Struggling small towns anticipate potential resurgence with KRT intervention

Struggling small towns anticipate potential resurgence with KRT intervention

In the small towns of Middle-Ural, Russia, the Comprehensive Territorial Development Program (CTDP) faces significant challenges, particularly in the areas of affordable housing and investment attraction. This article explores the current obstacles and potential solutions based on recent developments.

**Key Challenges**

1. Reduction in State Support for Local Businesses and Development - Budget constraints have led to a 43% drop in government subsidies for small and medium businesses in Q1 2025, limiting funds available for local development and infrastructure projects, including affordable housing. - The number of small businesses and self-employed individuals receiving government aid has declined by 17%, reducing the pool of potential local partners for development initiatives. - Planned allocations for SME support over 2025–2030 are 20% lower than the previous six-year period, indicating a negative trend for local development resources.

2. Weak Investor Interest - Economic slowdown and a widening budget deficit discourage private investment in small towns, where returns on investment are perceived as riskier and lower. - Without robust subsidies or loan guarantees, local governments struggle to attract developers for affordable housing projects or other community infrastructure.

3. Housing Affordability - Small towns often lack the financial and technical resources to launch large-scale affordable housing projects independently. - Inflation and import restrictions, exacerbated by international sanctions, drive up building material prices, making new housing less affordable.

**Potential Solutions**

1. Strengthening Local Partnerships and Diversifying Funding - Encourage collaboration between local governments, private developers, and community groups to pool resources for housing and infrastructure projects. - Develop mechanisms for mobilizing local savings and attracting investment from regional stakeholders.

2. Targeted Government Support - While overall SME support is declining, targeting remaining funds towards affordable housing and essential town infrastructure can maximize impact. - Introduce or expand programs that directly subsidize housing for low-income families or offer tax incentives for developers building affordable units.

3. Attracting External Investment - Showcase unique local assets (natural resources, tourism, and cultural heritage) to attract outside investors. - Simplify land-use and permitting processes to make it easier for developers to initiate projects in small towns.

4. Leveraging International Models - Adapting successful international development strategies, such as USAID-inspired programs, could improve transparency and strategic planning in small-town development.

**A Case Study: Middle-Ural**

The city of Middle-Ural plans to develop a new district, the reservoir shore, which currently has little housing. However, the project requires a dam to be built and around 130,000 sq.m of housing to be constructed on 11 hectares of land, making it challenging for investors and banks to determine profitability. Despite these challenges, the CTDP offers a holistic approach to transforming depressed areas into attractive places for living and doing business.

In Middle-Ural, several large developers are working together on a city development plan, and around five years ago, the only way to implement CTDP projects was through finding investors via tenders. Now, operators manage projects with areas over 20 million sq.m, and the managing company receives shares of participation, distributes financial resources received from tenders, and decides independently how to use them.

The main goal of the CTDP is to improve urban environments by demolishing dilapidated housing and constructing new homes on landscaped territories. The developers hope that this will attract young people to the city and help retain residents, particularly young families. The new district could potentially become the city center.

However, the question remains whether there will be buyers for the new housing in current conditions without affordable mortgages and given the state of modern industry. Private investors are unwilling to provide funds for resettlement due to low demand for housing in the region.

**Conclusion**

The current challenges for CTDP in Russian small towns—particularly in affordable housing and investment attraction—stem largely from reduced government support, economic uncertainty, and limited local capacity. Solutions require a mix of targeted public investment, innovative partnerships, and adopting successful international development strategies, despite the broader context of tightened budgets and geopolitical pressures.

1. The Comprehensive Territorial Development Program (CTDP) in Middle-Ural could utilize sports facilities as a means to attract private investment and increase public interest in the new residential district.
2. To address housing affordability issues, incorporating low-cost sports and recreational facilities in developments could provide an added value for potential residents, making the neighborhood more attractive and ultimately boosting the demand for housing.

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