Editor-In-Chief of NTV Tatiana Mitkova: Mr President, this is your third such interview with a journalist. Today let us talk about specific things, ones that touch everyone’s lives, namely housing and employment.
In recent years the government has been strong and confident enough, and flush with enough cash to begin to address the housing problem. Before the crisis it did a lot in this respect. But now construction and mortgage programmes have been the first to feel the blow. The regions are reporting reduced investment in capital construction and delays in renovation of decrepit housing. And yet you have said that your priorities have not changed, that you want to sustain the momentum and not lose what has been achieved. What is the actual situation?
President of Russia Dmitry Medvedev: You know, I think that we’ve chosen a good topic for our conversation, because it affects a huge number of our people, millions of our citizens are concerned about this. And you know, I have to say with absolute frankness that the crisis has had a major effect on the work that we have done in a range of areas. This is a great shame and a great pity. I personally feel particularly bad about this because it has been a difficult issue since the Soviet period, we have been dealing with it for so long and made so many efforts in this regard. And of course you’re right: it is a great shame that so many of the things that were underway have had to be curtailed.
Nevertheless, I want to talk about what we’ve done and what remains to be done. In doing so, I have to speak in ways that tend to annoy a lot of people. Talk of billions of roubles annoys almost everyone. “What are these billions of roubles? It would be better if you could tell me specifically how to sort out my real problems instead of talking about billions. Just give me the chance to get hold of the money that will resolve my particular problem, allow me to buy an apartment or make my instalment payments.” Nevertheless, without those billions none of these very specific problems can be resolved.
So what has been done over the last few years? We have really made quite significant progress in the last three years to boost the volume of construction. We started with something like 50 million square metres of housing per year and last year we already reached nearly 64 million square metres. The idea was and still is to build not less than 1 square metre of housing per Russian citizen per year. This was the overall target. We are not yet able to meet it, but nothing can deflect us from this course.
Moreover, we have achieved some very good results in mortgage lending. We started with figures like 260, 200 billion roubles for mortgage loans way back in 2006. In 2007, we far exceeded that and got up to 556 billion, and last year we reached 633 billion, even realizing that at the end of the year these processes were stopped.
We have made substantial progress in this regard, and of course it would be particularly unfortunate to stop now, and we have no intention of doing so. We shall continue to work on facing up to these challenges.
Now we have created two special funds to deal with housing problems including renovating homes, capital construction, demolition of decrepit housing, and creating new housing programmes.
This year we have decided to additionally allocate more than 100 billion roubles specifically for the housing and public utilities sector and the renovation of decrepit housing. But there is a second fund for a special programme that involves buying land and then having banks lend money primarily to developers and construction companies that are willing to build housing and work on building facilities. Without this we cannot create a normal housing market.
In addition, of course we must follow up on past decisions we have made, including those relating to housing for certain categories of citizens. I will give you a couple of examples. We started these programmes and we will not abandon them, despite the crisis. These are targeted programmes, for example construction of housing for military personnel.
There are also programmes in support of our veterans that we are committed to complete by 9 May 2010, Victory Day. We must ensure that all our veterans have comfortable accommodation. We will not abandon this project and it will be completed on time.
Tatiana Mitkova: Can you tell me if the government will help ensure that people have the possibility of realising their dream of owning a normal home?
Dmitry Medvedev: When we started working on this issue we debated for a long time on what mechanism to use, and we eventually came up with the mortgage as the primary mechanism. This is an unusual mechanism for us. Six or seven years ago, we didn’t even know this word or knew it only from books. It came to Russia from foreign countries and we weren’t acquainted with the idea of mortgages. But the mortgage has become part of our lives, people have started to go to banks and get loans. And what is most important is not to devalue this mechanism, but rather to give it more flexibility and provide more money. These intentions have informed everything we’ve done. We must not undermine confidence in the arrangements that we have so painstakingly created.
Tatiana Mitkova: On the question of these mortgages, if I may, there are indeed very big problems associated with them. The government has decided to help out those who got into difficult situations and cannot repay their loans. But the procedure for obtaining this support involves a lot of red tape and has elicited many complaints. I read somewhere that you have to put together a dossier comprised of 16 different forms. What can be done about this?
Dmitry Medvedev: Strictly speaking, the number of forms required is actually less than half that, but that does not resolve the problem, because we understand that trying to track down even one piece of paper can take months and destroy the very purpose of the scheme. There are problems with mortgages now. And I would like to say that we have now made a number of decisions that will help at least partially restore the proper functioning of this very important mechanism.
What is being done? We have a special fund designed specifically for mortgages, or not exactly a fund, but rather a mortgage lending agency. This agency must have no problems with its capital, so we have increased its capital by 20 billion roubles, and another 40 billion will come as loans. Why do we need this? It’s not because we want this agency to get so big and fat that it ends up dominating the housing market. No. It simply means that specific people can get loans at a reasonable interest rate.
What do I mean by that? Now mortgages are being offered at a rate of 20 percent [per annum]. No normal human being is going to take out a mortgage at that rate. And this is why there was no development in the 1990s, when interest rates for mortgages and general interest rates were so high, and that is why development has now stopped. So we need mechanisms to reduce this rate.
Several years ago, I said repeatedly that our goal was to reach 7–8 percent per annum. At that rate, people will snap up mortgages. And they did so even at 11–12 percent and the bulk of mortgage loans were made at about these rates. Now it’s 20 percent. This additional money, these billions that sometimes we do not want to talk about but have to, should be used to bring this rate down to 15 percent per annum, to 14–15 percent. Even that is too high. And we hope that other means of co-financing being implemented in the Russian regions will do even more to reduce this rate.
As a result, the overall effect could be a reduction of 8 percent or even 8.5 percent. And thus we would come back to the rate that we had, the one at which people were actually willing to take out a mortgage.
Tatiana Mitkova: Do you have a sense of the time frame in which this should happen?
Dmitry Medvedev: This should be done right away because the money has been allocated. But I don’t want there to be any misunderstanding on this point. We cannot instantly restore the volume of mortgage loans to what they were. The figure of 633 billion is a very large sum of money for our country. Almost a fifth of the population could solve their housing problems using their own resources, including of course money that they have borrowed against their income. This is a very encouraging figure because even in the most developed countries only half the population solve their housing problems by purchasing their own homes. The other half continue to live in rented houses, in rented apartments, and in apartments provided under a contract of employment.
So that's our goal of course, even if for now we have to maintain the current level. And basically we have all financial solutions to do that. But we have to admit that we cannot help people across the board. We have to start with those in the most vulnerable categories. In effect, this is what the regions have to decide. In other words, they have to choose whom to support. Categories such as young professionals or young families. And this is a very important task, because we now believe that about 40,000 such apartments can be created this year. Others include pensioners, social workers and public sector employees, that is, those people who do not have additional sources of income.
Tatiana Mitkova: I think we are finished with the subject of housing for the moment. I should add that this is an important topic because it employs hundreds of thousands of people. And of course it is very important that people feel secure, including those who work in this area.
Dmitry Medvedev: You know, I have to respond to that. What you say is absolutely right. This is important for everyone, because everyone needs a normal apartment, everyone needs a proper home.
Tatiana Mitkova: Yes.
Dmitry Medvedev: These are needs that cannot be resolved once and for all. New families are created, people’s needs change. But it is very important that housing creates a so-called multiplier effect. And incidentally what we do in construction affects many other areas. By the way, in the first three months of this year, strangely enough, we even grew by two percent compared to the same quarter last year.
Tatiana Mitkova: Perhaps a sort of delayed reaction?
Dmitry Medvedev: Absolutely, a delayed reaction caused by the fact that we made such a good start last year. But all the same it is very important that we not lose this momentum in the construction sector as a whole, because a lot of jobs depend on it.
Tatiana Mitkova: Well, let’s move on to the subject of jobs. Of course here the situation is complicated. The unemployment seems to decline, and the authorities are taking steps to help people who have lost their jobs. But it seems to me that our only answer is paying out benefits, because everything else – organising public works, retraining programs, business start-up grants – is not working or not working as desired.
Dmitry Medvedev: As you know we started with the simplest things. And we made no secret of the fact that our task was to help the poorest, most vulnerable categories of the population, and in my view this was the right thing to do. But how to help them? First just provide some money. For this reason we decided to substantially increase unemployment benefits. But you’re absolutely right when you suggest that we must not stop there. We must now think about how to help people who are keen to find a new job, go to work in business or try to establish their own business. This is much more difficult than simply receiving unemployment benefits. This requires internal motivation and, if you like, willpower and a zest for living. But on the other hand the most important decisions are the ones that people make for themselves. In this sense, we have made certain decisions. This means creating new jobs and laying a new groundwork for small businesses that are starting up. True, so far we haven’t spent a lot on this. Amounts depend on the decisions taken in the regions. But nevertheless there is start-up capital for those who want to start their own businesses. The overall objective is to create a substantial number of temporary jobs in the coming year. We want to set up almost 1,070,000. That is a very significant number for our country. We must retrain people using the programmes that have been established and which, incidentally, have now finally been approved by all the regions. I had to scold some of the regional leaders to get them moving but this has finally been done, the programmes have been approved. They have already begun to work. About 260,000 people need to be retrained. This is also a very important project.
Recently, the general rate at which unemployment was increasing actually fell significantly relative to the rate in January-February. It grew a lot in January and February, about 9 percent. In March-April it slowed to one and a half percent. This is significantly less, but it happened in part because those who previously did not want to register as unemployed have now done so, knowing that unemployment benefits are available. But of course this is also the result of creating new jobs. And we should simply intensify our efforts in this area, simply because now the great challenge is, let me repeat, to create good opportunities for those who are willing to work under new conditions, even if in certain cases that involves moving to a new town and working in different conditions.
Tatiana Mitkova: So we’re talking about those who are now known as socially active citizens.
Dmitry Medvedev: Those who consider themselves to be socially active and those who have made this difficult decision because circumstances sometimes compel us to engage more in social activity.
Tatiana Mitkova: Just a few days ago in an interview with our colleagues from Novaya Gazeta and at public meetings you discussed the fate of civil society and democracy in our country. I need to read you something here. Here are some responses to your comments from Internet blogs. They range from the fairly neutral: “Well, finally the authorities remembered this,” to the more critical: “This sort of talk is mainly for foreign consumption.” And even sad ones: “It’s just like the 1990s: as soon as the country is in crisis, the authorities start talking about democracy. In the good years it was all about stability, but now that Russia is in a difficult situation, here we go again” — end quote. How do you react to this?
Dmitry Medvedev: First, I think that it’s very good that there are such different views on this subject and different assessments of the authorities’ response. In fact, this is precisely what we’ve been trying to encourage in recent years, including by getting people to speak out about the actions of the authorities, make comments based on real results.
As for the subject of ‘democracy and stability’ or ‘democracy and the possibility of addressing the most pressing challenges’, it seems to me that one should never suggest that such things are in necessary opposition. It would be a very bad scenario indeed – and by the way this has happened in our history – to engage in talking about reforming the political system as a substitute for the most fundamental, the most important things for everyone: the opportunity to earn decent money, to feed oneself and one’s family, to enjoy peace and security on the streets, ordinary human life in short. So I do not think that we should set these things off against each other now, or say that we are currently in a different phase of development and that it is time to deal with, say, some political changes. On the contrary, I believe that at a time of crisis, a full-fledged financial crisis, we should concentrate on the main objective, namely overcoming the consequences of this crisis. This involves making decisions on pressing economic problems that range from macroeconomic to very specific or, for example, the housing problems we have just been talking about. This means that we must not lose sight of one simple thing, even during this very difficult period, namely that our success depends on whether the state and civil society can act in harmony and together to achieve a common goal. And in this situation it is very important that everyone be involved, not simply those who believe that in recent years we have evolved in the best possible way. There are people who don’t believe that. But it is how we work together to overcome the crisis that will determine what we can create in the future. By that I mean a fully functioning economic system, a prosperous economy and a fully developed political system, the development of Russian democracy.
Tatiana Mitkova: Thank you very much for this conversation, Mr President.
Dmitry Medvedev: Thank you.