Integrating housing wealth into the social safety net for the Moscow elderly: an empirical essay
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This essay examines the possible implications of post-transition housing wealth for dealing with low incomes among the elderly in the Former Soviet Union. The Russian elderly have often been among the most vulnerable in the wake of economic transition. On the other hand, they have also been the beneficiaries of a very large transfer of wealth in the form of privatized housing. However, in the absence of a developed financial system, it has proven difficult to use housing wealth to address income concerns because this requires either being able to borrow against the expected future income stream or the sale of the asset. The existence of such large unencumbered wealth holdings by lower income elderly creates an opportunity to provide what might be termed “housing safety net insurance.” We show that the Russian elderly hold so much housing wealth that these financial instruments could allow many of them the possibility of being able to move out of poverty and the risks of becoming poor and into middle income status for the rest of their lives. In this essay we discuss what would be involved with the elderly using financial instruments to access their housing wealth. This review highlights how general asymmetric information problems associated with writing annuity contracts, particularly when these contracts involve housing, have been dealt with in market economies. We briefly discuss some of the circumstances in Russia that could compound these sorts of problems. We then consider the empirical situation of the elderly in Moscow in more detail. This description illustrates the potential demand for such financial products and attempts to determine whether the housing wealth of the elderly could provide a platform to ameliorate some of their poverty problems. The empirical findings for Moscow are likely to be similar, if not as extreme, in many other FSU countries because in these countries the elderly also own a great deal of unencumbered housing wealth, and they are often older societies.
JOUR
Buckley, Robert M.
Cartwright, Kim
Struyk, Raymond
Szymanoski, Edward
2003
Journal of Housing Economics
12
3
202-223
1051-1377
10.1016/S1051-1377(03)00025-1
484
