VAGUE FUTURE OF KYIV SUBURBS

Kyiv city authorities been preoccupied with the idea of a big metropolitan Kyiv for more than twenty years. Should it be implemented, the territory within a radius of 50–60 kilometers would fall under the authority of the Kyiv government instead of the oblast government. Thus, in the past the government could make a resolution to pass the land to a new authority, but now altering borders requires the approval of the city’s neighbors.

Meanwhile, the oblast flatly refuses to part with the land and up until now has been quite successful in foiling attempts to acquire its territory. Every governor regardless of their political affiliation have absolutely singular in this.

The reason is absolutely banal: the land in Kyiv’s suburbs is also not cheap. According to conservative estimates, it is worth a billion dollars.

Moreover, in case construction is started out of town, it is not the same to oblast officials to whom the benefit from construction investments is allocated. These make up ten of millions dollars and is set to continue increasing.

The efforts of Kyiv officials to obtain the permission from local communities, like Vyshhorod or Brovary, were not productive. Local “revolts” were suppressed, with Vyshhorod deprived of 87% of its land. This could be a pure coincidence, but Bila Tzerkva, which is quite loyal to the oblast authorities, was promised that its territory will be doubled.

The final result of the long-lasting battle for land is pitiable for Kyiv – the capital will not gain anything. Moreover, while the city administration and the oblast authorities were fighting, any joint cooperation in terms of development was out of the question. At the same time, many Kyiv businesses snipped off bits of land, successfully settling the issues at the regional level, which is was much cheaper for them (even including informal expenses).

The land designated for urban expansion (the so-called spots in seven regions adjacent to Kyiv: Kyivo-Sviatoshenksy, Obukhovsky, Brovarsky, Boryspilsky, etc.) is of special value. This was where the purchases of the rights for land ae concentrated. As a result, almost all plots along the major highways thirty kilometers from Kyiv are already held privately.

Thus, if the Kyiv Administration really has any intention to build 10 million square meters of housing beyond the bounds of the Okruzhnaya (Circular) Highway, it will have to negotiate with the businessmen [not regional authorities]. In this case their prices will be significantly higher those, which were stated in the documents for transfer of the property rights.

The talks about the return of these plots to the state or community property are just that - only talks. According to conservative estimates, more than 12 thousand hectares of land became private property according to various schemes. However, in reality, this number is much bigger since purchases of the land of collective farms, etc. was not considered. Thus, the Khotovsky collective farm owns 11 thousand hectares of land from the oblast and from Kyiv. Its privatization cost Kyiv businessmen only … 3 million hryvnias. Now the prices are higher, yet the controlling stake in the former collective farm is unlikely to cost more than 2 -3 million dollars. By the way, an average collective farm in the oblast owns about 10 thousand hectares and even after return of the initial shares it controls a lot of land.

In September 2006, the board of the oblast state administration established that in Vyshhorod, Boryspil, Kyivo-Sviatoshynksy, Baryshevsky, Makarovsky and Pereyaslav-Khmelnytsky regions 134 thousand hectares of land is not used or is being misused. Of that amount, 53 thousand of hectares are non-arable lands, most of which are not subject to the ban on privatization.

Yet, not even a thousand of those several thousand hectares of land, were announced as “stolen”, returned and it is unlikely that anything more will be returned.

The sale of ten hectare lots was rather successful – this business enjoys very good support of various political forces.

Before the parliamentary elections, businessmen even proposed additional funding to a pro-presidential force to gain a majority in seven regional councils in the suburbs. The issue of land would have been payment for their assistance. The project was not implemented, yet a redistribution of land continued. The oblast state administration stated that “the use of land is being changed on a large scale in the oblast in order to obtain profit from its sale.”

At the same time, the position of the provincial authorities is easily ignored when it is necessary. Regional administrations continue issuing permits for changing land use…

The most problematic regions were already mentioned: suburban Kyivo-Sviatoshynsky, Boryspilsky, Vasylkivsky regions as well as the remote Makarovsky region.

Recently, suburban towns easily ignored instructions from the oblast state administration to stop the temporary allocation of the land plots outside residential areas. Thus, right behind the Okruzhnaya (Circular) Highway in the town of Vishneve there is a “practice of allocating land beyond the city limits for the construction of tall buildings.”

According to a more complicated scheme, the involvement of fair Ukrainian courts is needed. As a result, they produce decisions of the following kind. In Boryspil region, in the region of Bortnichy, courts ruled to illegally change the use of 180 hectares of arable lands for industrial purposes and give it for free to the company Vinzavod Bortnichi.

The Makarovsky district court obligated the regional state administration to issue permits to the change of use of 75 hectares of land from individual farm land into land for residential and utility buildings outside the city limits and approved the appropriate documentation.

A bill from Bohdan Hubsky, “On amendments to the Land Code of Ukraine” is in the pipeline. According to it, state administrations will be relieved of control over land use.

Regions have been striving for their independence. Recently projects to create totally new satellite cities: Zolochyv (in the Borsypil region) and Belohorodka (in the Kyivo-Sviatoshynsky region) have appeared. Bucha will become a city next year.

Cash flows not only into the land market. Since 2000, when residential construction in oblast decreased to 337 thousand square meters a year (out of which 197 thousand in the cities), a steady increase in construction began. According to State Statistics635 thousand square meters of residential housing was constructed in 2005, which means that the volume of construction doubled and reached the same level as in 1995.

Individual developers, constructing one and two-story houses, are still the main players. They recently accounted for three-quarters of total construction volumes in the oblast, however due to a renewal in multi-story housing, their share decreased to two-thirds.

According to statistics, 738 houses with more than five rooms and a total size of more than 200 square meters were constructed in the oblast in 2005. Their added size accounts for 31% of total housing built in the oblast, and for more than half of new housing built in villages.

This trend is gradually increasing. Quite recently, Ukrainian business and the official elite were quite satisfied with cottages in the recreational areas within Kyiv city limits (such as Pusha-Voditsa or the river zone in Koncha Zaspa) and didn’t want to go deep into the oblast. However, it is becoming increasingly difficult to get cheap land in Kyiv (yet still possible), so it is quite predictable that things will develop in a new direction.

Several cottage towns are already being constructed in the oblast, reaching 40 in number. If all the plans to construct cottage towns are implemented, 580 thousand square meters of housing will be constructed in Kyiv oblast by 2009, according to the consulting company Kanzas. Despite a massive advertising support, the actual share of cottages in the oblast is more modest.

Generally speaking, there is no program to construct economy suburban housing. Their prices can compete with housing in Kyiv, a square meter can cost at least 1,200 dollars on the primary market.

At the same time, the middle class is being offered apartments in cities adjacent to the capital: where multi-story housing is popular. In the year 2000, oblast developers built only 68 thousand square meters of multi-story buildings (which is five times less than in 1995). Since then, there has been a small increase to 100 – 130 square meters a year. However, as the prices of housing in Kyiv have exceeded the means of not only the average-salary but also a significant segment of highly-paid people, they realized that there is life beyond then Okruzhna Highway and that Boryspil is not so far after all.

In 2003 there was aggressive development in these hot spots, which caused a period through 2005 when multi-story housing out-stripped small cottage construction in the cities yet again. This construction trend is expected to exceed the 1995level .

For example, Brovary is planning to increase its annual construction volume this year to almost 50% as compared with the last year – from 62.7 thousand square meters up to 94 thousand square meters. While back in 2004, only 48.5 thousand square meters were constructed. City authorities want to insure annual growth of 20 thousand square meters of housing to reach a level of 150–160 thousand square meters a year. About 40 multi-story projects are being currently in development. Since it is much faster to reach the center of Kyiv from Brovary than from Troeshchina these plans are rather feasible.

There are similar plans in another city next to the capital – Boryspil. After ammunition storage is finally removed from the village of Kotsyubinskot, a construction boom will begin there. This village is within four kilometers of the nearest metro station in Kyiv.

Nevertheless, the importance of this construction should not be overestimated. Last year, 4,448 one-three room apartments were constructed, 3,639 of which were in the city, the lion’s share in 19 buildings more than nine-stories tall.

Kyiv Oblast is very different from Moscow Oblast, where more buildings are constructed beyond Moscow’s circular highway than in Moscow itself. In Ukraine we have a approximate proportion of 1:2 in favor of the capital, and it is still not clear how fast this trend will change.

On the other hand, the prices for the newly built houses in Kyiv start at 1,400 dollars per square meters (while in Brovary it is 850 dollars per square meters). Yet if there is a sharp increase in demand for housing in the suburbs, prices will grow their as well. This is actually happening now. Thus, there are already newly build houses in Vishneve at a price of more than 1,250 dollars per square meter.

Moreover, if Kyiv developers’ terrible expenses for engineering can be qualified as fairytales (their actual costs in 2004–2005 were less than 70 dollars per square meter), worn-out facilitiesin the suburbs will be a serious problem for a large scale construction. For example in Vyshhorod, its electricity supply network failed to carry the increased load. Waste disposal facilities are not in their best condition, to put it mildly; developers in Boryspil have already faced this problem.

By the way, local authorities demand 10% of the investment for developing the infrastructure, while for local companies it take 5 % as a rule.

This, however, doesn’t scares off developers. A major advantage of the oblast market is its tendency away from monopolization. In Kyiv during the approval of projects and allocation of land, a company, which has no connections to the Kyiv city council, would face a whole list of requirements and would not necessarily allow them to obtain a permit. This is much less of a problem in the oblast.

City and village councils are less spoiled and appreciate extra money. In addition, they are less dependent on oblast authorities. Thus, even in the heat of war between the city and the oblast, the Kyivgorstroy construction company started its project in Bucha. It is difficult to imagine something similar happening in Kyiv. Moreover, if a construction company fails to find a common language with authorities in one town, it can easily try a different one.

However, the main construction companies in the oblast are represented by local companies. Also companies in the regions started to go to the oblast Where construction companies from from Donetsk, Ivano-Frankivsk, Dnipropetrivsk, and Crimea work. Other Kyiv-based companies follow the example of Kyivgorstroy, which intends to double the population in Bucha.

Oblast construction companies are not enthusiastic about newcomers, because they cannot compete with them, except for those in Brovary. Moreover, some of them are being purchased. They explain their moves by the need to attract money to their construction projects. Nevertheless, the Kyivans brought not only money but also problems. Thus, the construction of five buildings in Vyshhorod started by company Smart Systems, was frozen.

Thus, expansion beyond the circular road cannot be stopped. Of course, developers can focus resources within the city limits (up to 16–20 million square meters, according to the estimates), nevertheless the share of non-Kyiv construction will gradually increase and will eventually dominate. Then, the game will have different rules.

Neither the city, nor the oblast will be unprepared for that. Kyiv’s development plan is based on the assumption that the capital will be given more land. Oblast authorities believe that they will defend themselves.

As a result, there is not an integrated development program (similar to Moscow oblast’s development plan).

Meanwhile, the following simple calculation will give an idea of what the stakes are in this game. That 10 million square meter area, which lies outside the limits of Kyiv, would bring in at least 15 billion dollars. By the way, even 10% retained for the oblast is a good amount, and this figure could be increased …

Oblast authorities have already made a proposal to the city according to which the money, which the administration receives from construction in Kyiv will be invested into housing in oblast. The fact that these houses will be social flats is a plus for Kyiv.