In a typical one-on-one televised meeting, Deputy Prime Minister Marat Khusnullin updated President Putin on the state of housing construction. He noted that construction and related sectors now account for more than 20% of GDP and highlighted Russia’s annual housing targets with a striking comparison. Russia is on track to complete 100 million square meters of housing in 2026 — a modest decline from 2025 levels but still in line with the pace maintained since the pandemic. “Even in the Soviet Union, they didn’t build like this during reconstruction.”
This comparison is remarkable from a housing perspective. The Soviet Union, including during the Gorbachev era, pursued ambitious plans to expand living space per family. By invoking the post-war period, policymakers are benchmarking current performance against a past that may not even exist, while offering reassuring narratives for both the Kremlin and the public.
Khusnullin also claimed that every ruble spent on housing construction generates a “1.68 multiplicative effect” — a multiplier that currently exceeds the economic impact of military spending. He used this figure to justify continued lobbying for mortgage subsidies. What he omitted, however, was that construction output in January-May fell 7.6% year-on-year — the steepest decline in a decade and worse than during the 2015−2016 recession. Housing completions by floor space dropped 22%. Construction costs have risen 40−60% since 2022, depending on the project, matching or exceeding broader inflation.
Khusnullin told Putin that more non-housing projects were completed in the first half of the year, implying they had cushioned the housing slowdown. Yet the loss of up to 25% of housing orders — which normally provide crucial upfront payments — has severely damaged developers’ cash flow. Aleksandr Shokhin of the Russian Union of Industrialists and Entrepreneurs has warned that transport construction companies are now running aggregate annual losses exceeding 280 billion rubles, with cash-flow gaps for debt servicing reaching as high as 30%. This is triggering a downward spiral in project activity.
Although transport represents a smaller share of the construction market than housing (following the mortgage-subsidy-driven boom of 2020−2024), it serves as a key leading indicator. These projects typically rely on public funding and are structured through concessions or public-private partnerships. Many are designed under Ministry of Finance rules to return capital to investors quickly in order to offset Russia’s high political risks. In theory, when the state runs large fiscal deficits, such projects should be preserved as a source of counter-cyclical stimulus. Because many have been shifted to the regional level, that stimulus is largely absent.
The Kremlin is also failing to use the economy’s “spine” to sustain construction employment. In the first half of 2026, Russian Railways’ investment program totaled only 323 billion rubles — roughly the same nominal amount as in 2021, representing a real-terms decline of more than 40−45%. Because Russian Railways must borrow to fund capital investment, high interest rates have sharply reduced its appetite for new projects. While Khusnullin presented a calm assessment of road construction — expected to receive 9.1 trillion rubles in project financing between 2026 and 2031 — industry groups are clearly waiting for more positive signals. In April, the Cement Union warned that the Ministry of Economic Development’s base and conservative scenarios pointed to cement demand declines of 11.3−25.9% this year. If current trends continue through 2028, Russia’s cement demand could fall to levels last seen in 1966 in the Russian SFSR.
What is Khusnullin trying to achieve by suggesting that current housing construction exceeds even the Soviet post-war recovery? The goal is not necessarily to lie outright, but to establish de-historicized reference points for the Kremlin — useful both internally and, more importantly, for external messaging. Choosing the late 1940s or early 1950s as a benchmark is effective because few people alive today remember the period, while it still evokes politically convenient narratives of Russian resilience. That resilience narrative, however, is closely tied to a society mobilized for war.
The most revealing (and troubling) element of the meeting was Khusnullin’s emphasis on the multiplier effect of housing spending. It is unsurprising he made this argument directly to Putin, given the president’s insistence that the government fix the economy without altering his core priorities. While aggressive interest-rate cuts by the Bank of Russia would help some families buy homes and support developers, market mortgage rates remained well above the subsidized 6.5% level even when the central bank held its policy rate below 5% in 2020 and early 2021. The bulk of the subsidies were phased out in June 2024 because they had become fiscally unsustainable and were fueling inflation. Nothing fundamental has changed since then. What benefits housing construction is detrimental to the rest of the economy struggling with high interest rates.
Comparisons like the one Khusnullin offered deserve scrutiny because they illustrate how detached official economic messaging has become from the realities facing ordinary people and businesses. No credible solution has yet emerged to address the contraction and near-stagnation seen in the first half of 2026. Officials can claim that the difficulties are not “critical,” but this is a politically convenient distinction. The problems are not critical for the Kremlin. They are increasingly critical for large parts of the country. Housing construction and demand for homes as a safe asset were among the main drivers of economic growth from 2020 to 2025. In the current wartime environment, they have become a headwind and a source of persistent inflationary risk. Conditions may indeed be better than in 1946−47, when famine and Soviet policies cost hundreds of thousands of lives. They may even be better than in 1948 or 1951. But if this is as good as it gets, mobilization — whether rhetorical or actual — appears increasingly likely.
