Aleksey Raskhodchikov. Transfer to ESG: Housing Development and New Strategies for Urban Development.12 february 2022

Aleksey Raskhodchikov at the Christmas Summit in Tyumen 2022

At the end of last year, Russian Public Opinion Research Center conducted an opinion poll among citizens of all regions of Russia in order to determine current housing needs. The results show that the most part of the population of this region are rather satisfied with their living situation and own apartments. The reason, apparently, is that there aren’t that many old and dilapidated apartment buildings in Tyumen, and that affects how the situation is perceived. Speaking of people wanting to buy homes, it is worth pointing out that the region’s rate of citizens owing countryside real estate is one of the highest in Russia. It is not quite clear to me yet why, but 28% of all housing purchased in the region is located out in the country.

I would also like to point out that the share of people wishing to move from Tyumen to other cities and buy apartments in Moscow or St. Petersburg is very small. This is an excellent indicator! One of the important characteristics of Tyumen, a unique highlight that no other region, including Moscow, has is natural population growth. Also, the city’s rate of relocation is the lowest in Russia, which means that people are happy to stay, live and work there. In my opinion, the primary mission of the regional authorities is to do everything in their power to keep it that way, to strengthen that trend, and then there will be no shortage of housing or investments.

Sometimes we forget a basic thing. What is our most valuable asset? What should we invest in, because it will only continue to grow in value? Gold? That’s a good version, but gold is worth nothing if there is no one to buy it. That’s why I say that the most valuable asset is people. We are still not good enough at calculating social impacts and risks, and that is a big problem. My colleague spoke of student campuses. That is a good idea, but a campus in the city is one thing, and a campus on the outskirts is another. Relocating a student campus to the outskirts of town doesn’t work in 80% of cases. It can only work for students of Mathematics, Physics and other exact sciences. That’s global statistics. The picture is the same all around the world, including Oxford and Harvard. It has been confirmed by 500 years of experience. Campuses for Humanities students cannot exist in isolation, unless they somehow become points of attraction that could boost the development of new districts. Right now, the authorities of Tomsk are planning to move the university campus beyond the Tom River, and if the city indeed develops in that direction, then we can discuss the scenarios.

The prices in the region are quite favorable, too. Just look at the difference between Tyumen and the country’s average. Yes, people do complain. But people always complain at the high prices, nobody ever says that the prices are too low. However, the share of citizens considering local housing too expensive is very small, too, and that would mean that housing is generally affordable to people. I’m not saying that the prices should go up, of course, I just mean that the market seems to be quite balanced in Tyumen.

My other colleague was saying that the soft mortgage program doesn’t work. Well, let’s face it, it will not work, given the facts. The moment the Central Bank raised the interest rate, it was the end of story. Everybody understands that, including our government. Obviously, we will never achieve the targets set by the national project with the interest rate that high. That is why other incentives are now proposed, including purchase of housing with compensation, renovation programs and social housing. We are now at the point that Europe reached long ago. If we look at the capital of Austria, for instance, 50% of apartment buildings under construction there at the moment are municipal housing that will later be rented out to citizens. In other words, a new market is emerging, that’s for certain. It is a question of a few years. I don’t yet see the details of how it will function. As we all well know, our municipalities are unable to manage social housing. If that sector goes to the market, a new structure will form, a new mechanism for those who will undertake municipal housing and social rent, but the essence of it is not clear enough now.

Let us talk about the transfer to ESG. As we all know, when somebody starts publicly discussing sustainable development, transfer to ESG or to low-carbon economy, that’s when the trouble with electricity and water supplies begins. Europe is a perfect case in point. They started talking about it, and there they have it. But seriously, why has the vice governor raised the question? Well, in fact, the transfer to ESG is a key point for Tyumen. We all understand that oil and mineral production is over one third of the gross product of the region. It has received the hardest blow. Unlike coal mining, investments to oil production have not been banned yet, but trust me, they will be in a few years.

What is ESG for companies? That label is quite old and extensively used by numerous banks in Russia. If a company is not environmentally friendly and socially responsible enough, if it has issues in its corporate management, it will get less money or at a higher rate of interest. This is not the problem; the problem is that people start putting that label on cities. Various ESG indexes are work in progress now, and we will probably see them as soon as next year.

What is the biggest threat? There’s one basic thing: it is the question of politics. The Western policy of the last 200 years was built on the principle of humanity declared long ago. Human beings were supposed to have rights, everybody was equal to everybody else, all people were brothers and so on. But then Hitler stepped into the picture, all his deeds and everything that happened after reversed the ideas of humanity.

Today, the Western countries have no other common goal that could become a pillar of progress and make their powers legitimate, no other shared vision that could bring them together. No other except ESG. That is why ESG and sustainable development are the inevitable future, and we have to take part in it. It could become the vision that will unite us. This is especially important for Tyumen Region. I’m not sure if Tyumen is able to compensate for losses if there is trouble in the oil market and if oil producing companies get sanctioned. Judging by the current housing situation and the fact that not a lot of people complain at the lack of residential housing and high prices, Tyumen will at least have something. Oil production and sale of petroleum is not everything the region has. The share of oil refining, of oil industry is 30% of the gross product.

Last but not least. We are used to thinking that the location of housing is the most important thing. In fact, not exactly. Studies show that when people buy housing, they take into account a lot of things, including the absence of dirty production facilities nearby and the abundance of parking spaces. I’m saying this because Tyumen is just starting to elaborate strategies of spatial urban development, and the way the ESG principles will be implemented in it is crucial for the region and for our whole country. We all take part in it now. I believe that your association also needs to participate and to influence the elaboration of those strategies. I’m not talking about the usual stupidities that our people enjoy so much, such as drawing up city prosperity indexes. I urge you to go into real strategic development; your organization could take part in it in collaboration with others. If a new spatial strategy is formed in Tyumen, it has to be complex. We have to have a good understanding of how it is formed, on what principles, how it will be developed as a complex structure that will include student campuses, our scientific and industrial potential, and we have to understand the risks that the energy transition may pose. The risks will definitely be there, especially in mining and oil producing regions. We need to take those risks into account and prepare for them in advance.