An Op-Ed for an Entrepreneurial Forum
Roman Vasilenko, Doctor of Economics, President of the International Business Academy (IBA)
In 2014, I began working on a project in the field of housing cooperatives. Over the following ten years, this work became an important part of my professional life. During that time, tens of thousands of members gained experience with the cooperative system, and I had the opportunity to observe its development across different regions of Russia.
A ten-year perspective makes it possible to assess the model based not on initial expectations, but on actual results. Over this period, both the strengths of cooperatives and their vulnerabilities have become clearly visible.
That is why today I would like to look at the system without excessive optimism or unwarranted skepticism. A housing cooperative cannot automatically replace a mortgage, but it can become an additional mechanism for addressing housing needs. To achieve this, it is necessary not only to develop the model itself, but also to improve the conditions in which it operates.
Buying an apartment requires significant financial resources from a family. For most people, this means expenses that will shape their household budget for many years to come.
The most common way of purchasing a home is a mortgage. The buyer makes a down payment, the bank provides the remaining amount, and the borrower then gradually repays the debt together with interest.
This model is well established and has an obvious advantage: it allows a person to purchase property immediately rather than saving its full cost in advance. At the same time, however, it creates a long-term debt burden.
With a high interest rate and a long loan term, the total amount repaid can significantly exceed the price of the apartment. As a result, the cost of the property itself and the cost of the financing used to purchase it become two very different figures.
There is also the issue of accessibility. Not every citizen has a sufficient down payment or can demonstrate an income that meets the bank’s requirements. For some groups, age, non-standard employment arrangements, or credit history can create additional obstacles.
There is therefore a genuine demand for instruments that allow people to address their housing needs in a different way.
The cooperative model is based on a collective principle.
Members pool their funds and become part of a shared system that gradually directs resources toward purchasing homes for its members. Once one member resolves their housing needs, the mechanism continues to work for the next participants.
Receiving an apartment does not mean that the member’s financial participation ends. The member continues to meet the agreed obligations, and their subsequent payments become part of the continued flow of funds within the system.
This is fundamentally different from a conventional mortgage. With a bank, the customer uses borrowed capital and pays for it in the form of interest. A cooperative uses a different mechanism: collective financing of its members’ housing needs.
However, this model has an important prerequisite: every person must understand its internal economics before joining. A cooperative requires not only regular payments, but also trust in the system, member discipline, and effective management.
Housing cooperatives exist far beyond Russia. In a number of countries, they have become an established part of the housing sector.
The Swiss experience shows that cooperative housing can account for a significant share of the market. This is particularly evident in Zurich, where such organizations are widespread.
Collective forms of housing organization have also long been part of the market in Austria and Sweden. Germany has a long history of building-savings mechanisms that have been developing since the 19th century and have become an established way of preparing funds for home purchases.
In Latin America, cooperatives have acquired an even broader social role. In Uruguay and Brazil, they have in many cases become the foundation of sustainable communities, combining the provision of housing with the development of local social infrastructure.
Russia also has its own experience. Soviet housing construction cooperatives were used for decades as one of the ways for citizens to obtain their own homes.
Modern Russian cooperatives therefore have historical roots. Their task today, however, is to adapt the collective principle to a market economy, modern legislation, and new requirements for financial transparency.
For a potential member, one of the most attractive features may be the ability to participate without having a large amount of money available at the outset.
A mortgage requires the borrower to meet a bank’s criteria and provide a down payment. For someone with sufficient income but limited savings, this can become a serious obstacle.
In a cooperative, funds can be accumulated gradually. A member progressively increases their share and moves toward purchasing a home within the established system.
This does not mean that a home becomes available without financial obligations. Rather, it involves a different sequence of actions: instead of needing to have substantial capital immediately, a person has the opportunity to build up the necessary amount gradually.
The most noticeable difference between the two models becomes apparent over a long repayment period.
Suppose an apartment costs 8 million rubles. If we consider a 20-year mortgage at an annual interest rate of 12%, total payments could amount to around 21 million rubles.
For the buyer, this represents a substantial additional cost associated specifically with the use of bank capital.
The cooperative model does not involve the same interest-based structure. As a result, its economics may be more attractive for some participants.
However, it is important not to oversimplify the comparison. The absence of bank interest does not mean that participation in a cooperative is entirely free of costs. There are operating expenses, payment structures, and other elements of the financial model.
Therefore, a responsible comparison should take into account the total cost of participation rather than a single indicator.
A cooperative also has a characteristic that cannot be fully measured in monetary terms.
A member becomes not simply a customer of an organization, but a participant in a community. Their financial participation is connected to other people who are part of the same system and pursuing the same goal — purchasing a home.
This can create an additional sense of responsibility and trust.
But there is a corresponding downside. The more important the collective element becomes, the higher the requirements for transparency. A member must understand how the organization operates, how funds are used, and what determines whether their own goal can be achieved.
Alongside its advantages, Russian housing cooperatives face problems that cannot be ignored.
One of the main challenges is the regulatory framework.
General rules governing consumer cooperatives exist, but the specific nature of housing cooperatives requires more detailed regulation. As a result, organizations that operate according to substantially different principles can fall within the same legal category.
This creates risks for both members and legitimate market participants. If individual organizations misuse the cooperative structure, the consequences affect the reputation of the entire sector.
Therefore, the state’s task is not simply to regulate existing relationships, but to establish clear rules that make it possible to distinguish legitimate housing cooperatives from abusive practices.
The second issue concerns the inflow of new members.
A dynamic cooperative model assumes that funds circulate continuously and that the housing needs of different members are addressed sequentially. If the number of new participants declines, this can affect the pace at which the entire system operates.
For subsequent members, timelines may become longer and progress through the queue may slow down.
This does not necessarily represent a flaw in the underlying idea. Rather, it is a characteristic of its economic mechanics. But precisely for this reason, potential members need to be informed in advance about how the system works and what factors affect the timeline.
Transparency is particularly important here: people should make their decisions with a clear understanding of both the advantages and the potential limitations.
The third area of risk is corporate governance.
Large banks operate under constant supervision and are required to follow numerous procedures. A cooperative organization may have greater freedom, but that should not mean less responsibility.
As the number of members grows, internal audits, regular financial reporting, independent oversight, and a clear system for communicating with members become necessary.
I believe these requirements should be regarded as an essential part of a mature organization rather than as unnecessary bureaucracy.
The future of housing cooperatives depends largely on how consistently their systemic problems are addressed.
The first requirement is specialized regulation. Market participants need to understand which rules specifically apply to housing consumer cooperatives, what responsibilities management has, and what protection mechanisms are available to members.
The second is maximum financial transparency. Members should be able to regularly obtain information about the organization’s financial condition and the movement of collective funds.
The third is the creation of additional mechanisms to protect members’ savings. Insurance for members’ contributions, guarantee funds, or other mechanisms capable of increasing participant security could all be considered.
The fourth is the development of a professional community. Self-regulation and common standards could serve as an effective complement to government regulation.
The sooner the sector establishes high standards for transparency, management, and accountability on its own initiative, the less likely it is that these rules will be shaped solely under the pressure of external regulation.
I see no reason to portray mortgages and cooperatives as competitors that must necessarily displace one another.
Bank lending is suitable for people who meet a financial institution’s requirements, have a down payment, and are prepared to take on long-term obligations.
The cooperative model addresses a different need. It can provide an additional option for people for whom the banking model is unsuitable for financial, formal, or other reasons.
In this sense, the development of cooperatives does not diminish the role of mortgages. It can expand the range of solutions available to people when purchasing a home.
Ten years of practical experience have led me to a conclusion that applies far beyond the housing sector.
Any socially oriented business model is sustained not by promises, but by rules.
A cooperative may have an attractive economic concept, a clear goal, and a large number of members. But without transparency, financial discipline, and effective oversight, even a strong model becomes vulnerable.
That is why I believe housing cooperatives have prospects in Russia, but their further development must be accompanied by higher operating standards.
For entrepreneurs who choose projects at the intersection of business and social needs, this is particularly important to remember: people’s trust cannot be earned through an attractive concept alone. It emerges when an organization is transparent about its capabilities and limitations, follows established rules, and takes responsibility for its decisions.
It is precisely this combination of economic efficiency, transparency, and accountability that can make housing cooperatives a sustainable part of the Russian market—not an exotic alternative, but a fully-fledged tool for addressing housing needs.