About reactivation of the State Housing and Utility Inspectorate, or ‘there can be only one’

23-12-2020

The quality of housing and utility services has always captured attention. Many of us, consumers, faced the inadequate quality of housing and utility services and illegal actions of natural monopolies. No wonder the Ukrainian people’s deputies didn’t ignore the improvement of the housing and utility services quality.

The draft laws No.4403 and No.4404 proposing to address the issue of inadequate quality of housing and utility services by creating another state supervisory authority (namely, the State Housing and Communal Inspectorate) were recently presented. These draft laws are a modified version of the draft law No.2100 developed by the Ministry of Regional Development last year. The State Regulatory Service of Ukraine (SRS) decided to refuse to approve this draft law due to non-compliance with key principles of state regulatory policy, such as practicability, adequacy, efficiency, and balanced approach, as well as due to the violation of requirements regarding preventing the adoption of inconsistent and duplicate regulatory acts.

Apparently, due to the importance and reasonability of comments made by the SRS along with the impossibility of creating the State Housing and Communal Inspectorate without duplicating the functions of other state agencies, a people’s deputy O.Y. Kucherenko, instead of the Cabinet of Ministers of Ukraine, became the subject of the draft law legislative initiative registered as No.2100 in the Verkhovna Rada of Ukraine.

However, after numerous comments in the conclusion of the Main Scientific and Expert Department of the Verkhovna Rada of Ukraine, the draft law No.2100 was returned to the legislative initiative subject for revision.

As for comments made, they particularly relate to the interference in the powers of the Cabinet of Ministers of Ukraine, the inconsistency of the proposed concept of state supervision (control) with the existing one, excessive duplication in sectoral laws, and excessive detail of legal regulation of relevant public relations, and so on.

The revised draft law No.2100 now has a second chance to be adopted in the form of draft laws No.4403 and No.4404. The subject of legislative initiative did not take into account the comments that became the basis for returning the draft law No.2100 for revision in draft laws No.4403 and No.4404, so they are still relevant.

However, the very idea of ​​establishing the State Housing and Communal Inspectorate is debatable. What arguments for the creation of the State Housing and Communal Inspectorate were voiced during the above-mentioned presentation and why, in our opinion, are they weak?

Argument 1. Currently, there is only a state body responsible for developing state policy in the field of housing and communal services, while there is no agency responsible for its implementation.

This is definitely not the case. Under its Regulation, the Ministry of Regional Development ensures the development and implementation of state housing policy in the field of housing and communal services. But as for the policy in the field of control of housing and communal services and energy efficiency of buildings, it is just formed by the Ministry of Regional Development. However, this does not mean that this policy is not implemented by other authorities.

For example, state supervision (control) over the activities of economic entities in the housing and communal services market is carried out by checking the fulfillment of legal requirements and/or compliance with licensing conditions (under the procedure for monitoring compliance with licensing conditions) by natural monopolies and economic entities in related markets. And under the law, these functions have been already assigned to the state body, which is the National Energy and Utilities Regulatory Commission (NEURC).

Argument 2. No agency would be an arbiter between local self-government bodies, housing, and communal services providers, and consumers.

This is also not true, and it is not even about the court (the Latin ‘arbiter’ means mediating judge). The fact is that the Laws of Ukraine “On Housing and Utility Services” and “On Consumer Protection” entrust the protection of the rights of housing and communal services consumers to the State Service for Food Safety and Consumer Protection. If the mentioned body is not enough, there are also “arbitration” powers of the NEURC that considers consumer appeals on actions of economic entities engaged in energy and utility services and resolves disputes, including between such economic entities.

Argument 3. Poor monitoring of drinking water quality.

It should be noted that the Cabinet of Ministers of Ukraine entrusts the State Service for Food Safety and Consumer Protection with the implementation of state policy in the field of sanitary and epidemiological well-being and control (supervision) over compliance with sanitary legislation. So, the State Service for Food Safety and Consumer Protection monitors how water supply companies control the quality of drinking water in the process of its extraction and treatment as well as in distribution networks.

That is why in paragraph 3 of the decision of the National Security and Defense Council of Ukraine of 13/03/2020, the State Service for Food Safety and Consumer Protection is instructed to strengthen control over water supply and sewerage systems in settlements.

Argument 4. A large number of obsolete housing leads to increased requirements for control over the frequency of major repairs.

We would like to focus on this issue, because the existing problem, in contrast to those mentioned above, really needs to be solved in some way. However, even if we establish an endless number of various inspectorates, as well as a special “State Inspectorate to check the frequency of major housing repairs” together with local authorities in each Ukrainian settlement, it will not solve the problem of failed major repairs.

Control could help if a responsible company or organization (house managers or housing cooperatives) collected funds for major repairs and used them improperly, but there is a completely different situation.

Funds for major repairs are not included in the price of apartment building management service, and the total cost of major repairs of an apartment building necessitates a long process of collecting these funds. Those far-sighted housing cooperatives that have been accumulating funds for major repairs on separate accounts for a long time should have regretted this very much in 2014-2015 due to the inflationary devaluation of hryvnia savings.

So how will the increased control address the issue of frequency of major repairs? It seems more appropriate to use the funds allocated for the establishment and operation of the State Housing and Communal Inspectorate directly for these major repairs, rather than for control over their frequency. Moreover, control can be effective only if persons responsible for major repairs (apartment building co-owners) are fined for failure to carry such repairs. However, to what extent does this correspond to the consumer protection goal stated by the drafters?

Argument 5. Consumers of housing and communal services have nowhere to go to protect their rights, including violations by natural monopolies.

To disprove this argument, in addition to the powers of the above-mentioned NEURC and the State Service for Food Safety and Consumer Protection, which already protect the rights of housing and communal services consumers, the powers of the State Inspectorate for Energy Supervision and the Antimonopoly Committee of Ukraine (AMCU) should be mentioned.

The State Inspectorate for Energy Supervision carries out state energy supervision in the electric utility and heat industry. Its powers directly provided by law include the supervision of ensuring a reliable and safe supply of electricity and heat to consumers. In turn, the AMCU is responsible for state control over compliance with legislation on protection of economic competition on the basis of equality of economic entities under the law and the priority of consumer rights, prevention, detection, and termination of violations of legislation on protection of economic competition.

Thus, there are some bodies, which powers include the protection of consumer rights from violations by housing and communal services providers, and they exercise these powers. That is why it is inappropriate to raise issues related to the lack of a state body implementing state policy in the field of housing and communal services control. And if there are gaps in the control of housing and communal services, it seems more appropriate to extend the functions of existing state supervision bodies. It will be more efficient and less burdensome for the budget.

In the context of increasing State budget expenditures, it should be noted that the amount of UAH 43.3 million provided by the drafters for each year will be not enough for the full operation of the new inspectorate, especially in the first year of its establishment, taking into account that the central office and four territorial bodies will need for vehicles, premises and office equipment. Additionally, specific features of the established body provide for control measures in various settlements, and the costs of these measures will significantly exceed the travel expenses specified in the financial explanation.

In such a way, these draft laws should be revised, while the very idea of ​​ ​​establishing the State Housing and Communal Inspectorate is debatable. If necessary, it seems more appropriate and unburdensome for the state budget to assign additional powers in supervision (control) of housing and communal services seem to already established and functioning state bodies, in particular, the State Service for Food Safety and Consumer Protection and the State Inspectorate for Energy Supervision.

At the same time, the creation of another state body proposed by the draft laws will not significantly affect the existing problems to be solved, such as consumer protection, failed major repairs, poor quality of drinking water, and the quality of housing and communal services in general.

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