Calculation of the private investor’s income in the housing and utilities sector in the context of transition to long-term tariff regulation

Abstract

The article considers the necessity of transition of housing and utility services to the long-term tariff setting system. This task was set by the Government of the Russian Federation in June 2021 as part of the approval of the “Concept for the introduction of tariff setting mechanisms for organizations engaged in regulated activities for the long term”. Current annually indexed tariffs on housing and utility services don’t let the housing economy develop, as they are not attractive to private investors and aggravate the conflict between the owners of residential premises and management organizations. Over the years, the lack of social trust and shortage of budgetary funds have substantially reduced the quality of housing in Russia. And the state of the housing stock in the country today needs mass overhauls using energy efficient materials and innovative technologies; otherwise, the number of accidents in residential buildings will only increase. This requires additional investment, as budgetary sources are only able to cover certain types of work and volumes of financing. Russia needs a new system of tariff formation, which would be able to take into account all the features of the housing and utilities sector and the possibility of financing, given the monopolistic structure of this sector. The paper proposes a conceptual approach to calculating the long-term value of the housing and utilities tariff by redistributing the excess profits of monopolies in favour of the private investor. An important condition for the implementation of the proposed approach is the maintenance of the rate of construction in the Russian Federation and the values of long-term average and marginal costs for the production and provision of utilities.