KSG Hosts U.S.-Russian Symposium

An agreement signed last weekend at the Kennedy School of Government promises to make home mortgages widely available to citizens of Moscow for the first time since the fall of the Soviet Union.

The agreement was the result of the Second Annual U.S.-Russian Investment Symposium, sponsored by the Kennedy School last weekend.

The new pact coordinates the efforts of Fannie Mae; the International Finance Corporation; BankBoston, and the Boston law firm of Day, Berry and Howard. The corporations will advise all interested parties on establishing a mortgage system.

Yuri Luzhkov, Mayor of Moscow, and Graham T. Allison Jr. '62, director of the Kennedy School's Belfer Center for Science and International Affairs, signed the agreement.

"We are enthusiastic about mayor Luzhkov and most impressed with what he has accomplished over the last six years in transforming Moscow," Allison said. "We are honored to be able to work with him and his team in this important initiative."

"This is a historical event which will have important economic and political consequences for Russia," Stefan Zhurek, assistant director of the Kennedy School's Strengthening Democratic Institutions Project, said in an interview yesterday.

Scholars who were not involved in the new plan underscored the importance of instituting such a program in Russia.

"Mortgages are a very interesting institution that Russians are in need of," said Timothy J. Colton, director of Harvard's Davis Center for Russian Research and Feldberg professor of government and Russian studies.

Zhurek explained that Soviet Moscow was overcrowded and that a lack of housing was a major problem. In the last few years, though, Luzhkin's regime has built 75,000 new apartments each year, Zhurek noted.

"The problem," Zhurek said, "is that when you build something you have to sell it. The average apartment in Moscow sells for around $250,000. There are very few people able to pay that in cash."

"Now the housing is there," Zhurek continued. "The mortgage system will enable middle class people to purchase it."

"Under the socialist system, the state took responsibility for providing citizens with housing, and excelled in failing at that task," Luzhkov said in a press statement. "Under the new conditions, we must find new ways that are appropriate in a civilized world. There are many approaches to the problem, but only one acceptable solution: to build using the resources of the citizens."

Luzhkov added that "the state must create conditions so that people can build their own housing. A functioning mortgage market under which the state helps citizens to receive funding on favorable terms is the only long-range solution."

None of the corporations involved has made a financial commitment.

"This is about a short-term advisory role and any question of financial involvement after that would come at a later point," Martin Levine, managing director of Fannie Mae's international housing finance services division, said in a Boston Globe story earlier this week.

Other corporations are welcome to join the program as well.

An institution becomes involved by submitting a letter expressing intent to participate in the agreement.

The agreement calls for the group to draft "a statement of principles for creating a mortgage system for the construction and sale of housing in the City of Moscow" within 90 days.

The completed agreement will go into effect immediately. Allison, who is also the Dillon professor of government, anticipates that the new mortgage system will be available to the citizens of Moscow by the end of the year.

Luzhkov cautioned that complete development of the system could take as long as three years.

The agreement is also expected to aid Moscow's recovering and quickly-growing tourist industry. Luzhkov said that Russia is in the process of building hotels, service centers and transportation systems.

Zhurek emphasized that this agreement was not the only result of the conference. "There were many important deals signed," he said. "But none of the others has been officially announced."

According to Zhurek, the symposium has become a landmark meeting place for top world economic and business leaders.