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Worn to the bone and left alone ‘Defrauded co-investors’ are one of Russia's biggest protest movements, but that hasn't helped
According to various estimates, there are somewhere between 40,000 and more than 100,000 “defrauded co-investors” in Russia — people who paid money for new apartments, but were never able to move in because construction on these homes never finished. The problem has persisted for more than a decade, and the thousands of people cheated out of their money have spent that time organizing protests and appealing to state officials, but the government has yet to resolve the situation. Vladimir Putin even issued an executive order giving the country three years to abandon shared-equity construction completely. A year later, however, it still dominates Russia’s residential real estate market. In a special report for Meduza, Pyotr Manyakhin, a correspondent for Batenka.ru, learned more about how Russia’s cheated investors are fighting for their rights.
“There are enemies of the people among us who are preventing new developers from continuing construction!” yells an elderly woman from the stage at a Communist rally on February 3 in Moscow. “We’re for social justice! We’re for Grudinin!”
Pulled over people’s outer clothes, the orange shirts reading “Defrauded Co-Investor” are lost among the red banners and veteran communists passing out copies of the newspaper Trudovaya Rossiya (Labor Russia). The defrauded co-investors are gathered farthest from the stage, where Communist Party presidential candidate Pavel Grudinin addressed his supporters just a few minutes earlier.
“We’ve lost all hope. We’ve gone to the Kremlin. We’ve gone to the mayor. Nothing happens. We get the same run-around everywhere. Nobody can force the developer to finish building the house — the developer has gone bankrupt,” says Valery Ryabkov, squinting in the falling snow. “Now we’ve got three children, a co-investment contract, we’ve won seven lawsuits, and we’re registered formally as defrauded co-investors. And nothing. We bought this apartment ourselves. The government didn’t give it to us. We didn’t receive it for our three children, like it used to be in Soviet times. I’d gladly support the Communists!”
Ryabkov says everyone in his family is now a defrauded co-investor: he and his wife Yana and their three kids — at least two of whom were apparently born into this status. In 2012, the Ryabkovs sold their only apartment and bought a two-bedroom unit in the “Tsaritsyno” residential complex (which had been under construction for six years at the time, but the family decided to go ahead with the purchase). In order to buy the property, the Ryabkovs used their federal subsidies for multiple-child families to take out a mortgage at 14 percent. To make the payments, Valery says he’ll “have to work two jobs for 10 years.” His family is now living in a rented apartment and paying the mortgage on a home that’s still unfinished and unoccupied.
“They raise billions in fines with just one traffic camera. We need 15 billion rubles [$260 million],” Ryabkov says, though the city estimated in November 2017 that it would take 60 billion rubles (almost $1 billion) to finish building the entire housing complex. “Konstantin Timofeyev, the head of Moskomstroiinvest, covered up his offshore withdrawals. He should be in jail, and the government should pay to finish the construction. The developer is already behind bars.”
“Daddy, are you still talking about that? Why'd you say my name?” Valery’s son, Timofey, asks.
“No, you’re Timofey and he’s Timofeyev,” the father answers, taking a flag from the child’s hand that reads, “Defrauded Co-Investors of the Tsaritsyno residential complex.” The flag hangs from a plastic telescopic rod, instead of a wooden stick. Valery then continues: “We thought we were under the state’s protection. That’s actually a load of crap.”
“Daddy, this guy here said, ‘You shouldn’t write ‘defrauded co-investors’ on the flags.’ He says we should write: ‘BUMS!’” Timofey yells.
The head of the “Nastyushka” conglomerate that owns the Tsaritsyno residential complex was indeed arrested on fraud charges. The Ryabkovs’ home is almost ready: the building frame is done (and it only took the better part of 10 years), but the communication lines still haven't been connected. The developer went bankrupt just before finishing the job. After several appeals by co-investors to the district attorney, the Construction Ministry, the Kremlin, and the courts, Moskomstroiinvest hired a new developer: a city-owned company called “Mosotdelstroi Number 1.” The project’s new roadmap says finishing work on the housing complex should begin in late 2019 and wrap up by late 2021 — a mere 15 years after breaking ground.
By 2021, however, many of the apartments could be missing their tenants. According to Elena Godlevskaya, who serves in a co-investor civic action group, 27 homeowners in the Tsaritsyno community died from heart attacks and strokes in the last year alone. (There are 6,000 co-investment contracts in the housing community altogether.) Godlevskaya says, “Some people, seeing no escape from debt, unable to master the complicated costs of housing and mortgages, and failing to overcome the collapse of their family or the deaths of loved ones, were ready to take their own lives.”
Ours are a passive people
Shared-equity construction came to Russia in the early 1990s with market economics. Private construction companies sprung up like weeds, when the co-investment real estate market was still totally unregulated. According to experts, the partnership model itself emerged in the mid-1980s in Argentina, where the authorities created a joint-stock company that accepted deposits from members of the public, which were used to finance various construction projects. The deposits were converted into shares in the company, which could be exchanged for a certain number of square feet in an actual housing complex. The country’s economy was in ruins at the time (Argentinians endured 12 denominations in seven years), and shared-equity financing worked because ordinary people simply couldn’t get bank loans, unlike construction companies. Thanks to this model, the number of property owners in Argentina rose almost tenfold.
Russia’s first defrauded co-investors started appearing in the 1990s, but they didn’t mobilize into a political movement immediately. “There weren't really any organized protests back then. It was more local associations of people. There wasn’t a political [component], but the problem was visible,” says Nadezhda Kosareva, the president of the Urban Economics Institute and a professor at the Higher School of Economics. Kosareva helped develop the federal law that regulates shared-equity construction in Russia today. The legislation emerged, she says, largely in response to the country’s defrauded co-investors eventually forming a mass movement in the early 2000s. In 2003 and 2004, a whole series of laws were adopted on affordable housing that included new town-planning and housing codes, as well as regulations on shared-equity construction.
The data varies when trying to count the number of defrauded co-investors in Russia today. Representatives for the Construction Ministry told Meduza that there were 836 “problem sites” in 69 different regions across the country, as of January 2018. The head of the ministry, Mikhail Men, said in September that 38,000 people bought homes at these sites. According to a working group in United Russia’s General Council, however, the country's defrauded co-investor population is three times greater (almost 120,000 people).
The co-investors themselves say they’re sure the government is understating their numbers. Vitaly Kiselyov, the leader of the Krasnodar Co-Investors’ Union, says he and his many children are just one of 15,000 families in the city still waiting on their apartments, though Vladimir Ustinov, Vladimir Putin’s presidential envoy to the Southern Federal District, says there are fewer than 3,000 defrauded co-investors in the entire district.
In 2016, Kiselyov’s mother bought his family an apartment that had supposedly been on the rental market for four years already. To this day, however, the Kiselyovs haven’t been able to move in: the building is still uninhabitable. “Nobody does anything. I can’t even look at it. The whole thing just kills me. Ours are a passive people,” says Kiselyov in despair. “We’re tired of waiting for our own homes. My grandmother called me to say that she bought an apartment in a new complex. The paperwork says the building is finished, and she was issued a deed and all the necessary documents. But in reality, it’s just an empty field. There’s no construction whatsoever. Now she has to live in a tent. There are people who have died before getting their apartments.”
Kiselyov organizes protests, pickets, and public letters to the city’s administration. He says the government decided to “mock” Krasnodar’s defrauded co-investors when it appointed former Mayor Vladimir Evlanov to head the city’s working group on addressing the co-investor problem. Many of Krasnodar’s still unfinished high-rise apartment complexes were started during Evlanov’s tenure, and a lot of these construction projects were never authorized by local officials. Thanks to the mayor’s negligence, Kiselyov says, developers even managed to build a whole neighborhood without any regulatory oversight from the city. “This is an insult,” Kiselyov says. “Evlanov told me, ‘Finish building your own house!’ In fact, they shouldn’t have allowed the unauthorized construction in the first place.”
Like most protesters in the defrauded co-investor movement, Kiselyov and his union have turned mainly to the government for solutions. They want the state to create an interdepartmental commission staffed with local officials and representatives from the Interior Ministry, Investigative Committee, Federal Security Service, and Attorney General’s Office. So far, the commission hasn’t happened. “The administration sees no benefit in it. It’s one thing when they’re chiding some developer and threatening him with fines — that’s a civil proceeding,” Kiselyov explains. “But if that same developer is summoned by investigators or the FSB, he starts singing a different tune.”
Several professional lawyers and politicians have also joined the protests. Alexander Bakaev, a lawyer and the former head of the Novosibirsk Defrauded Co-Investors’ Association, joined the movement after buying a home that was never finished. In late June 2010, protesters pitched tents in the center of the city, demanding the completion of their homes. Bakaev put his tent in the square outside City Hall. He also went out, bought the cheapest mobile phone he could find, programmed his number into it, and mailed it to the mayor, suggesting that the mayor didn’t seem to know how to contact the protesters. The phone ended up coming back unopened, but the very next day City Hall’s Construction Department offered to meet with the defrauded co-investors.
Bakaev is a prominent activist in the Novosibirsk area. Together with colleagues in the regional public chamber, he organized the “national-cultural” “Siberian Will” group. He’s also criticized Moscow’s regional policies, demanding that the state provide people in Siberia with the same social benefits offered in the capital. For such outspokenness, Bakaev and his associates have even been accused of separatism, and in 2014 local officials refused to let him stage a “March for Siberia’s Federalization.”
Today, Bakaev says the issue with his apartment has been resolved, and the new head of the local co-investors’ association is Valery Naumenko, a deputy in the Novosibirsk City Council from the Communist Party. But Bakaev remains the group’s chief consultant, and he’s still an activist with the organization, offering legal help and filming documentary movies (for example, about the city’s history). When he first started doing all this, Bakaev says both the public and the government thought of co-investors as “losers at a casino” who “willingly handed over their money to scammers.” But those perceptions have changed, he says.
Nevertheless, co-investors have a complicated relationship with the authorities. When these activists tried to organize a series of pickets along central roads in major cities on May 1, 2017, local officials around the country staged outdoor festivals to crowd them out. And the conflicts aren’t always so gentle. In Yoshkar-Ola, anti-extremism police investigated a picket by defrauded co-investors; in Ryazan, the authorities used tractors to disperse a crowd; and in November 2017 the Attorney General’s Office banned a website operated by co-investor activists in Gelendzhik (apparently because they planned a protest on the same day that Vyacheslav Maltsev’s supporters hoped to stage a “revolution”). Irina Denisova, the head of a co-investors’ civic action group in Saratov, told Meduza that local police officers contacted her activists and said they were “all extremists” (in the end, she got off with another warning).
“We had one suicide, and two families broke up”
There’s a name that chills the flesh of co-investors in Saratov: Alexey Abasov. Through his construction company, “Grad-S,” Abasov sold apartments in the unfinished “Breeze” housing complex and another 13 high-rise buildings at various stages of completion. He and his wife, Galina Chernova, own a total of 163 apartments. Today, Abasov lives in a jail cell, and Chernova is under house arrest. The couple’s deceit is so notorious that their victims even wrote a small poem about it: