Build it and they will come

February 07, 2020

Migration, both domestic and abroad, is playing a major role in transforming the world's largest cities, and Moscow is no exception. Researchers at HSE University, the Institute of Geography of the Russian Academy of Sciences (IGRAN) and Strelka KB identified which cities' residents are buying newly built apartments in the capital and how economic inequality between Russia's regions is changing the face of the city.

Major cities are the backbone of any modern economy and a gateway between national economies and international markets. People move to such cities for the sake of superior education, good jobs, the higher quality of life and personal prospects. But before all else, they need housing.

Moscow and the Moscow region are vivid examples of how a major influx of migrants and the resultant housing boom can transform a city and its environs. Such metamorphoses are apparent to even the untrained eye, but surprisingly little research has been conducted on the subject --with regard to Moscow as well as other cities. There are various theoretical models of spatial equilibrium that describe the relationship between migration, economic stimuli and intangible factors that make this or that territory attractive, but there are practically no studies analysing the empirical data with regard to Russian cities.

The regulatory framework governing the market for land determines what is built, where, and at what price in metropolitan areas. The influx of migrants also drives up prices and the number of new housing starts. Migrants from wealthier regions and those hailing from areas with lower incomes purchase housing in different price categories and in different parts of the city. For this reason, prices along with inter-regional inequality determine how attractive the city is for migration. After all, it is problematic to move to a city that offers no affordable housing.

Six Concentric Belts

The researchers based their work on data on temporary labour migrants, those who took up permanent residence in the Moscow region, information on housing construction in Moscow and the Moscow region, as well as on a depersonalized customer base in the primary housing market.

In analysing the housing data, researchers identified 877 multi-storey residential projects with a total housing area of 37.5 million sq. ft that were at the stage of either construction or sale in 2015. Each is located in one of six concentric belts: three in the core and three in the suburban zone.

At the core of the metropolitan area is a business district within the Garden Ring, a residential and business belt at the site of former industrial zones along the Third Transport Ring and a residential belt within the MKAD. The suburban zone includes a belt of sub-centres within 10 km of the Moscow Ring Road, a suburban belt within the Moscow Small Ring (MMK) and a peripheral belt beyond that.

By analysing these data, the researchers were able to assess the share of non-resident buyers in the Moscow housing market and compare that to migration activity.

It turns out that among the buyers of Moscow region real estate, the residents of cities with a population of 100,000-250,000 are the most active in relation to their numbers. These include residents of such cities as Kovrov, Novomoskovsk, Murom and Novocheboksarsk. It is primarily residents of larger cities who buy apartments in Moscow itself. They hail from oil and gas centres such as Surgut and Nizhnevartovsk or neighbouring regional centres such as Vladimir, Smolensk and Tula. They have both the incentive and the opportunity to relocate. It is very difficult for the residents of small cities and rural areas to save enough money to buy housing in even the outlying Moscow region, and the residents of Russia's megacities see Moscow as offering little advantage over their own locations.

Homebuyers from the poorer regions focus on the zone between the Moscow Ring Road and MMK that lies approximately 30 km from the city centre and where up to 70% of all new housing was built in 2015-2017. (The zone lying 10 km. from the centre saw half as much new housing construction.) From this distance, the commute to jobs in central Moscow takes about 70-80 minutes.

In the nearby Moscow region, where a huge pool of low-cost housing is concentrated, the proportion of buyers from other regions is growing, reaching an average of 24%. That figure is as high as 35%-45% for the buyers of inexpensive housing located 25 km. or more from the city centre.

The nearby suburban zone of the capital is the main 'territory of entry' for migrants, and housing construction in the Moscow suburbs is the most important mechanism for limiting prices on housing in the region and maintaining economic incentives for large-scale migration to the capital region.

How to Manage an Anthill

'There are many studies on how the city or agglomeration develops, on the relationship between migration and economic incentives,' said Nikolay Kurichev, Dean and Associate Professor of the HSE University Faculty of Geography and Geoinformation Technologies and Senior Researcher at the IGRAN. 'However, there are practically no articles examining how people coming from different regions are distributed within the city.'

The researcher said that U.S. studies reveal that strict construction regulation influences how urban agglomerations develop in terms of the dynamics of employment, nominal wages, housing prices, supply volume, migration flow and population. There are also Chinese studies showing the correlation between the affordability of housing and migration from rural areas to the cities. Lithuanian studies have shown that limiting housing construction tends to constrain long-term growth of the population in an agglomeration by forcing housing prices upward. Kurichev notes, however, that in existing studies the spatial structure of the city and its interaction with domestic migrations are considered in isolation.

The geographer says that the results of the new work are important for the spatial development strategy of not only the Moscow region but of the whole country. Regulation of construction of the 30-km zone beyond the Moscow Ring Road -- a tiny sliver compared to the area of the entire country -- is the key to managing migration to Moscow and the Moscow region and, by extension, the national issue of relocation. The Moscow metropolitan area is now undergoing extensive development, diminishing the quality of life for everyone and destroying the ecological underpinnings of the region.

The current urban development policy and the reality of the market for land in the Moscow region are actually stimulating this process. By investing in the construction of roads and metro lines, by funding housing construction -- including through renovation -- Moscow promotes a further influx of migrants and an outflow of skilled personnel from other Russian cities, diminishing their human capital. It thus becomes a vicious circle: by 'luring' people from the regions, the capital becomes even more attractive for the next wave of migrants.

National Research University Higher School of Economics

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