housing affordability.

1) long-term lending secured by mortgage agreements

concerning:

At the beginning of 2018, prices for the construction of

new housing were mainly 33 thousand roubles per 1 sq. in

Kazan (Russian Federation, the Republic of Tatarstan) (10).

The average family includes 3 people. The average number of

working family members is 2 people. During the construction

of a one-room apartment of 40 sq. m within 2 years, it would

be necessary to pay a minimum of 1,320 ths. roubles,

excluding inflation and risk of job losing. With uniform

payment of such costs at the expense of current income, the

total income of family members shall be at least 70-80

thousand roubles per month. Of this income, 55 ths. roubles

should be allocated for housing construction purposes, and

•

existing (old) housing;

acquired (new) housing;

combined security;

2) medium-term and long-term share accumulation,

which is called the purchase of housing by installments;

3) preliminary (prior to construction) share accumulation;

the use of loan and savings deposits;

4) housing (municipal, state, commercial) special-purpose

loan where loan repayment is ensured by the acquisition of

securities secured by square meters of housing and price

equivalent;

5) “internal lending” in the system of consumer (housing)

cooperatives;

15-25 ths. rubles shall be used to satisfy food needs, etc.,

forming the minimum consumer budget for the family.

This means that the affordability barrier corresponds to a

barrier of opportunities to receive 36 ths. roubles salary per

month.

6) using proceeds from the sale of old housing under the

suspensive and dissolving condition at the security price in

the construction of new housing (a specific method of lending

to new construction);

The number of income freedom degrees of the citizens is

the number of independent activities in obtaining by the

majority of citizens the income they need for life and work,

development and procreation. According to the model ideas

of the authors, there shall be at least 3 degrees of such

freedom in a modern fair society:

7) combination of these methods.

Most of these methods can be implemented in

cooperatives on a private basis to the benefit of the

cooperative members and the cooperative as a whole.

Wealthy cooperative members can form a special mutual

fund for the purchase of housing by the cooperative and the

provision of such housing for use (on a rental basis) to less

wealthy cooperative members, who acquire such housing as a

result of share accumulation (6). Such an investment will

actually be 3-5 times and more profitable and more secure for

wealthy cooperative members than depositing money; for

example, in the Savings Bank of the Russian Federation.

Moreover, economic benefits can be generated in different

ways. Some benefits will be equivalent to interest on a loan,

others will be related to rental fees, and others will be due to

the difference in internal tariffs for users and homeowners,

etc.

•

freedom to earn income through service to

society;

•

freedom of entrepreneurial income;

•

freedom to earn income through employment.

Degeneration of freedom degrees occurs not only due to

the economic and other legislative prohibition of freedom of

these types of activities, but also due to the emergence of a

relationship between these types of activities, with the loss of

labor freedom and the emergence of mass hidden

unemployment (11,24,25,26).

Given this nature of distribution, either rich citizens, or

large families with a large number of employees can build

housing. For example, if a family consists of 12 people, all of

whom work and receive average wages (approximately 36

ths. roubles per each for Kazan (12-17), then such a family

will be able to build a two-room apartment at the market

prices. Or 4 families, consisting of 3 employees, shall work

for the needs of one family.

Conclusions

An important advantage of this method is the fact that

this approach does not require a deposit (mortgage) of new

housing. The need for a housing pledge disappears, since the

house owner is a cooperative for the period of share

accumulation. There are fewer risks, problems with taxation,

debt servicing, etc. If this method is accompanied by the

purchase and sale of old housing under a condition (under a

suspensive and dissolving condition), as a result of which a

citizen improves housing conditions by 5-10 sq. m, then the

barrier to housing affordability may decrease to the level of

In order to increase the housing affordability, it is

necessary to:

•

reduce the affordability barrier for as many

citizens as possible, taking into account their real incomes;

increase employment guarantees for the period

of housing acquisition;

•

-10 ths. roubles per employed person (14,23).

Estimating the distribution model through integration, it

•

increase the income of citizens.

Increasing housing affordability is a set of measures and

actions taken by a citizen, an association of citizens, who

want to build housing, as well as municipal and state

authorities (13,21,22), which is aimed at bringing the current

capabilities for as many citizens as possible with their

housing needs.

To reduce the affordability barrier within the framework

of market relations (without using budget funds), the

following methods can be used:

is possible to determine the share of citizens to whom the

purchase of housing will become available while lowering the

access barrier to 8-10 ths. roubles per employed family

member. With the development of a cooperative form of

organization, methods of share accumulation, various

methods of internal lending, as well as the use of old housing

for the purpose of financing housing construction, the

availability of new housing can be increased by a private

initiative regulated by the authorities for additional 50 - 300

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 955-959

ths. people, for example, for the citizens of the Republic of

Tatarstan.

Although the authors negatively relate to the mortgage

model implemented in Russia (15, 18, 20), considering it

unacceptable and economically harmful, the following should

be noted.

responsibilities, that is, the whole range of functions (future

or current) of the owner, which are included in the concept of

the legal status of a cooperative member. The more

effectively such status and its differentiation are used in the

interests of the cooperative, the more effective is the power in

the cooperative. All costs of services (tariffs), internal costs

and burdens in the cooperative shall be related to the legal

status of the organization’s member and to observance of

his/her duties. it is necessary to establish different cost for

tariffs and other burdens for the cooperative members that

comply with internal rules, and for the cooperative members

that do not comply with the charter. Only a branched and

The use of a cooperative form of organization of future

homeowners shall be of interest to the organizations

developing the mortgage lending method. The fact is that a

pledge of housing from a legal point of view is unacceptable

if a share in the right of common ownership is not

simultaneously laid together with housing (16-19).

Communal property, which is part of a single property

complex, is a very specific property, in relation to which a

share in the right of common ownership does not have any

real (monopoly) security.

Organizations involved in loans secured by mortgage

agreements either try to artificially determine a share in the

right of common ownership, or try to circumvent the

requirement of simultaneous pledge of housing and a share in

the common property. The majority is trying to somehow

determine the share in the common property without the

consent of all homeowners living in the common house and

without a share in the right to own land. At the same time, as

a rule, the registration documents of property rights to the

condominium of all homeowners are absent.

strict responsibility for observing internal rules in

cooperative is the basis of collective power in a cooperative.

Acknowledgement

The work is performed according to the Russian

Government Program of Competitive Growth of Kazan

Federal University.

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