De Soto, Russian Style: Property Rights And red tape
Abstract: The purpose of this study is to identify obstacles to and explain the failure of the recent property rights formalization reform in Russia. The reform was expected to radically lower the costs of obtaining property deeds for millions of Russians who currently have only de facto ownership interest in small plots of suburban land and dwellings, known as dachas. However, the reform failed to achieve the desired results: only a small percentage of dacha owners have taken advantage of the new law. The study discusses factors that may affect the pace of reform: a lack of professional, financial, and administrative support for the reform from the government; resistance to the reform by local bureaucracy that benefits from excessive entry barriers; and low demand for formal property rights from de facto dacha owners. We also study the factors that affect individual decisions to formalize property rights to dachas, using micro data collected in the suburbs of St. Petersburg. The data comes from a specialized survey of 700 households that own a dacha, as well as in-depth interviews with real estate experts. The study concludes that corruption of local government, along with a lack of demand for formal property rights because of perceived informal tenure security, are the most important factors impeding the reform.