Zhytomyr Luxury: How the City Builds Social Housing for IDPs at Prices of Premium Residential Complexes in Kyiv and Odesa

As of this spring, Ukraine had nearly four million internally displaced persons, and within just the first three months of 2025, this number grew by another 188,000. These people flee front-line areas, often leaving everything behind, making housing one of their most pressing needs. For three years now, both the government and several international organizations have been trying to organize the process of providing accommodation for displaced persons. However, so far, it shows more signs of chaos and typical corruption schemes than of systematic work. 

Zhytomyr is among the first cities where construction of a residential complex for internally displaced persons began with the support of the European Union. A total of 116 families are expected to receive a roof over their heads. Yet construction is dragging on, materials are purchased at inflated prices, and the cost per square meter exceeds the market rate. 

According to official statistics, more than 12,000 displaced persons currently live in the city. Most of them are forced to rent apartments or look for places in dormitories and temporary shelters. At present, nearly 450 families, over 1,000 people, are on the waiting list for social housing. 

Since the start of the full-scale war, the Zhytomyr community has already implemented several donor-funded projects for displaced persons: it has renovated a dormitory on Otamaniv Sokolivskykh Street, built a modular town in Veresy, and is now refurbishing another dormitory on Dombrovskoho Street. These are important steps but only partial solutions, as demand is far higher and thus requires larger-scale measures.

An ambitious project with slow implementation

Since Zhytomyr became one of six cities in Ukraine where social housing for internally displaced persons is being built with support from the European Union, one such large-scale initiative involves the construction of an entire residential complex for IDPs. The project is coordinated by NEFCO — an international partner helping Ukraine implement numerous projects funded through grants and concessional loans. Zhytomyr had previously cooperated with NEFCO before the full-scale war: with their support, the city modernized its heating networks and insulated kindergartens and schools. Now Western partners are financing the construction of housing for displaced persons.

On Chervonyi Lane, four apartment buildings with 116 flats are being constructed, designed to accommodate over 400 people. The project’s estimated cost is around half a billion hryvnias, and the procuring entity is the Major Construction Department. The design includes one- and two-room apartments, with all ground-floor units adapted for people with disabilities. The complex is intended to be energy-efficient, with solar panels installed on the roofs and a solid-fuel boiler providing heating. The territory will include playgrounds, green areas, and parking for 48 cars. A shelter for residents is also planned within the complex.

The contracts were signed last spring, and construction was initially expected to be completed by the end of September 2025 (the deadline was indicative). However, as of September 25, only 53% of the work had been completed. 

In a comment to local journalists, the head of the department, Viacheslav Hlazunov, admitted that it would not be possible to finish construction by the end of September. They will strive to complete it by the end of the year so that new residents can move in early next year.

Who is building the housing?

The main contractor for this project is ArtHaus LLC, a company owned by the well-known local construction family Boblo. In March 2024, two contracts worth nearly UAH 310 million were signed with the company. Under these agreements, it is to build the residential blocks, carry out partial apartment repairs, and provide minimal furnishing. The costs of design, expert review, supervision, and additional works are not included — they are financed separately by donors. This year, the total value of the contracts was reduced by UAH 18.5 million. The official reason was the cancellation of certain works, though the municipal department did not specify which ones when responding to an information request.

A full account of this family’s business record and projects would take considerable time, so let us highlight only the key points. The core company of Petro and Nataliia Boblo’s family used to be Zodchestvo LTD, which could easily be called the favorite of the city’s Major Construction Department — the firm regularly secured its contracts. The city administration also had a good relationship with the entrepreneurs themselves. In 2018, Zhytomyr Mayor Serhii Sukhomlyn awarded Petro Boblo a medal For Merits to the City. The award was explained as recognition of his active role in the city’s development, though, notably, it was his wife Nataliia who accepted it on his behalf. 

One of Zodchestvo LTD’s most significant projects was the Transparent Office, for the reconstruction of which tens of millions of hryvnias were allocated. However, over time, the project became the subject of criminal proceedings due to suspected abuse of office. The firm disappeared from the public radar, and ArtHaus took its place. This practice is quite common in Ukrainian business: once a company becomes implicated in a criminal case and risks losing contracts due to reputational issues, it is easier to abandon it and set up another — owned by the same people.

Formally, these two companies are different entities, but in essence, they belong to the same informal construction group. They even share the same legal address and have common projects in their portfolios. Another piece of evidence is found in the asset declaration of Petro Boblo’s son, Andrii, who in 2017 worked at the Zhytomyr Regional State Administration’s Department of Architecture and the State Architectural and Construction Inspectorate. In his declaration, he reported income from both companies as well as his father’s income from leasing construction equipment to them.

At the beginning of this year, following Petro Boblo’s death, control over the company fully passed to his wife, Nataliia, while Serhii Diachenko became the director.

How the contractor was selected

Since the project is partly funded by international partners, the tender was conducted under the procurement rules of the international organization. However, the contractors were not chosen directly by the donors — the right to make the final decision was delegated to the Zhytomyr City Council, while NEFCO was responsible for checking the company’s integrity and approving the signing of the contract.

Five companies took part in the tender. ArtHaus offered the lowest bid, slightly undercutting ElitBud-1, the only other firm whose proposal fit within the budget. Journalists had previously reported links between these companies — for example, one of them had rented construction equipment to the other. The remaining participants offered higher prices and were not considered further. 

Interestingly, there were several tenders for this project. Although the construction of social housing for IDPs in Zhytomyr is funded by Western partners, part of the expenses is still covered by the city budget. The local budget finances finishing works, the construction of the shelter and surrounding area, and the connection of external utilities. In December 2023, the department held a separate tender for these works, which resulted in a 61-million-hryvnia contract — again signed with ArtHaus LLC. 

Even at the announcement stage, it was clear that the tender conditions favored a “friendly” company. One of the requirements was to provide an inspection report confirming that the bidder had visited the construction site, signed by representatives of the procuring entity. This requirement is potentially discriminatory: the department can decide at its own discretion whom to sign such a report for and whom to refuse. Even if a company visited the site, the procuring entity could simply deny the signature, which would become a formal reason for rejecting its bid. Such conditions limit competition and create an advantage for “insiders,” effectively violating the principles of openness and equal access to public procurement. The Antimonopoly Committee of Ukraine has repeatedly recognized this requirement as a violation.

Nevertheless, the Major Construction Department insists that it acted within its powers and followed all legal procedures, assuring that there were no prior arrangements with the contractor.

“There were no discussions that the company ArtHaus LLC should receive the contract,” — the department stated in its response.

However, by awarding ArtHaus the December 2023 tender, the officials effectively opened the door for the same company to win the subsequent international tender. It would have been illogical for multiple contractors to work simultaneously on the same construction site. Thus, by “properly” drafting the tender requirements once, the city

Prices under scrutiny

Before examining the issue of markups in this project, it is worth briefly summarizing what is already known. A major project funded by both international partners and the city budget was awarded to a favored construction group. It was done rather boldly — one of the tender’s documentation sets was clearly written to exclude unwanted competitors. Meanwhile, the winning company has been slow to justify the trust placed in it, as the construction progress leaves much to be desired. It is already evident that residents will not move into the new buildings this year — they will have to wait longer.

If this were the only issue, it might have been overlooked. But there is another — perhaps the most important — question: the efficiency of fund use. Out of the total budget, the contractor has already received almost UAH 120 million (and note: since the construction is financed by grant funds, it is exempt from VAT). A review of the cost estimate revealed that the company supplies certain materials at inflated prices. It is important to note that the final resource statements (actual expenses) list material costs without VAT, yet even so, they exceed retail prices in construction stores, which already include VAT. 

Let’s start with mineral wool slabs. The city department paid UAH 683 per square meter, while the market price averages between 525 and 562.50 hryvnias. This means that for this single item alone — depending on how one accounts for VAT — the overpayment may range from UAH 230,000 to UAH 380,000. 

Concrete blocks are among the most essential building materials. ArtHaus supplied them at UAH 2,895 per unit, whereas Kovalska sells the same blocks for 2,235, and Alex Group for as little as 1,807. Thus, the overpayment may have reached from UAH 364,000 (with VAT) to UAH 570,000 (without VAT). Typically, wholesale purchases bring lower prices — but here, the opposite is true: materials cost more than in retail.

And windows are no exception. They were purchased at UAH 6,377 per square meter, while the local manufacturer Ocean offered them for 5,055, and STEKO for 4,271. That is another UAH 360,000 to UAH 575,000 in potential overpayment, depending on VAT calculations.

On just these three positions, nearly one million hryvnias could have been saved. In total, we estimated about five million hryvnias in potential overpayments. It should be noted, however, that part of this difference may be explained by the fact that the contractor did not list warehouse or storage costs separately, which might have been included in the materials’ issue prices.

Official explanations vs. the real situation

The municipal department insists that the contractor independently analyses the market and sets prices based on its internal database. We reached out to ArtHaus director Serhii Diachenko for comment but received no response. NEFCO, on the other hand, explained that the contractor’s proposal had passed the state examination and was therefore deemed justified.

“As we understand it, the state examination evaluates the price list based on the quantities and volumes of materials specified in the project documentation and verifies the accuracy of the applied pricing methodology. Since the proposal received a positive conclusion from the state examination, the prices were also positively confirmed. The contractor was responsible for assessing its offer in terms of delivery costs and the required quality of materials. NEFCO set specific requirements for the quality of insulation materials,” — NEFCO commented.

In other words, Western partners relied on the local authorities and delegated responsibility for price verification to the Ukrainian side and its expert bodies. However, according to Dozorro’s research, the state expert organization does not verify prices for individual construction materials — it merely assesses the general reasonableness of expenditures. As a result, no one involved in the process — neither the donor nor the procuring entity, which was supposed to do so — actually analyzed the prices. This creates a gap in the control system.

The city budget also suffers

A similar situation applies to the works financed from the city budget. ArtHaus has already received more than UAH 36 million (including VAT). Yet, here too, the cost estimates show inflated material prices — with potential overpayments exceeding one million hryvnias. Since these are budget funds, they are subject to taxation, and because the final resource statements list prices without VAT, we added 20% for a fair comparison.

For instance, B15 (M200) grade concrete was supplied at UAH 3,621 (with VAT) per cubic meter, including storage costs. In Zhytomyr, the same concrete can be purchased from Trading House Beton for UAH 2,550, or from Buddelux for 2,400. This amounts to around UAH 164,000 in excess costs — funds that could have been used for other essential needs.

The same pattern appears with cast-iron manholes (D400), purchased at UAH 10,032 each. Their actual market price is much lower: Teploarmatura sells them for UAH 7,488, while Impex-Group offers them for as little as UAH 5,925. The likely overpayment here is about UAH 325,000.

Price per square meter — too much?

There is yet another aspect that rivals both contractor integrity and potential markups in importance: economic feasibility. What is the actual cost per square meter in the upcoming complex? Let’s calculate. In response to our inquiry, the Major Construction Department reported that the total project value is UAH 485 million. 

This amount includes building construction, partial finishing, furnishing, landscaping, utilities, design, and inflation risks — covering both municipal and donor contributions. Since this figure also includes the cost of constructing shelters, installing individual heating units, and mounting solar panels — all relatively unique and costly features — we subtracted them from the calculation. The adjusted total came to UAH 463 million. Dividing this by the total apartment area (6,800 m²) yields UAH 68,000 per square meter.

That’s roughly the same price one would currently pay for a fully renovated apartment in Kyiv’s most prestigious Pechersk district. Yet here we’re talking about social housing in the center of Zhytomyr. For comparison, in Zhytomyr’s Grand City Dombrovskyi comfort-class complex, a one-bedroom apartment with designer renovation, modern appliances, air conditioning, and a walk-in closet costs UAH 65,000 per square meter. In nearby Vinnytsia, a ready-to-move-in two-room furnished apartment in the Residence comfort-class complex sells for UAH 53,000 per square meter. In Odesa, for the same price as a square meter in Zhytomyr’s IDP housing project, one can buy a business-class apartment in Kadorr City — a one-bedroom unit with full furnishing and designer renovation costs about UAH 69,000 per square meter, while a two-room apartment in the neighboring Perlyna business-class complex costs UAH 70,000 per square meter. 

Even in Lviv, where housing prices are among the highest in Ukraine, a one-bedroom comfort-class apartment with a terrace in R2 Residence sells for UAH 72,000 per square meter.

According to Nataliia Melai, head of the Zhytomyr regional branch of the Ukrainian Real Estate Specialists Association, the current average market price for new housing with renovation in Zhytomyr is UAH 57,000 per square meter. In her view, the main factors shaping local housing prices today are location convenience, relative safety, and interior finishing quality. 

This means that the cost per square meter of social housing for IDPs in Zhytomyr exceeds the market price of fully renovated and furnished apartments even in some of Ukraine’s more expensive cities. Paradoxically, for the same amount spent on one square meter in this municipal project, one could buy a comfortable apartment in a private development — not only in Zhytomyr but also in Lviv, Odesa, or Vinnytsia.

Last year, Dozorro analyzed state procurement transactions for rebuilding multi-story buildings destroyed by Russian shelling and concluded that it is more cost-effective for the state to buy ready housing on the market than to build it from scratch.

Conclusion

This was supposed to be a story about help — about how the state, in partnership with international donors, cares for people who lost their homes to war. Instead, it has turned into a very different narrative. The main contractor was a company with long-standing ties to the local administration and evident advantages. One of the tenders even contained a clause that effectively restricted competition, allowing the authorities to decide who could participate. Such practices are not only unfair but also limit opportunities for other companies that could have offered better terms. Construction is proceeding slowly, and there are currently no guarantees that the facilities will be completed on time. The department head has already publicly admitted that work may only be finished by the end of the year — meaning that hundreds of displaced families will once again have to wait.

The most serious issue, however, is the lack of effective oversight over expenditures. Despite being funded by EU grants and municipal resources, neither the donors nor the procuring entity actually verify whether the prices for building materials are justified. As a result, the contractor purchases materials at inflated prices, leading to multi-million-hryvnia overpayments. These funds could have been used more efficiently — for the benefit of society, not private interests.

Zhytomyr’s example shows that even well-intentioned initiatives without proper control carry serious risks. Perhaps the state should reconsider its approach to large-scale housing construction. A more effective solution could be channeling funds into flexible and transparent forms of IDP support, such as housing purchase certificates on the open market. This would give people real choice and ensure transparent use of public money. 

Update

After the article was published, Zhytomyr Mayor Serhii Sukhomlyn, who a year ago became head of the State Agency for Restoration and Infrastructure Development of Ukraine, contacted Glavcom to comment. For balance and comprehensive coverage, we summarize his key points, as he disagrees with the author’s conclusions.

• The cost per square meter of low-rise housing — and in this case, a four-story complex — is higher than that of high-rise construction. Building low structures is an EU donor requirement.
• The cost also includes the construction of shelters, which are mandatory under the project and influence the total price.
• The project provides fully renovated apartments equipped with household appliances, making price comparisons with other complexes in Kyiv or Odesa less accurate.

This article was produced under the “School of Investigative Journalism” program by the Kyiv Media School educational initiative.