The program failed its main goal — to make housing affordable for citizens
The end of any government support program evokes a desire to evaluate its effect. I must admit that the preferential mortgage went well. With national records. In June, banks issued 176.6 thousand loans worth 777.2 billion rubles, which is 39% and 44% more than May values, respectively, and the average size of a mortgage loan increased to 4.4 million rubles! However, the achievements could not hide the unpleasant truth: the program miserably failed its main task — make housing affordable for citizens. The lion's share of financial benefits from the budget was received not by poor citizens, but by wealthy private investors-speculators, as well as bankers and developers. Over four years, preferential mortgages have increased prices for new buildings significantly, which has forced many families to forget about improving their living conditions. In addition to the credit bubble, which threatens a wave of bankruptcies of citizens and construction companies, serious deformations have arisen in a number of related industries, increasing risks for the Russian economy.
Let us remind you that mortgages with state support with a rate of up to 6.5% “for everyone” started in April 2020 to support the demand for new buildings that fell during the pandemic. To stimulate the issuance of preferential loans, the government provided subsidies from the budget to selected credit organizations. At the same time, in mid-spring 2020, the difference between the market and preferential rates was only 1.82% (the weighted average commercial rate in banks fell to a record low of 8.32% per annum). For comparison, at the end of June 2024, on the eve of the closure of the super-popular program, the difference between market rates (20%) and preferential (8%) mortgage rates was already 12%! Why did such a imbalance occur?
The preferential mortgage was essentially a response to force majeure for the construction industry and was initially calculated until November 1, 2020. But the coronavirus epidemic passed, and the preferential mortgage was extended several times, making various adjustments to it, since it was recognized as “extremely effective.” Especially for banks and developers. Thus, from April 2020 until its end, in total, according to DOM.RF Bank estimates, 1.5 million loans were issued within its framework for a total amount of 6 trillion rubles. At the end of 2023 alone, banks earned a record profit of 3.2 trillion rubles. And a significant part of the net interest margin came from preferential mortgages, which became the main driver of the development of the housing market. At the same time, banks also received trillions of rubles in subsidies from the state budget.
Developers also received substantial benefits from preferential mortgages. Over the course of four years, the capitalization of many large developers on the stock exchanges took off like a balloon. According to Rosstat, in 2023 a record 110.4 million square meters were commissioned in the Russian Federation. m of housing (+7.5% compared to 2022). More than 51 million sq. we had to use apartment buildings. The secret of success is simple. According to developers, at the end of June 2024, about 80% of sales of new apartments were accounted for by preferential and family mortgages. But can the housing market be considered healthy if it, like a drug addict, has been sitting on a preferential credit needle for four years in a row?
To increase sales and margins, developers together with bankers have come up with, as the Central Bank admits, various “schemes” . Starting from the “near-zero” mortgage and ending with the now popular letter of credit. The financial regulator is fighting all these ideas with varying degrees of success.
Representatives of related industries also took their piece of the budget pie, taking advantage of the opportunity. For example, at the beginning of 2020, a ton of reinforcement cost 34–35 thousand rubles, a year later, thanks to the jump in demand, it was already more than 60 thousand rubles. Moreover, on the world and Russian markets, metal prices have been falling since May 2021. In 2023, individual players became so insolent that it was only possible to curb the rampant appetites of one large valve manufacturer through the joint efforts of the Ministry of Industry and Trade, the Ministry of Construction and the Federal Antimonopoly Service.
During the launch of the program, none of the numerous curator-officials bothered to identify the recipients of assistance and fix the prices for new apartments at an acceptable level. There was simply no such goal, because this program was intended to be temporary. As a result, due to targeted mortgage subsidies, average prices for new buildings have doubled in many large cities over the past three years. This is several times higher than official inflation.
In the first quarter of 2024, the gap between prices in the primary and secondary housing markets, according to Rosstat, amounted to 55%! This indicated a dangerous overheating of the new buildings segment and increased risks of depreciation of collateral for banks.
The endless rain of money from the budget distorted the structure of demand: new apartments were bought not by those who really needed them, but by those who have a roof over their heads — enterprising private investors who were in a hurry to monetize freebies from the state. This trend was especially evident in August 2023 in Moscow, when there was a rumor about the imminent closure of preferential mortgages. Then speculators took out several preferential mortgages from different banks and bought about 80% of new buildings in the capital in order to make money on rising prices.
The authorities came to their senses only at the end of last year, when the principle of one-time issuance was introduced into state mortgage programs. Who prevented the introduction of restrictions for speculators earlier? The Ministry of Finance, so vocal about budget savings, woke up from hibernation only in April 2024. When two months remained before the end of the preferential mortgage program, deputy head of the department Ivan Chebeskov said that “the possibility of introducing a salary qualification” for high-income families is being discussed. As the official explained, people with a salary of 500 thousand rubles. per month can afford to take out a housing loan on market conditions.
“The largest volume of preferential mortgages was issued in the capital regions and the Krasnodar Territory. Stimulate the housing market in these wealthy regions
at the expense of the state is hardly advisable,” Maxim Osadchiy, head of the analytical department of the BKF bank, told MK. In his opinion, preferential mortgages did not fulfill their main task — they did not make housing more affordable. On the contrary, housing has become less affordable due to the rise in real estate prices caused by preferential mortgages. “Essentially, government subsidies aimed at reducing mortgage interest rates have gone down the drain,” the banker admitted.
“For the state budget, preferential mortgages have become a significant burden, since at least 400–500 billion rubles are allocated for it annually, which significantly exceeds the costs of indexing pensions and healthcare,” said Natalya Milchakova, leading analyst at Freedom Finance Global. According to her, preferential mortgages led to a lending boom and an increase in the debt burden of Russians to the point that in some regions, and not rich ones, the share of income that entire families gave to service their debts reached 70–80%, and on average In the Russian Federation, many borrowers give about 40% of their income to pay off debts. There is a threat of a credit bubble.
As Oleg Repchenko, head of the AC «Real Estate Market Indicators IRN.RU», noted, in addition to the rise in prices, the completed preferential program also distorted the supply structure. If earlier developers, as a rule, designed one-third of “one-room apartments,” “two-room apartments,” and “three-room apartments” into residential complexes, today about 70% of proposals are studios, “one-room apartments,” and “euro-bedroom apartments” (“one-room apartments” with a large kitchen) . “On each floor there are not 4 or 6 apartments, as in Soviet houses, but entire corridors with studios and one-room apartments. It seems to me that we are building ghetto hostels, not housing for young families. The main problem of the housing market is inadequately inflated prices,” the analyst concluded.
According to Bloomberg Economics economist Alexander Isakov, from the spring of 2020 to the spring of 2024, affordability (the ratio of income to housing prices) for borrowers not eligible for the mortgage subsidy program decreased by about 48%, and its main beneficiaries were developers, and not the population.
“If before 2019 in the Russian Federation there was a trend toward increasing housing affordability, then since 2020, affordability, on the contrary, began to decline,” admitted the Institute of Urban Economics Foundation. Its experts calculated the housing affordability coefficient (HAR) for Russian cities, which reflects the ratio of the market value of a new apartment with an area of 54 square meters. m to the annual income of a family of three (based on average per capita income). According to the results of the study, in 2023 it would take 4.8 years for a family of three to save for an apartment in Moscow. In 2019, before the start of the state program, this would have taken 4.2 years. In St. Petersburg, the life expectancy at the end of 2023 was 4.7 years compared to 3.8 years in 2019. To save for housing in Kazan, in 2023 a family needed 4.5 years versus 3.2 years in 2020. The decrease in affordability over four years occurred, according to experts, due to the fact that prices for “square meters” grew faster than household incomes.
Now a family mortgage is being prepared to replace the preferential mortgage. What's alarming? Its parameters are approved by the same officials who four years ago developed preferential mortgages behind closed doors with the influential construction and banking lobby. Again, changes are being prepared on the sly, without independent experts and public opinion. Again, we are told beautiful tales about affordable housing.
If the authorities really want to help poor citizens solve the painful housing issue, then they should first establish basic order with the allocation of land plots for residential complexes at exorbitant prices (for example, 90% of the land in the Moscow region potentially suitable for housing construction is in private hands), reduce the cost of connecting to monopoly networks, and also introduce a progressive property tax, which is much fairer than the progressive personal income tax. Then housing prices will become adequate after speculators flee, and preferential mortgage programs will not be required. We need political will for these reforms.