E-building. The urban planning reform aims to combat corruption in the construction industry (photo: Vitaliy Nosach, RBC-Ukraine)
The rebuilding of housing infrastructure in Ukraine after the war presents several new challenges for the government. As a result, the Verkhovna Rada has finally passed a bill (No. 5655 E-construction) introducing urban planning reform despite the controversial discussions surrounding it. The reform is aimed at eliminating confusion and bribery in the construction market. President Volodymyr Zelensky is expected to sign this bill by the end of the year. Read more about why the heads of major cities oppose the current version of the reform, who will oversee it, and how it will help restore housing infrastructure in the RBC-Ukraine article.
The development of the urban planning reform, led by the head of the Servant of the People party, Elena Shulyak, began 1.5 years ago. The process involved international expert organizations, including those funded by the United States and Great Britain, who provided assistance to Ukraine.
In summary, the reform focuses on digitizing key processes related to the construction of new facilities: from obtaining permits to monitoring construction progress and facility acceptance.
Anyone involved in control and permitting decisions will need to verify their identity with a digital signature and take personal responsibility for their actions. The project's authors believe that this will prevent abuse and reduce corruption in the construction sector.
E-construction. Combating illegal developments
There is little doubt that the construction sector in Ukraine requires oversight. The old system allowed for illegal development, which often resulted in investor deception, housing loss, and social protests.
For instance, the well-known case of the 42 problematic houses on Voitsekhovsky Street in Kyiv. This led to 13 thousand investors being deceived. Local authorities seemed to turn a blind eye to these unauthorized structures.
In total, according to rough estimates of experts, unscrupulous participants in the construction process earn about 10 billion dollars a year (!) on transactions and schemes in the construction industry (!).
The need to stop chaos in the construction industry has been evident for some time. This is especially crucial as Ukraine faces extensive infrastructure restoration following the shelling by the Russian Federation.
As a result, there is a strong public and international demand for maximum transparency, openness, and digitization of processes. The reform aims to incorporate these principles into urban planning.
The monopoly of local authorities on permit issuance creates a construction market monopoly in major cities. Typically, 2-3 developers with close ties to the mayor's office become the primary sponsors of election campaigns in these cities.
At the same time, as stated in the bill, local governments not only do not lose basic rights, but also gain the mandatory task of overseeing development (with a clear explanation of how to do this) and specific rights to stop unauthorized building.
E -building. Complete digitalization
The key focus of the reform is the Unified State Electronic System in the Construction Sector (EGESS), which must be used for obtaining all construction permits (registration at the start of work, examination of project documentation, licensing, energy efficiency certification, etc.).
For comprehensive oversight, the reform allows a wide range of people to monitor the progress of a construction project: urban planning authorities, market participants (customers, developers, architects, contractors, manufacturers of building materials, etc.), regulators (persons for licensing, energy audit, personnel certification, etc. .d.), registration authorities (CAS, notaries, public registrars), executive authorities (CAA, National Police, State Emergency Service, cultural heritage protection authorities, etc.), local authorities, experts in the field of urban planning and energy efficiency.
On the portal of the Unified State Electronic System in the field of construction, everyone has their own electronic cabinets.
All documents, reports, etc. are stored or created in the EGESS, and a number of key documents will exist exclusively as electronic documents, particularly design documentation for construction.
The portal will also include a public analytics module, which will be accessible to anyone. The launch is scheduled for July 2023.
Simultaneously, the reform also introduces several innovations to automate many processes. Among the announced decisions: registration of the right to commence construction work (if all documents are available), freezing project documentation with violations, halting the issuance of a positive review report if the site has cultural heritage status, acceptance of the completed construction project for operation.
The bill also presents a mechanism to protect historical heritage. The Ministry of Culture expressed concerns that the reform would diminish the authority of the cultural heritage protection agencies. The advocates of the reform argue that the electronic system will automatically prevent the issuance of building permits if the developer encroaches on an architectural monument, so these concerns are baseless.
E-construction. Combatting corruption
The bill aims to break the dominance of local authorities in making decisions throughout the construction process, which often led to corruption. This is why small communities support the bill, while large cities with massive developments are opposed.
Every decision or action of a participant in the urban planning process recorded in the e-system leaves a personalized digital trace in the system. In cases of law violations, this will clearly identify the illegal step and its perpetrator. The reform also entails increasing administrative and criminal responsibility for illegal actions.
The bill, which was supported by the Parliament, was approved with all the input from the main anti-corruption organization of the country, the National Agency for the Prevention of Corruption. During the discussion of the proposal, the NAPC insisted on making final touches to the draft law in relation to the sections of urban planning documentation, which does not fundamentally impact the essence of the reform.
“It should be understood that the reform affects many interests and to please everyone is just to leave everything as it is, without changes. For example, mayors and the Association of Ukrainian Cities offer to transfer electronic keys on behalf of, but we want to personalize this process in order to see the person responsible at each stage. That is why our negotiations with NAPC continue for a long time and scrupulously,” Olena Shulyak, the author of the project, noted in a commentary to RBC-Ukraine.
E-construction. Olena Shulyak, leader of the Servant of the People party, one of the authors of bill No. 5655 (photo: Vitaliy Nosach, RBC-Ukraine)
E-construction. What the public and authorities say about the reform
Despite facing opposition from local governments and individual developers, the document has significant backing. Specifically, two deputy prime ministers who have the president's trust, Alexander Kubrakov and Mikhail Fedorov, immediately expressed their support for the reform.
Kubrakov stated that the reform was developed with expert support from the Transparency and Accountability in Public Administration and Services project funded by the United States Agency for International Development (USAID) and the UK government.
Additionally, the Ministry of Communities, Territories and Infrastructure Development invited the G7 countries and the European Union to jointly implement the urban planning reform, which also received positive feedback.
The Minister of Digital Transformation of Ukraine Mykhailo Fedorov believes that the bill is 'a unique example of a real digital reform.' According to him, most of the services for the start of construction and commissioning are offered online through the Diya portal. All paper documentation is gradually being converted to electronic in a single system.
“According to international partners, these tools alone already provide 11.1 billion hryvnia of anti-corruption and economic effect per year,” he noted.
The bill is supported by a number of specialized as well as business associations, including the Chamber of Commerce and Industry, the All-Ukrainian Association of Communities, the Ukrainian Business Council, the All-Ukrainian Agrarian Council, the Association of Realtors of Ukraine, the League of Insurance Organizations, the National Association of Road Workers of Ukraine and others.
However, the mayors of the largest Ukrainian cities have expressed their disagreement with the bill. The Association of Ukrainian Cities stated that the reform creates conditions for a monopoly centralized admission of builders to the market, and the control and supervision of local governments are undermined by replacing them with monitoring, which only involves supervision of unauthorized construction.
According to Shulyak, the core of the urban planning reform focuses on increasing the role of local governments, expanding their powers, and enhancing their accountability.
According to the bill, the executive bodies of local councils will be responsible for ongoing and consistent monitoring of development. The current legislation does not offer specific ways to implement this, and appears more as an option rather than a requirement.
The reform changes this and mandates local executive bodies to continuously monitor development in communities. Officials will be personally responsible for the proper exercise of their powers.
E-construction. Vice Prime Minister for the Development of Communities, Territories and Infrastructure Oleksandr Kubrakov (photo: Vitaliy Nosach, RBC-Ukraine)
E-construction. Problematic issues
Because the final text of the proposed law is not available to the public today, there are many controversial issues surrounding the reform. We asked the bill authors for answers to the most prominent questions.
No. 1. On the exclusive admission of “our” builders to the market
As explained by the bill authors, the right to do construction work can only be obtained if all documents in the registers and cadastres are valid.
It will be impossible to “buy” such a right due to the implementation of an electronic system. In the final version of the reform, licenses will be issued automatically through the office in the registry.
“Every action or lack of action by a specific official involved in this process will be tracked in an electronic system, so we are discussing the digitization of processes that are a tool to fight corruption,” Kubrakov explains.
Regarding potential abuse by regulatory bodies, the law imposes strict liability for any violations – offenders will be fined and may lose their property and the right to work in the market.
№ 2. Who will be granted the right of private control
Urban planning reform does not replace state control with private control. These structures will coexist.
Moreover, important infrastructure facilities (such as bridges, subways, overpasses), facilities serving state bodies, local governments, or national cultural heritage, will continue to be monitored exclusively by the state.
The introduction of private construction control bodies should not be cause for concern. We already use the services of private doctors or notaries in the same way. However, the rights of private control bodies should be balanced by the executive and local authorities and come with clear responsibility.
The Ministry of Regional Development has experience in delegating functions to private organizations – expert organizations examining project documentation have been operating since 2011. Now about 50 organizations work alongside state expertise.
No. 3. On the new powers of the Ministry of Development of Communities, Territories and Infrastructure
Critics of the reform argue that the Ministry of Regional Development is taking on some of the functions of the State Architectural Inspectorate, including making decisions on holding market participants liable and imposing fines.
The bill provides for the separation of control and supervisory powers, according to its authors. Therefore, the Ministry of Regional Development will carry out the functions of state urban planning supervision.
Supervision will cover: urban planning and architectural authorities; urban planning control bodies; developers of construction project documentation; expert organizations; certain types of work (services) related to the creation of architectural objects; self-regulating organizations in the architectural field; and executive bodies of village, township, and city councils are authorized to monitor developments.
At the same time, a planning group in the ministry will be formed to involve the public in considering cases of offenses.
№ 4 Countering potential secret cooperation between a private oversight body and a developer
Critics of the reform think that developers will be able to establish private companies to oversee themselves. However, the project's creators emphasize that this won't make sense, as there are several restrictions on private oversight.
Also, urban planning officials will need to get insurance to cover damage caused to people or property as a result of their illegal actions or inaction during urban control.
If the authorized urban planning officials don't meet the set criteria or seriously violate the law, their powers are ended and they are held accountable.
E-building. How urban planning reform will combat local corruption
That is, “private oversight” cannot ignore violations by the customer (contractor), since in that case they will be accountable until their powers are revoked (termination of urban planning oversight).
If the customer doesn't fix violations related to unauthorized construction, the contract with “private oversight” is ended and the customer can't make an agreement with another “private oversight”. In this case, urban planning oversight of the unauthorized construction site will be done by the executive body of the village, township, city council.
Also, the bill doesn't include taking away architects' copyright. The edition only states that the essential condition of the agreement for developing design documentation for construction is to define the process for making changes to the design documentation for construction and determining authorized persons for architectural supervision.
E-construction
As mentioned earlier, the chaos in the construction industry leads to serious problems. These issues are especially critical now, as the rebuilding of Ukrainian cities, almost daily destroyed by Russian missiles and ammunition, becomes a priority for post-war Ukraine. Probably, due to this, the president will not veto bill No. 5655 (E-construction), and the reform will be launched by the end of the year.
Of course, to successfully carry out this process, maximum transparency and efficiency in fighting corruption is necessary. The need for consistent international aid for recovery also requires adhering to global standards, which the corresponding reform should guarantee.
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