Scam or effective solution? Resettlers in Vinnytsia almost built a cooperative house, but now the land plot has been seized

For a long time, everything went according to plan in the story of the house on Zulinskoho Street, which people, tired of waiting for effective solutions from the state and hoping for a lottery in soft credit programs, decided to build a house on their own.

Construction progressed at a rapid pace. The price per square meter was significantly lower than the market price – 9 thousand hryvnias. Already in May 2022, the building was to be put into operation. But with the beginning of the full-scale invasion, certain problems began both with the construction and among the housing cooperative members. Suddenly it turned out that more than 30 million hryvnias were needed to complete the construction.

Some cooperative members accuse the head of the housing and construction cooperative, Yuriy Zykov, of misuse of funds. The head of the building cooperative justified the changes by the rise in building materials prices and investors' refusal of commercial real estate in the building. It was not without a split within the cooperative. Rubryka investigated the first practice of building cooperative housing for displaced people.

Modular towns, preferential lending, and inefficiency 

Before the start of the full-scale invasion, about 1.5 million internally displaced persons were officially registered in Ukraine. It is difficult to say how close this figure is to reality since, for a long time, people living in temporarily occupied territories had a certificate of resettler for convenience and payments. At the same time, many actual migrants were not registered as IDPs.

However, one thing is clear: in Ukraine, many people were left without housing (they still don't have it now). The state began developing programs to provide IDPs with housing.

Some of them, for example, modular towns, should become a temporary solution. But the occupation dragged on, and modular houses with minimal conditions became permanent housing for many.

Subsequently, the state offered preferential lending for resettlers. There were several state programs, but they had rather strict conditions: age, an apartment from a building commissioned at least 20 years ago, a large down payment, and so on. Although not en masse, people participated in these programs as well.

Last year, the German government irrevocably granted Ukraine 24.5 million euros to implement the program for the provision of preferential mortgage loans. The number of people registered for this program is almost 30,000. Every month, Derzhmolodzhitlo holds a raffle, based on the results of which winners are randomly determined to receive a soft loan.

russia's full-scale invasion, the destruction, and the occupation of Ukrainian cities forced even more people to leave their wealth for years and go into the unknown. As of July 2022, the International Organization for Migration counted 6.6 million internally displaced people.

Some of these people will probably never return home, as their permanent homes have been destroyed. It is quite possible that before the de-occupation of Ukrainian territories, people will have time to firmly establish themselves in a new place, develop new social ties and not want to return.

Take matters into your own hands

In Vinnytsia, the resettled people got tired of waiting for effective solutions from the state. They began to build an apartment building on their own, forming a housing cooperative, "Spilna sprava." The name comes from the public organization of the same name, registered in 2015 by Yuriy Zykov, a resettler from occupied Horlivka. He became the chairman of the building cooperative.

The public organization united many displaced persons with similar problems, the main of which is the lack of their own housing. Later, they had the idea of ​​a cooperative house.

Now the project is at the final stage: connection to public utilities, installation of elevators, and finishing works are in progress.

How much does it cost to build a high-rise building?

A plot of land was needed for construction. The settlers appealed to the Vinnytsia City Council with a request to allocate land, but officials did not hurry with this decision. In January 2020, the Vinnytsia city council adopted a decision to lease a plot of land.

The settlers believe this was directly influenced by the changes in the Electoral Code adopted in 2019. Certain code articles gave resettlers the right to vote in local elections.

Construction started at the end of 2020. The cost of the works at that time was 61.5 million hryvnias.

"The entire project cost 94 million hryvnias. But we removed "non-critical works" from it. They found a company that will be engaged in construction through the tender procedures. The construction price is 61.5 million hryvnias, but it does not include the connection of networks and the improvement of the surrounding area," Yuriy Zykov explains.

Members of the cooperative had to make a down payment of 30% of the total cost of the apartment.

At the beginning of construction, the price of one square meter was 9 thousand hryvnias. According to Yuriy Zykov, this price is 30-40% lower than the market price. The recipe for cheapness was hidden in the details.

The first is that the resettled people did not have to participate in the auction to purchase a plot of land, as the Vinnytsia City Council rents it out for 15 thousand hryvnias per month.

The second is the lack of commercial markup that real estate developers make when they sell homes for profit.

The third is the realization of commercial real estate on the basement floor (premises for shops and so on) with an area of ​​960 square meters at a market price, which made it possible to balance the price for apartment buyers.

The cooperative members have repeatedly appealed to the ministries that take care of the affairs of displaced persons and communities, but they have not received the expected support.

Yuriy Zykov says:

"I am sad that no one needs this in our country. Throughout the construction process, we appealed to the President's Office, Deputy Prime Ministers, and Cabinet of Ministers… And still, we were left alone with this problem. During the eight years of the war, nothing more or less acceptable was built in the country so that it would be possible to make some program to provide housing for the displaced persons."

Prices for materials have increased

The building was supposed to be commissioned in May 2022. But a full-scale invasion put the process on hold. According to Yuriy Zykov, prices for building materials have risen, and investors who wanted to buy commercial real estate abandoned their plans because of the war.

Therefore, to complete the construction, people need to contribute more than 30 million hryvnias.

However, some members of the cooperative categorically disagree with this. People claim that they transferred the total price of the apartment's purchase to the cooperative's account and thereby fulfilled the terms of the contract. Now they have to pay another 50% of the cost of the apartment.

"Yuriy does not show us an estimate or information about what caused the price increase or at what stage everything went wrong. But the price can't go up by 50% just like that," says Nataliya Herasymova, an investor in a cooperative building.

Natalia believes that the construction was a "scam" from the beginning because, according to her, in the contracts concluded with the cooperative members, it was stated that they pay 9,000 per square meter and receive a house that has been put into operation.

"But it turned out that they concluded an agreement with the general contractor that the general contractor simply builds a house and does not provide communications. That is, at the initial stage, Yuriy knew that there would not be enough money, and they did not include the connection of communications in the estimate," Nataliya emphasizes.

Another member of the cooperative, Oleksiy Kutsak, also talks about other works that require an additional budget.

"There is a construction estimate, which is 61.5 million hryvnias. On August 4, we were told that this contract remains, but there is still a list of works that were done not by the main developer but by another contractor. And at the same time, budget funds, about 61.5 million, were not allocated for these works. Relatively speaking, additional work has arisen," he explains.

Oleksiy and Natalia were part of the audit commission, which was supposed to audit the financial and economic activities of the cooperative. They say no one responded to their requests to provide financial documents with income and expenses.

"The only thing we have seen is the acts of overpayments and the work performed on these overpayments for the first two quarters of 2021," says Oleksiy.

In turn, Yuriy Zykov offers to estimate the market value of the real estate in Vinnytsia and emphasizes that the house was built for a low price anyway. He also notes that prices continue to rise due to inflation:

"We have already lost three months. Considering inflation and the rise in prices for building materials, we lost 3 million hryvnias."

How to solve the problem?

Yuriy Zykov says that he proposed a solution to the lack of funds: apartment owners can buy commercial real estate on the basement floor at a price of 13,570 hryvnias per square meter.

However, Nataliya says these are disadvantageous conditions for the cooperative members since the real estate will remain the property of the cooperative or condominium formed after the house is put into operation and not the property of the people who will pay for this property.

Yuriy claims that this is necessary so that people can make all future decisions about this real estate together:

"If, for example, the cooperative decides to lease or sell real estate, it gives the funds to its members in proportion to the purchased real estate. We cannot divide the property into parts. Everyone will want to choose a piece, for example, in the middle. And when the question arises that someone wants to rent the premises, this property owner in the middle will be against it."

Nataliya Herasymova says she would like to sit at the negotiating table and try to sell commercial real estate on the basement floor at a higher price than the one Yuriy offered.

"The district is being actively developed; there is almost nothing there so far, except for a couple of ordinary shops," Nataliya describes the situation.

Therefore, she believes that real estate there can be sold for a higher price, for example, for 20 thousand hryvnias per square meter. And with these funds, it will be possible to finance the completion of the works.

The cause is in the hands of law enforcement and lawyers

According to Yuriy, some cooperative members are ready to pay for the house to be put into operation. Those who disagree "gave the last chance" to sign an additional agreement to purchase commercial real estate. If they refuse, Yuriy plans to sell their apartments to other displaced persons in Vinnytsia for 13570 UAH per square meter.

In this way, he wants to return the money that the cooperative members, who are now refusing to pay, have invested — the balance he wants to invest in completing construction.

Members of the cooperative who were dissatisfied with the price increase turned to the police. At this time, a court arrest was imposed on the land plot at the request of investigators of the National Police.

Yuriy Zykov denies all the charges and notes that the raiders, who want to take away real estate, are already interested in the situation. He warns that all parties to this conflict can remain without housing.

Natalia and other members of the cooperative who disagreed with Yuriy's conditions recorded appeals to President of Ukraine Volodymyr Zelensky to help restore justice.

Rubryka will continue to monitor this situation.