Roman Vasilenko, Doctor of Economics, President of the International Business Academy (IBA)
In 2014, a project related to housing cooperatives became part of my professional work. Over the past decade, it has grown into a significant part of what I do. During this time, tens of thousands of members have joined the cooperative system, giving me an opportunity to observe how this model operates and evolves across different regions of the country.
Ten years is a sufficient period of time to compare initial assumptions about the model with what actual practice has shown. Over this period, both the advantages and weaknesses of cooperative housing have become apparent, as have a number of questions that have yet to receive definitive answers.
For this reason, housing cooperatives should be assessed today without taking an overly positive or negative view. They are not a universal substitute for mortgage lending, but under certain conditions they can serve as an additional way of addressing the housing problem. To achieve this, both the cooperative model itself and the environment in which it operates need to be improved.
For most families, buying an apartment is one of the largest financial decisions they will make in their lifetime. Such an expense can shape a family’s budget for many years to come.
Mortgages remain the primary way of purchasing residential property in Russia. The mechanism is relatively straightforward: the buyer contributes their own funds as a down payment, the bank finances the remainder of the purchase, and the borrower then repays the loan, together with interest, over an agreed period.
The main advantage of this approach is obvious: a person does not need to have the entire purchase price available in advance. However, the downside is a prolonged debt burden.
The higher the interest rate and the longer the loan term, the greater the difference can be between the original price of the apartment and the total amount the borrower ultimately pays. As a result, the cost of the property and the cost of bank financing become two very different figures.
In addition, mortgage programs are not equally accessible to everyone. One person may lack a sufficient down payment, while another may not have sufficient documented income. Additional difficulties can sometimes arise because of age, employment circumstances, or credit history.
This is why the housing sector needs mechanisms that allow people to work toward purchasing their own property through a different financial model.
The foundation of a housing cooperative is the pooling of resources by its members.
People become part of a shared financial system in which funds are used to address the housing needs of individual members. Once an apartment has been purchased for one participant, the flow of funds does not stop: the system continues to operate for those who are still working toward their own goal.
After receiving housing, a member does not immediately leave the financial process. Under the terms of the cooperative, they continue to fulfill their obligations, while their contributions remain part of the ongoing circulation of funds within the system.
This is one of the key differences between a cooperative mechanism and a conventional mortgage. With a bank, a person receives borrowed capital and pays interest for the right to use it. A cooperative is based on collective participation and mutual financing of housing needs.
However, this approach has one fundamental requirement: prospective members must understand in advance how the financial model works. Regular payments alone are not enough. The system requires participant discipline, trust in the organization, and effective management of its resources.
Housing cooperatives have existed outside Russia for a long time, and in some countries they occupy a significant place within the housing system.
Switzerland is a notable example. Cooperative housing plays a particularly prominent role in Zurich, where this format has become widespread.
Collective models of housing provision are also well established in Austria and Sweden. In Germany, building-savings systems have been developing for many decades. Their history goes back to the 19th century, and the idea of saving money for the subsequent purchase of a home has become a familiar part of the country’s financial culture.
Cooperation has acquired particular importance in several Latin American countries. In Uruguay and Brazil, for example, housing cooperatives have in many cases become more than simply a way of addressing housing needs; they have also served as a foundation for building sustainable local communities. Housing construction there is often accompanied by the development of appropriate social infrastructure.
Russia does not have to start from scratch either. During the Soviet period, housing construction cooperatives remained for decades one of the available ways of obtaining private housing.
Thus, modern Russian housing cooperation has a historical foundation. However, today’s task is not simply to reproduce past experience, but to adapt the collective approach to a market economy, the current legal framework, and modern requirements for financial transparency.
For a potential cooperative member, the fact that they do not necessarily need to have substantial capital available immediately can be an attractive feature.
When taking out a mortgage, a buyer generally needs to make a down payment, and the application is assessed according to a range of banking criteria. For someone with a stable income but limited savings, the initial amount required can itself become an obstacle.
A cooperative approach allows the necessary funds to be accumulated gradually. As members make their contributions, they increase their share in the system and progressively move closer to purchasing a home.
At the same time, it is important to understand the nature of this advantage correctly. Cooperation does not make an apartment free and does not eliminate financial obligations. What changes primarily is the way the necessary funds are accumulated: instead of having to find a large amount immediately, a person has the opportunity to work toward the goal step by step.
Another significant difference becomes apparent when comparing long-term payments.
Suppose an apartment costs 8 million rubles. If a person takes out a 20-year mortgage at an annual interest rate of 12%, the total amount repaid could approach 21 million rubles.
In such a case, the difference between the price of the property itself and the amount ultimately paid to the bank by the borrower becomes substantial. This difference reflects the cost of obtaining borrowed capital.
A cooperative model works differently and does not involve an equivalent interest-based structure. As a result, its overall economics may appear more attractive to some people.
However, it would be incorrect to draw a conclusion based solely on the absence of bank interest. Participation in a cooperative also involves certain expenses, administrative costs, and rules governing contributions.
The proper comparison should therefore consider not just one parameter, but the participant’s total expenses over the entire period of their involvement with the system.
Cooperation has another characteristic that cannot be reduced to financial calculations alone.
A cooperative member is not simply a consumer of a service. They become part of a community of people united by a common goal: addressing their housing needs. Their participation is connected with the actions of other cooperative members who are in a similar situation.
This principle can strengthen a sense of shared responsibility and encourage greater participant engagement.
At the same time, the collective nature of the model increases the need for organizational transparency. Members should have a clear understanding of how the system works, where the funds are allocated, what rules apply, and what circumstances determine how quickly they can achieve their own housing goal.
The advantages of the model do not eliminate the problems that need to be discussed openly today.
One of the most complex issues remains the legal framework.
Rules governing consumer cooperatives exist, but the specific nature of housing cooperatives requires more detailed regulation. As a result, organizations with very different approaches to financial operations can operate under the same legal and organizational structure.
This situation creates risks for several parties. Cooperative members can potentially find themselves vulnerable, while responsible organizations may suffer reputational consequences because of the actions of those who misuse the cooperative structure.
Therefore, government regulation should not focus solely on monitoring existing relationships. It is equally important to establish clear criteria that distinguish professional and responsible housing cooperatives from various forms of abuse.
Another significant factor is the pace at which new members join.
The collective model assumes a continuous circulation of funds and the successive resolution of housing needs for different members. If the inflow of new participants declines significantly, this can affect the pace at which the entire system operates.
As a result, people further down the line may face longer waiting periods, and progress through the system may become slower.
This is more a feature of the economic structure than evidence that the underlying idea is unworkable. Nevertheless, potential members should be aware of this before joining a cooperative.
A transparent explanation of how the system operates is particularly important here. People need to understand not only the potential benefits, but also the circumstances that may affect how long it takes to achieve the desired outcome.
The third area requiring attention is the quality of corporate governance.
The banking sector operates under a large number of mandatory procedures and continuous supervision. Cooperatives may have greater organizational freedom, but this should not lead to lower standards of accountability.
As the number of members grows, the need for comprehensive internal audits, clear financial reporting, independent oversight, and regular communication with members also increases.
In my view, such instruments should not be regarded as unnecessary bureaucracy. For a large and mature organization, they should become a natural part of the management system.
The future prospects of housing cooperatives are directly linked to how consistently their systemic weaknesses are addressed.
The first step should be more specialized regulation. Market participants need to clearly understand which rules apply specifically to housing consumer cooperatives, what responsibilities the management of such organizations bears, and what forms of protection are available to members.
The second area is financial transparency. Cooperative members should receive regular information about the organization’s financial condition and the movement of collective funds, rather than learning about key indicators only when problems arise.
The third issue is the protection of members’ savings. Various instruments could be considered here, including insurance for cooperative contributions, the creation of guarantee mechanisms, and other solutions capable of reducing potential risks for participants.
Finally, the professional community itself needs to be developed. Self-regulation, common operating standards, and the voluntary adoption of higher requirements can effectively complement government oversight.
The more actively the industry itself raises the standards of transparency, management quality, and accountability, the less likely it is that necessary standards will emerge solely as a result of external regulatory pressure.
I do not consider it productive to portray mortgages and housing cooperatives as two competing systems, one of which must ultimately prevail over the other.
Bank lending works well for those who meet the requirements of a financial institution, have the necessary down payment, and are prepared to take on long-term debt obligations.
The cooperative mechanism is designed to address a somewhat different need. It can provide an additional option for people for whom the standard banking model is, for one reason or another, inconvenient or inaccessible.
Therefore, the development of housing cooperatives does not necessarily have to mean a reduction in the role of mortgages. It is much more appropriate to view these mechanisms as elements of a broader range of solutions, allowing different groups of citizens to choose the most suitable way to purchase a home.
Ten years of experience in this field have led me to a conclusion that extends far beyond housing cooperatives.
Ultimately, any business model that seeks to address social challenges depends not on an attractive idea, but on the quality of the rules under which it operates.
It is possible to create an appealing economic structure, bring together a large number of participants, and formulate a socially significant goal. But without transparency, financial discipline, and effective oversight, even a promising system becomes vulnerable.
I continue to see potential for housing cooperatives in Russia. However, further expansion of this sector should be accompanied by higher professional standards and stronger requirements for organizations.
This is particularly important for entrepreneurs working at the intersection of commercial and social objectives. Trust cannot be built through a concept or promise alone. It emerges when an organization is honest about its capabilities and limitations, operates according to clear rules, and takes responsibility for its decisions.
It is precisely the combination of economic viability, transparency, and accountability that can provide housing cooperatives with long-term sustainability. In that case, they can establish their place in the Russian market not as an unusual alternative to banking products, but as one of the fully-fledged tools for addressing the housing needs of the population.