Social mortgage

The currently existing Russian mortgage is inaccessible to the broad masses of the population and cannot solve the housing problem. In this regard, talk has already begun that there is a difference between mortgages and mortgages, that commercial mortgages should be developed for the “rich” minority, and for the “poor” majority, some kind of “social mortgage” should be thought out. Are such conversations legitimate and can the mortgage be different for different categories of the population?

It is quite obvious that in a country with such a significant differentiation in the standard of living, the conditions for providing housing to socially unprotected segments of the population should differ from programs focused on a rather narrow stratum of the “rich”. It is this factor that underlies the fact that the mortgage that has just begun to develop has already begun to be divided into “social” and “commercial”.

Supporters of this division argue as follows: “social mortgage” should be based on state support, concern only socially unprotected citizens, and the improvement of housing conditions within its framework should occur only within the established social norms.

“Commercial mortgage”, on the contrary, exists for citizens who have sufficiently high incomes in order to independently fulfill their loan obligations. This mortgage must be carried out on market conditions without any government involvement.

A similar division of mortgages into “social” and “commercial” has already begun to take place at the legislative level. In particular, it was reflected in the federal target program “Housing”, designed for the period until 2013, as well as in the Concept for the development of the system of mortgage lending, adopted by the government decree of January 11, 2000.

At the end of 2003, the State Duma invited the relevant departments to develop a special law on “social mortgage”, providing for the establishment of general provisions for its implementation for public sector employees and low-income citizens.

Supporters of “social mortgage” (let’s call them “populists”) believe that it is possible to clearly distinguish between “commercial” and “social” mortgages. The main thing, in their opinion, is that the latter does not develop by “pull” and that everything that is allocated from the budget is absolutely transparent, and it is also clearly defined who can count on these payments.

“Social mortgage” is a pseudo-mortgage?

However, even a layman understands that the introduction of “social mortgage” will entail a lot of questions related to who should be classified as socially vulnerable and low-income citizens. The trouble is that there are no clear evaluation criteria here and, it seems, cannot be. First, the country is too large, and the income that is considered large for one region is not for another. Second, the level of official income in a country where the overwhelming majority of workers receive “gray” and “black” salaries is not an objective indicator. Thirdly, the concept of “budgetary sphere” is extremely vague, because now a rare teacher or doctor has no additional earnings.

The introduction of “social mortgage” also has principled opponents (let’s call them “market people”) who believe that all issues related to housing lending should be resolved on a general basis and according to uniform standards dictated by the market, and not by officials.

In their opinion, everything that is done without taking into account the laws of the market is from the evil one, and “social mortgage” is a pseudo-mortgage that breaks all market mechanisms. Yes, this is not a mortgage at all, but the purchase of housing in installments, when the loan rate and the real cost of an apartment are artificially lowered, and the difference is repaid with budget money. But there is no money in the budget, and practical people have long understood that with its help it is impossible to solve the housing problems of 80% of the country’s population.

Therefore, “market people” say that if the state wants to improve the living conditions of its citizens, then let it help specific people. Interest rates and standards for issuing mortgage loans should remain market-based, just in the statement of income provided to the bank, low-income citizens should indicate the right to receive budget assistance as a source of loan repayment as a source of loan repayment. Indeed, in fact, it does not matter for banks where the borrower takes the funds to pay off the loan, whether it is his salary or a subsidy; the main thing is that the source of funding is constant and reliable.

Some “market people” are even convinced that “social mortgage” can do harm, especially if by it we mean something that allows a person to bargain for himself not a market loan, but a very cheap or generally free loan at the expense of budget funds. Of particular concern is the likelihood that other citizens, knowing about the possibility of obtaining a loan practically for nothing, will not line up for loans provided at market interest.

Efficiency is still questionable

The state has already tried to create a kind of “social mortgage” by developing programs for the provision of housing on credit to military personnel and employees of budgetary spheres. So far, they have not given a noticeable positive effect, because local officials themselves do not know what and how to do in this direction..

While the real estate market remains unstable, there can be no question, for example, of reducing the down payment (now it is 30% of the cost of an apartment). At the same time, banks cite high risks. And they are quite understandable. For example, for some time now it has been allowed to evict people from mortgage housing who cannot pay off the loan debt. But, as it turns out, this is contrary to the Constitution if the defaulter’s apartment is the only one, and the issue of providing him with alternative housing has not been resolved. There is some sluggish talk about resettlement housing stock and municipal “tenement houses”, but all this remains in words. And why should a municipality, say, have “social houses” on its balance sheet??

In some regions, attempts are being made to subsidize interest rates on mortgage loans from the budget. But the effectiveness of this approach is questionable. After all, such subsidies should last for the entire term of the loan, which is at least 10-15 years. Let’s say that today the budget has a certain amount for these purposes. And what will happen tomorrow if, for example, world oil prices go down and economic growth rates slow down? They will begin to revise the items of expenditure and the entire system of “social mortgage” will collapse?

What to do?

The issue of the availability of housing loans for the broad masses of Russian citizens still remains open. It is clear that the only possible way to simplify access to mortgages is to reduce the cost of housing. To do this, supply on the market must significantly exceed demand. But can we expect this in the near future?

This is where the state would be able to turn around in full force, seeking additional budgetary funds to finance housing construction. But where is there … It is much easier, in terms of the obscure term “social market economy”, to knock benefits out of business.

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