Author’s Column for the Entrepreneurship Forum
Roman Vasilenko, Doctor of Economic Sciences, President of the International Business Academy (IBA)
In 2014, I launched a project that significantly shaped my further professional trajectory — a housing consumer cooperative. Over the past ten years, tens of thousands of participants have gone through this model. I have observed its operation across different regions of Russia, recording both its strengths and its systemic limitations. Within the framework of an entrepreneurship forum, I would like to share these observations not as a promotion of a specific structure, but as an analytical view of the cooperative housing model itself, which, in my opinion, has development potential but also unresolved institutional issues.
Why the Cooperative Model Emerged
Buying a home is the largest financial transaction in the life of most families. At the same time, it remains one of the most strictly formalized and bank-centered processes. In a standard scenario, a person saves for a down payment, then takes out a mortgage at an interest rate that in different periods in Russia has ranged roughly from 8% to 16% annually, and over 15–25 years repays an amount that may ultimately be one and a half to two times the price of the apartment itself. According to various estimates, a significant share of the population — up to 60% — is effectively excluded from this model due to income level, age, or credit history.
The cooperative approach emerged as an attempt to bridge this gap. Its logic is based on pooling participants’ funds: a group of people finances housing purchases in turn for each member of the cooperative. The member who receives an apartment continues making payments, but without an interest burden. As a result, financial flows remain within the system rather than leaving it in the form of bank interest.
International Practice of Housing Cooperatives
Housing cooperatives are not a local phenomenon. In Switzerland, such structures account for around 5% of the housing stock, while in Zurich their share exceeds 20%. In Austria, the figure reaches approximately 23%, and in Sweden about 18%. In Germany, the building savings bank system (Bausparkasse), which is similar in logic to the cooperative model, has existed since the 19th century and has helped millions of households.
In Latin America, cooperative movements, including Uruguay’s FUCVAM and Brazilian initiatives, have become part of social infrastructure rather than a marginal alternative to the market.
During the Soviet period, housing construction cooperatives accounted for about 7–8% of new housing. After the 1990s, this practice in Russia was effectively interrupted, but it did not legally disappear. Modern attempts to revive it in the 2010s can be seen as an adaptation of earlier experience to a market environment.
Strengths of the Cooperative Model
Practice has revealed several stable advantages compared to the mortgage mechanism.
First, a lower entry threshold. For a significant share of citizens, bank mortgages are inaccessible due to the lack of a large down payment or formal income requirements. The cooperative format allows participation to begin with smaller contributions and gradually increase one’s share.
Second, the absence of interest overpayment. In a traditional mortgage, the final cost of housing increases significantly due to interest charges. In a cooperative scheme, this element is excluded, and payments are directed solely toward the acquisition and distribution of housing within the system.
Third, the social nature of interaction. A cooperative builds horizontal connections among participants. People understand that their contributions are directed toward specific families rather than an impersonal financial mechanism. This increases trust, especially in environments where financial institutions are traditionally approached with caution.
Problem Areas and Limitations
Alongside its advantages, the model also has systemic challenges that have become evident in practice.
The first is legal uncertainty. Existing legislation on consumer cooperatives is general in nature and does not take into account the specifics of the housing sector. As a result, a heterogeneous environment emerges: alongside bona fide projects, there are structures that use the cooperative form only nominally. This creates reputational risks for the entire model and calls for clearer regulation.
The second is dependence on a continuous inflow of new participants. The housing allocation mechanism is based on sequential financing: contributions from new members enable previous participants to receive apartments. When the rate of new entries slows down, waiting times increase. This is not an accidental issue but an inherent feature of the model that must be clearly explained to each participant in advance.
The third is the lack of unified management standards. Unlike the banking sector, cooperatives are not subject to equally strict supervision. This increases flexibility but also raises the risk of management errors. In practice, it becomes clear that large cooperatives require audit standards, transparent reporting, and independent oversight comparable to financial institutions.
Necessary Institutional Changes
Looking at the prospects for cooperative housing development in Russia, several key directions can be identified.
First, a dedicated federal law is needed to regulate housing consumer cooperatives and distinguish between bona fide models and abusive practices. A system of transparent financial reporting is also required, giving members real-time access to information on fund flows.
Another element could be a participant protection mechanism — share insurance or a guarantee fund similar to deposit insurance in the banking system. In addition, the role of professional associations is important, as they could establish industry standards before formal regulation is introduced.
Conclusions
The cooperative housing model is neither exotic nor experimental. It is a form that has historically existed in different countries and economic systems — from Switzerland and Germany to the USSR and modern Russia. It does not replace mortgages and does not directly compete with banks, but rather complements the market by serving a segment that the banking system covers only partially.
Experience over the past ten years shows that the stability of any cooperative model is determined not by slogans or ideology, but by the quality of its rules and their consistent observance by all participants without exception.