Author’s column for an entrepreneurship forum
Roman Vasilenko, Doctor of Economics, President of the International Business Academy (IBA)
In 2014, I launched a project that would define much of my subsequent professional life — a housing consumer cooperative. Over the past decade, tens of thousands of members have participated in this model. I have observed how it operates across different regions of Russia, and I have seen both its strengths and its weaknesses. At this entrepreneurship forum, I would like to share these observations — not as promotion of one specific structure, but as an honest reflection on the category of cooperative housing construction, which, in my view, has both significant future potential and serious unresolved issues.
Why a Cooperative at All?
Purchasing housing is the most expensive transaction in the lives of most people. At the same time, it is the most heavily regulated and most bank-dependent product on the market. In the classical model, a person saves for a down payment, obtains a mortgage loan from a bank at an interest rate that in Russia has fluctuated between 8 and 16 percent annually, and over the course of 15–25 years repays an amount exceeding the original cost of the apartment by one and a half to two times. According to various estimates, up to 60 percent of Russian families have no access to this model at all — whether due to income level, personal history, or age.
The cooperative model is an attempt to address this gap. The idea is simple: instead of each person going to a bank for money, a group of people pools their funds and purchases housing for one participant, then for the next, then for the next. The person who receives the apartment continues making payments without interest — and this is the key difference from a mortgage. The money circulates within a closed system rather than becoming bank profit.
International Context
Cooperative housing construction is not a Russian invention. In Switzerland, housing cooperatives (Wohnbaugenossenschaften) account for approximately 5 percent of the country’s housing stock, and in Zurich — more than 20 percent. In Austria, similar structures make up as much as 23 percent of the housing stock, while in Sweden — around 18 percent. In Germany, the Bausparkasse model, related to the cooperative system, has existed since the 19th century and over that time has helped tens of millions of families. In Latin America, the cooperative movements of Uruguay (FUCVAM) and Brazil have become social infrastructure rather than a marginal form.
Soviet housing construction cooperatives (ZhSK) accounted for approximately 7–8 percent of new construction in the USSR from the 1960s through the 1990s. This tradition in Russia was interrupted, but it was never legally abolished. What we were doing in the 2010s was, to a large extent, an attempt to reinterpret the Soviet model within the conditions of a market economy.
What Works in This Model
Over ten years, I have seen that the cooperative model has several fundamental advantages over the mortgage system.
The first is that the entry threshold is significantly lower. A person who does not have a 30 percent down payment at market price levels and a stable officially declared salary simply will not qualify at a bank. In a cooperative, they can begin with less and gradually build up their share contribution.
The second is the absence of interest burden. This is not an ideological dispute — it is arithmetic. If an apartment costs 8 million rubles, under a 20-year mortgage at 12 percent annual interest, a person will pay the bank approximately 21 million. The cooperative model eliminates overpayment in its banking form.
The third is the social effect. A cooperative is not a financial product but a community. People know each other and understand that their money is working for specific families rather than disappearing into an abstract financial institution. This matters from the standpoint of trust — especially in a society where trust in financial institutions has historically been low.
What Does Not Work or Works with Difficulty
I would be dishonest if I painted only a positive picture. In its modern Russian implementation, the cooperative model has several serious problems that I have observed firsthand.
The first is regulatory uncertainty. Russian legislation on consumer cooperatives is written in general terms, without specificity for the housing sector. This creates a gray zone in which some structures operate in good faith, while others use the cooperative format as a wrapper for entirely different activities. This area must be clarified legislatively — otherwise the entire sector will continue to suffer from association with bad-faith actors.
The second is dependence on the inflow of new members. In its dynamic form, the cooperative model requires constant replenishment: the first member’s share is financed through the contributions of the second and third members, the second member’s through the fourth and fifth, and so on. If the flow of new participants slows down or stops, the waiting period for receiving an apartment becomes extended over time. This is not a flaw of the model itself, but rather its mathematical characteristic, which must be explained clearly to everyone joining.
The third is the weakness of management standards. Unlike banks, cooperatives are not subject to strict prudential supervision. This provides flexibility but creates the risk of management errors. Over ten years, I have become firmly convinced that any large cooperative requires the same standards of internal audit, reporting to members, and independent oversight as financial institutions — even if the regulator does not require it.
What Needs to Change
If the cooperative model has a future in Russia — and I am convinced that it does — it requires several systemic changes.
A specialized federal law on housing consumer cooperatives is needed, one that clearly distinguishes legitimate activity from abuse. Transparent reporting standards are necessary — a member should be able at any moment to see exactly how their money is being used. Mandatory share insurance or a guarantee fund analogous to the bank deposit insurance system is needed. And there must be a professional community capable of developing standards before the regulator imposes them for us.
Conclusion
Cooperative housing construction is neither a niche idea nor financial exoticism. It is a functioning model tested in Switzerland, Austria, Uruguay, Germany, and in both Soviet and now Russian practice. It does not eliminate mortgages, does not compete with banks, but instead covers the segment of the market that banks cannot or do not wish to serve.
Ten years in this field have taught me one important thing: a model works only when its rules work. Not promises, not inspiring speeches, not loud success stories — but rules that are followed by all participants, including the founders. That is the main lesson I would like to pass on to young entrepreneurs thinking about socially oriented business.
