Roman Vasilenko, Doctor of Economics, President of the International Business Academy (IBA)
In 2014, I began working on a project related to housing cooperatives. At the time, assessing the prospects of this sector largely meant relying on the underlying idea and expectations for its development. Today, the situation is completely different: I have ten years of practical experience behind me, tens of thousands of cooperative members, and the opportunity to observe how the cooperative model performs across different regions of Russia.
A period of this length makes it possible to distinguish theoretical advantages from actual results. Ten years is enough to understand which elements of the system really work, where difficulties arise, and which questions remain unresolved.
As a result, my view of housing cooperatives today is primarily pragmatic. I do not see them as a universal solution to the housing problem, nor do I believe it is appropriate to set them against mortgages. This is a different mechanism that, under certain conditions, can expand a person’s options when purchasing property.
However, for cooperatives to establish a more significant position in the market, it is not enough to rely solely on the advantages of the model itself. Management standards need to be raised, regulation improved, and additional safeguards created for participants.
For a family, buying an apartment is not an ordinary consumer purchase. In most cases, it involves an amount of money that affects the family’s financial position for many years.
Mortgages have become a familiar way of addressing this need. The mechanism is straightforward: the buyer pays part of the cost of the property using their own funds, while the bank provides the rest. The borrower then repays the money over a long period, along with interest.
The advantage is obvious: a person can purchase an apartment much earlier than they would be able to if they had to save the entire amount themselves. But they pay for this opportunity through the cost of borrowed funds.
With a long loan term and a high interest rate, the total cost can be significantly higher than the original price of the property. In other words, a person is paying not only for the apartment itself, but also for the extended use of bank financing.
There is another side to the issue. The banking system imposes certain requirements on borrowers. They need savings for a down payment, proof of income, an appropriate credit history, and other qualifying criteria. Not every potential buyer is able to meet these requirements.
This is precisely where alternative financial mechanisms can play a role.
The essence of housing cooperation is easiest to understand through the principle of pooling participants together.
A person joins the system, builds up their share, and becomes part of a community whose members work together to address their housing needs. The funds are not used exclusively for one particular buyer: the financial mechanism continues to operate, helping provide housing to different cooperative members in succession.
Once a participant receives an apartment, their relationship with the system does not necessarily end. Under the established rules, they continue to make the required payments, while financial resources are directed toward addressing the housing needs of other members.
This is what fundamentally distinguishes the cooperative model from a standard bank loan. With a mortgage, the relationship revolves around credit: the bank provides capital, and the client repays it with interest. In a cooperative, collective participation is the central element.
However, the collective principle comes with its own requirements. A member must understand how their financial obligations are calculated, how funds circulate within the system, and what circumstances can affect when they receive housing.
Cooperation requires discipline from its members. But it demands no less from the organization itself: transparency, professional management, and the ability to fulfill its commitments.
Housing cooperation in Russia does not exist in isolation. Similar mechanisms are used in different countries and, in some cases, have become a significant part of national housing systems.
Switzerland is one of the best-known examples. In Zurich, cooperative housing has become particularly widespread and is now an important part of the city’s housing stock.
Similar collective approaches have long existed in Austria and Sweden. Germany has its own longstanding tradition of building-savings schemes. Their development began as early as the 19th century, and the idea of setting aside funds in advance for a future home purchase gradually became an established financial instrument.
In Latin America, the role of cooperatives in some cases extends beyond the housing problem itself. In Uruguay and Brazil, they have helped build communities while simultaneously addressing housing construction and the development of surrounding social infrastructure.
Finally, Russia has its own history in this area. During the Soviet period, housing construction cooperatives were used for many years and represented one of the ways people could obtain their own homes.
Modern Russian housing cooperation therefore cannot be considered an entirely new phenomenon. What is new is the context in which it has to operate. Today, the collective principle needs to be combined with market mechanisms, modern legislation, and higher standards for financial disclosure.
One of the reasons a person may consider a cooperative model is the amount of capital required at the outset.
With a mortgage, having a down payment is an important part of the transaction. For a family with a regular income but without substantial savings, this can become a serious limitation.
A cooperative takes a different approach: the necessary funds can be accumulated gradually. A participant increases their share through regular contributions and progressively moves toward purchasing a home.
However, it is important not to create a false impression. A lower barrier to entry does not mean an absence of financial obligations. The apartment still has to be paid for, and the participant takes on certain commitments.
The main difference lies in the mechanism: instead of having to provide a substantial portion of the property’s cost upfront, a person is given the opportunity to accumulate the necessary funds within the cooperative system over time.
When comparing different ways of purchasing an apartment, it is not enough to look at the size of the monthly payment. Much more important is the total amount spent over the entire period of participation.
Consider a hypothetical example. An apartment costs 8 million rubles. With a 20-year mortgage at an annual interest rate of 12%, the total amount of payments could reach approximately 21 million rubles.
The difference between the price of the property and the final cost therefore becomes very substantial. In effect, a significant part of this difference represents the cost of the bank loan.
The cooperative mechanism works differently and does not use a comparable interest-based model. For some people, this can make its overall economics more attractive.
But it would be a mistake to draw conclusions based on this factor alone. Cooperatives also involve expenses related to administration, the structure of contributions, and other elements of the system.
Therefore, a meaningful comparison must answer a more complex question: what is the total cost of achieving the housing goal under each option?
Only this approach makes it possible to compare mortgages and cooperatives objectively, without promotional oversimplification.
A cooperative system contains a social component that is difficult to express in monetary terms.
A member is part of a community of people with a shared goal. Their actions are connected to the financial behavior of other participants, while the success of the entire structure depends on how steadily the collective mechanism operates.
There is a potential advantage here. Participation in a shared undertaking can increase personal responsibility and create a stronger sense of belonging to a community.
At the same time, this creates an additional requirement: everything happening within the system must be as clear as possible.
A person needs to know how collective funds are managed, what rules apply within the organization, what determines the pace of progress, and what risks exist.
The greater the role of the collective factor, the less room there should be for a lack of transparency.
The potential of the model itself does not guarantee rapid expansion. There are several objective factors that need to be taken into account.
The first issue concerns legislation.
General rules exist for consumer cooperatives, but housing cooperatives have their own economic and social characteristics. Universal rules alone are therefore insufficient to fully describe all the specifics of how such organizations operate.
Another problem is that organizations with completely different operating principles can appear identical from a legal and organizational standpoint.
This creates risks for cooperative members while also damaging the reputation of responsible organizations when someone uses the cooperative model for improper purposes.
The government’s task here should not be limited to strengthening oversight. It is necessary to establish a clear legal framework that enables market participants to understand in advance the requirements imposed on an organization, the responsibilities of its management, and the mechanisms available to protect members’ interests.
The second factor is inherent in the economic nature of a dynamic cooperative system.
Funds within the system are constantly circulating, while participants’ housing needs are addressed sequentially. A decline in the inflow of new members can therefore affect the overall pace of operations.
If the dynamics of the system change, people at later stages may face longer waiting periods.
This should not automatically be regarded as a flaw in the cooperative model. Rather, it is a characteristic of the mechanism that prospective members should understand in advance.
People have a right to know what determines the timing and why it may change. The more accurately an organization explains these processes, the more informed a person’s decision to join becomes.
The third challenge is management.
A small organization and a large system with a substantial number of participants objectively cannot be managed in the same way. As the scale grows, the importance of internal controls and financial reporting increases.
Banks have long developed complex systems of oversight and mandatory procedures. A cooperative organization may have a different degree of operational freedom, but that does not mean it should be subject to lower standards of management quality.
On the contrary, a large cooperative needs internal audits, independent oversight mechanisms, clear financial reporting, and regular communication with its members.
At a certain stage of development, these are no longer additional administrative costs. They become essential elements of a sustainable organization.
When considering the future of the sector, I would highlight several areas that could provide it with a more sustainable foundation.
The first is the development of specialized regulation.
A cooperative member should understand in advance which rules govern a housing consumer cooperative, what responsibilities its governing bodies bear, and how members’ interests are protected.
The less legal uncertainty there is, the easier it becomes to distinguish professional housing cooperation from organizations that merely use its external structure without maintaining the appropriate standards of operation.
The second element is transparency.
It is not enough simply to inform a person about the conditions for joining. They should be able to regularly assess the organization’s condition and understand how collective funds are being managed.
Transparency should be an ongoing process, not a response to questions or problems that have already arisen.
The third area is the protection of members’ funds.
There are various possible approaches. Potential instruments include insurance for cooperative contributions, the creation of guarantee funds, and other mechanisms capable of reducing risks for participants.
At the same time, the specific form such protection should take requires separate professional discussion.
Finally, professional cooperation among market participants could play an important role.
Common standards, self-regulatory mechanisms, and voluntary efforts to raise operating standards could complement government regulations.
It is in the industry’s own interest to establish high standards of transparency and accountability in advance rather than wait for all necessary requirements to be imposed by an external regulator.
I see no reason to regard the two models as rivals.
A mortgage remains a rational solution for someone who meets a bank’s requirements, can make the necessary down payment, and is prepared to take on long-term credit obligations.
But there are people for whom this option does not work. The reasons may vary, from their financial circumstances to the formal requirements imposed by a lending institution.
For them, a cooperative system can provide another way of working toward home ownership.
Therefore, I would not describe the issue as a competition between two models, but rather as an expansion of choice. The more tools available on the market, the more likely people are to find a mechanism that suits their financial circumstances.
Ten years of practical experience have convinced me of one fundamental point: a social purpose alone does not make a business model sustainable.
Any system involving money and the interests of a large number of people needs clear rules. A good idea may attract participants, but only a well-organized system can sustain itself.
This is particularly important for housing cooperatives. They bring together substantial financial resources, long-term commitments, and an objective that is deeply important to people — owning their own home.
The Russian cooperative movement therefore has potential, but its further development must go hand in hand with higher standards of management, transparency, and accountability.
Entrepreneurs working in social-impact sectors should bear this principle in mind regardless of the specific industry. Trust cannot be built through a marketing concept alone. It develops gradually — through an honest description of capabilities, open acknowledgment of limitations, compliance with clear rules, and accountability for management decisions.
In my view, this approach can provide housing cooperatives with a sustainable future. If economic efficiency is combined with transparency and responsible management, the cooperative model can become a full-fledged participant in the Russian housing market and an additional tool for addressing one of the most important social challenges: helping people acquire homes of their own.