The State Duma has decided to revive the institution of tenement houses in the Russian Federation

State Duma deputies have begun work on a bill to create apartment buildings. In tsarist Russia, they occupied the lion's share of the rental housing market in large cities. The revived real estate format could become a profitable alternative to a mortgage if the landlord provides tenants with the right to buy out the apartment after 20-25 years. However, developers have given the legislative initiative a rather cool reception.

As Vladimir Koshelev, Deputy Chairman of the State Duma Committee on Construction and Housing and Utilities, explained, the Russian real estate market will soon see the emergence of an institution of apartment buildings, specially built not for the sale of apartments in them, but for their civilized leasing. In his opinion, this type of real estate, widespread in the Russian Empire in the late 19th and early 20th centuries, will help improve the living conditions of modern Russians.

Today, the Housing Code of the Russian Federation does not include the concept of "rental houses", although in fact there are examples of owners renting out not only individual apartments or flats, but also multi-apartment buildings. Thus, some analogues of rentable houses are apartments and apart-hotels. They differ from rentable houses in that they are commercial real estate and people living in them cannot register at this address.

As Sergey Smirnov, senior partner of the Vysotsky Estate network, told MK, apartment buildings have good prospects in the Russian Federation. According to his data, 5-6 such projects are currently being implemented in Moscow, but the potential capacity of this segment is estimated at 50 thousand families. There are already several successful projects in this direction.

In his opinion, the legislative initiative can change the Russian rental housing market. Because it will become more transparent and civilized. Shady schemes, including those for understating rates, will disappear. In addition, the taxable base will increase and the registration of tenants will improve. True, here we need innovations that allow tenants to be registered. As is known, temporary registration opens access to the social infrastructure of the district (schools, kindergartens, hospitals).

"Private companies will be happy to engage in the construction of apartment buildings. Especially if they receive the benefits that hotel business participants have today," Smirnov is confident.

Most developers interviewed by MK do not share such optimism. “In the current situation, due to expensive project financing, the implementation of such projects is of no interest to developers. The payback period for such projects can reach 10-15 years, which is catastrophically long by Russian standards. For comparison: the construction of ordinary residential complexes with apartments for sale pays off in an average of 3-5 years,” noted Ivan Tatarinov, executive director of the development company Glincom. In addition, in his opinion, developers of apartment buildings will have to fight the “gray” rental market, where rates can be significantly lower.

Deputy Financial Director of Granel Group Yuri Chernoivanov agrees with this point of view: “Today, the segment of apartment buildings is of no interest, since the payback period for rental housing takes 18-20 years. Investments in this segment can now be considered by sovereign state funds, for which a return of 4-5% is considered normal. In the case of 100% financing by state funds and banks, some of these projects may be of interest to professional developers as consultants and project managers (fee-development).”

According to developers, state benefits that would make these projects economically feasible could stimulate interest in apartment buildings. For example, financing construction from regional budgets. "In regions with the greatest housing supply deficit, the state could become the customer of the work, and such projects would remain on its balance sheet," Tatarinov believes.

According to Andrey Sado, managing partner of Penny Lane Realty, the state or city authorities can also exempt developers from paying fees for changing the type of permitted land use as support. The authorities can also provide subsidies for the construction of apartment buildings or preferential interest rates on loans.

"Giving a certain status to buildings for their conversion into apartment buildings does not seem entirely logical, given the presence of existing hotels and apart-hotels on the market offering both short-term and long-term rentals," Mr. Sado noted. In his opinion, hotel complexes with daily rentals and apartment-type apartments equipped with a kitchen can be classified as apartment buildings. "Thus, this bill is unlikely to have a significant impact on the real estate market in the rental segment," the expert is sure. In his opinion, the authors' references to the Russian Empire are also not entirely correct.

— The fundamental difference between pre-revolutionary apartment buildings and the modern facilities planned for construction lies in the purposes for which they were built, — Mr. Sado emphasized. — Pre-revolutionary apartment buildings were built by entrepreneurs to make a profit in the context of a stable ruble, when people preferred to rent real estate rather than buy it. At present, in the context of ruble instability and inflation, people are inclined to invest in real estate, even with high mortgage rates, since this allows them to preserve capital.

According to his assessment, in Russia the greatest demand for apartment buildings may arise among migrant workers and guest workers who have to live in conditions that do not meet modern comfort requirements. That is, apartment buildings will most likely be oriented towards the economy or comfort class segment.

Executive Director of the Moscow Investors Club Vladislav Preobrazhensky noted: “Considering the current high cost of credit for the developer and the amount of rent, it can be said that projects for the construction of profitable (rental, leased) houses will never pay off.”

He recalled that in the EU, the owners of such real estate are institutional investors who initially buy apartment buildings from developers in their entirety and then rent out the apartments. The principle is observed: the developer builds and sells real estate, the buyer - the owner of the real estate rents it out. These are different businesses and are beneficial to both. In the US, institutional investors include non-state pension funds, insurance companies, large investment companies and funds, hedge funds.

According to the executive director, as soon as owners in Russia “grow up” to the point of buying entire houses, it is quite possible that apartment buildings will appear. “The emergence of institutional investors is also possible, but this requires a different economic situation, including one related to a change in the country’s monetary policy. This process will not be fast, but preparations for the formation of the business itself related to apartment buildings should be made in advance. Therefore, legislative initiative in this matter can only be welcomed,” concluded Preobrazhensky.

Published in the newspaper "Moskovsky Komsomolets" No. 29539 of June 10, 2025

Newspaper headline: Mortgage alternative found with history