Experts discuss the reasons behind the varying increases in housing and utility rates and offer tips for saving money.
The annual increase in housing and utility tariffs on July 1 has become customary for Russians. However, July 2025 brings an unprecedented surge in utility costs for citizens, averaging 11.9% nationwide and exceeding 20% in some regions. This increase, which authorities term «investment-necessary,» is occurring despite slowing inflation and stagnant household incomes.
Why are tariffs increasing faster than inflation? Who determines the cost of electricity and water in each region? How can families protect their budgets from this sharp rise in expenses? We discussed these questions with experts: Pavel Sklyanchuk, a member of the expert council on housing and utilities under the State Duma Committee on Construction and Housing; Igor Kolesnikov, head of the «Urban Economy» project direction at the Institute for Urban Economics foundation; and Sergey Sergeev, head of legal support for disputes in the housing and utilities sector at the Moscow Bar Association «Yakovlev and Partners».
«We Have to Accept the Growing Numbers in Our Bills»
— Why is the traditional July indexation of housing and utility tariffs necessary? Where did this practice come from, how is it formed, and who benefits from it?
Sergeev: — Indeed, this is an annual event for us – tariffs are routinely increased every year. For the past few years, this has happened on July 1. The reason is clear: general inflation, rising costs of producing communal resources, increased material prices, wage increases, and so on. All of this is a consequence of the overall economic situation. Therefore, this process cannot be called unexpected or unclear. It`s all logical. The only question is the size of these increases – that, of course, worries everyone. But the fact that everything is getting more expensive is beyond doubt, so we have to accept the growing numbers in our bills.
Sklyanchuk: — Actually, it wasn`t always this way. The current tariff formation model has been in place for over 10 years. Before, indexation occurred twice a year to smooth out sharp jumps in utility costs. Then they switched to an annual increase in the middle of the year. Why exactly July 1 and not, say, September 1? I don`t think there`s any specific economic reason – it`s just the middle of the year. The model is based on inflationary processes. Our indexation is a catching-up process in terms of expected and actual inflation. The government makes calculations and, considering regional differences, sets threshold values – maximum indices for tariff growth.
This year, the government surprised us: many regions were allowed to increase tariffs above the inflation rate. A record indexation for the past 10 years is expected. If previously the increase was around 8–9%, now in some regions, like the Arkhangelsk Oblast, it reaches 20%.
But the model itself is like this: we have a flat tariff scale, and a simultaneous increase is made for all regions. Economists say that this simultaneity fuels the inflationary spiral because it is later incorporated into the final cost of goods and products.
Kolesnikov: — Yes, indexation in its current form appeared in 2014 when changes were made to the Housing Code. According to these changes, the amount paid by citizens for communal services cannot increase above the maximum index. This index is set by the Government of the Russian Federation according to established rules based on proposals and applications from the constituent entities of the Russian Federation, considering the current tariff situation, the state of communal infrastructure, and so on.
Utility companies need to repair infrastructure, build new facilities, and implement investment programs. Rising prices for materials, wages, and so on should not be compensated solely by tariffs. Currently, investment programs aimed at developing communal infrastructure, improving service quality, and connecting new consumers are mandatory.
The increase is related to this. On average, it is about 12% per year. This means that the payment by citizens for all communal services – water supply, sewage, electricity supply, and so on – should not increase by more than this percentage on average. But the figures vary by region – from 8% to 21%.
Until 2013, the law on the fundamentals of federal housing policy was in effect, which also had a limitation on tariff growth, but through different mechanisms – through the concept of affordability. The index approved at the federal level was intended precisely to ensure the affordability of utility payments for citizens.
«Modernization Seems Endless»
— Authorities report a decrease in inflation in the country: according to the latest data, its annual value is 9.6%. How then is the average 11.9% increase in utility tariffs justified? And why are the figures so different across regions – from 8% to 21%?
Sergeev: — Regarding the average figure of 11.9%, in my opinion, it`s not critical. In recent years, indexation has been around 8–12%. What worries me more is why the increase reaches 20% in individual regions. We have a federation, and constituent entities have the authority to determine the size of the increase. Much depends on how tariffs were previously formed and controlled. If tariffs haven`t grown for a long time in a particular region, a «catching-up» indexation might become necessary. This has happened before, for example, in St. Petersburg, where waste removal fees weren`t indexed for several years, and then they were raised by 30% at once. In my view, this is a mistake by those who should have been regulating the growth systematically.
An increase of 20–21% is the maximum allowable limit set for a specific region, but it`s not necessarily going to be fully implemented. And it`s important to consider that this might be an increase for specific services. Water supply might become more expensive in one place, gas in another. One needs to look at the tariff structure.
Sklyanchuk: — Overall, the figure of 11.9% doesn`t seem alarming, but if you look at the regions, the situation is much more acute there. Such a spread is possible because housing and utilities have both economic and political components. The federal center does not allow local authorities to restrain growth indefinitely – otherwise, the stability of the energy system will suffer. Many resources, like electricity, are distributed across several regions, and distortions are unacceptable.
As Minister of Economic Development Maxim Reshetnikov noted, housing and utility tariffs in 2025 have become more socially justified. The increase in energy tariffs leads to utility companies spending this money on paying for coal, electricity, and so on. Up to 80% of the increase goes precisely to purchasing resources, not to the utility companies themselves. Therefore, governors cannot simply «decide not to raise»: sooner or later, this will lead to disruptions.
During the COVID years, efforts were made not to raise tariffs or indexed them below inflation. Now, «leveling» is underway. Tariff formation in housing and utilities is distributed among different regulators. The Ministry of Construction is far from the only one. FAS (Federal Antimonopoly Service) plays the main role. Incidentally, Prime Minister Mishustin recently criticized the antimonopoly service for its passivity in this area and pointed to cartel agreements in the sphere of natural monopolies.
People don`t understand how the cost of resources – a cubic meter of water, a kilowatt of electricity – is calculated, and this causes irritation. Monopoly applications to tariff committees are not always transparent. Furthermore, the Accounts Chamber found that half of investment surcharges do not lead to real modernization – they are «empty shells». Approaches are now being reviewed to ensure that money actually goes towards updating infrastructure, and not just towards paper plans.
— Every year when tariffs are raised, there is talk about the necessity of modernizing networks, but in practice, this often doesn`t happen. Where does the money go if indexation is already included in the tariffs?
Kolesnikov: — Modernization of communal infrastructure is a lengthy process; it requires decades. In the 2000s and 2010s, tariffs barely grew, while enterprise costs increased, leading to network wear and tear. Currently, the tariff increase is economically justified: regions submit index proposals, which are agreed upon with the antimonopoly service and the government. Investment programs – construction of new facilities, networks – are also envisioned. In some regions, differentiated tariffs are in effect: industry pays more, but gradual equalization is planned. Funding comes not only from tariffs but also from federal subsidies and other sources.
— But, judging by the scale of indexation, this is clearly not enough. How can payers check whether the money is truly going towards modernization, and not just expenses?
Sergeev: — The country is large, there are many networks, so modernization seems endless. Tariffs for water and heat cover only the cost price and minimal profit; serious investments in renewal are not included. Modernization is partly funded through concessions, but not always effectively – sometimes networks are taken into management for profit rather than renewal. Ideally, such agreements should include clear plans: how much and what to modernize. Checks of tariff applications and expenditures are possible but require initiative and detailed analysis, which specialized bodies undertake.
— So, the tariff increased since July mainly includes funds not for modernization, but so that resource-supplying organizations can simply continue to operate?
Sergeev: — Not entirely. Something is certainly included for modernization, but in a very limited amount – mainly for maintaining current operability: patching holes, replacing the most worn-out sections. Full-scale modernization requires other sources – federal subsidies, concessions.
If everything could be modernized through tariffs, it would have been done long ago. But tariff revenues are insufficient. Therefore, there are other support mechanisms. What is currently included in tariffs is more about maintaining operability than capital modernization.
Why does modernization not end? Because there are very many networks. When some sections are put in order, others are already wearing out. This is an endless process: it`s impossible to replace hundreds of thousands of kilometers of networks all at once.
«Utility Debts — Over a Trillion Rubles»
— What can a consumer realistically do if the bill becomes unaffordable? What subsidies, benefits, compensations can families with low incomes count on, and how realistic is it to receive them?
Sklyanchuk: — Utility services are a mandatory payment, like spending on food or medicine. The problem is that many people have loans, and even with a normal salary, little money is left for utilities. To get a subsidy, one needs to prove that utility expenses exceed 22% of income – but this excludes many, especially working urban residents. There are benefits for pensioners, disabled people – they usually know about them and use them.
What can others do? Firstly, save individually: turn off lights, don`t waste water, monitor household appliances. Secondly, save collectively: insulate entrances, monitor heat losses, because we pay for all the heat that enters the house, not just what`s in the apartment.
