Where's the Rent Going?

By Tatyana LeiyeOn Nov. 21 Igor Dobrovolsky, the director of a private firm called Meander, announced that he was going on a strict-regime hunger strike -- refusing not only food, but water as well. He is doing this to protest what he claims are illegal actions on the part of government agencies in charge of managing state-owned residential and commercial properties in downtown Moscow, and the complete indifference to his protests on the part of Alexander Muzykantsky, the prefect of the central district. "Most likely," says Dobrovolsky, "if the city authorities do not start taking this problem seriously, we will never solve the housing problem or the city budget crisis."


The issues of power and property have become intricately intertwined in recent years. Property has become perhaps the best defense against inflation, bringing stable and impressive profits. It is well known that an apartment in the center of the city now costs roughly as much as a similar apartment in New York.


According to current legislation, there are two ways to obtain a lease on commercial property in Moscow. Either one can participate in competitive bidding or one can pass along a complex bureaucratic chain, gathering numerous signatures and approval forms according to a process laid out by a Moscow city government instruction called "Real Estate Management." Needless to say, there are always those who don't want to go through all this red tape and who therefore try to find some way around that is faster and cheaper. So, naturally, a third variant has developed -- going straight to the director of a certain property and striking a direct deal to lease a portion of it.


That is why, according to Meander, so far not a single desirable property in the center of the city has come up for competitive bidding. All the auctions held so far involve either small properties in bad repair, or space in buildings that are still under construction. The application of regulations on distributing this space is completely in the hands of bureaucrats, and they are hardly disinterested parties.


Two years ago the prefect of the central district -- the most prestigious district in the city -- concluded an agreement with Dobrovolsky under which he was to survey all the residential and commercial space controlled by the district administration on Tverskaya Ulitsa. Dobrovolsky's study revealed that no less than 40 percent of the space on this extremely prestigious street was illegally occupied.


How could this have happened? Every day we hear reports about how empty city and state coffers are. Many people who receive their wages from the government have had them withheld for months, and the salaries of those who are still being paid are pathetically low. State support for orphans, invalids and pensioners is likewise entirely inadequate. The government tries to solve its financing problems through taxation: Year after year taxes are raised, even though by many estimates less than 40 percent of the population is able to pay all its taxes. So isn't it paradoxical that in this case, where the city and the state have every right to be making money, they simply are not collecting it?


A look at nine buildings on Tverskaya Ulitsa found 4,100 square meters of commercial space that was either empty or was illegally occupied by firms with forged documents. These firms, instead of contributing to the city budget, are either paying someone off on the side or paying nothing at all. And this at a time when annual rent in this area is higher than $200 per square meter. This is the very space that should be up for auction.


The figure of 4,100 square meters refers to just nine Moscow buildings. What would we find if we surveyed the entire city? Or the entire country? We would no doubt find trillions of rubles of potential government income. But this money will never reach the government as long as the looting of state property continues.


In Russia, millions of people are living in appalling conditions. They wait for years to buy apartments. But Meander completed a study of just one regional administrative zone in Moscow and found eight apartments and more than 20 rooms in communal apartments either illegally occupied or empty. In another 20 apartments, firms had illegally set up offices: Of course, in most cases these were luxurious five-room apartments in excellent locations. But no one will be moving into any of these apartments as long as officials continue to benefit so much from the current situation.


But all the information collected by Dobrovolsky about the illegal distribution of real estate in Moscow is gathering dust in Muzykantsky's office. For two years now, there has not been a single response to any of Dobrovolsky's reports.


Laws, decrees and instructions have literally inundated us, often contradicting and repeating one another. And, of course, officials only fulfill the ones that are most convenient for them. Mayor Yury Luzhkov has three times called for an inventory of city property, but the City Property Committee says that it does not have the resources to undertake the project.


Igor Dobrovolsky maintains that he will see his hunger strike through, no matter what. He has signed a statement saying that any attempt to feed him by force will be considered an act of violence. He demands that the prefect's office fulfill its obligations to use illegally occupied commercial and residential space for the benefit of the city. In the first three days of the strike, he has received two phone calls. One was from the mayor's office, threatening to send in the police. The other was from the regional administration, offering him a new position -- a promotion. You see how the system works.





Tatyana Leiye is a reporter for Selskaya Zhizn. She contributed this comment to The Moscow Times.