Subject. Illegal renting of housing is a sector of the informal economy in the Russian Federation, which significantly damages regional budgets due to underpaid taxes from the activity. Objectives. I review the residential rent market and existing measures to counteract illegal instances. I also formulate what specifically may be done to legalize the activity, thus increasing fiscal revenue of regions. Methods. The study relies upon general and partial methods of research, such as analysis and synthesis, analogy, comparison, hypothesizing. Results. The study focuses on the statistics of the illegal renting of housing, analyzes the liability for the activity, identifies pros and cons for tenants and lessees in case of uncontracted relationships. I examine existing measures counteracting the sector of the informal economy. Conclusions and Relevance. Illegal renting of houses, among other thing, challenges the real estate market today. Certainly, people prefer to pay rental taxes, since the State does not have effective methods to trace wrongdoers, while respective bills and mechanisms are not intended to improve the position of tenants. To bring this informal sector to the legal ground, the government should contemplate what may be done to incentivize the registration of tenants’ income and further tax payments, rather than total control measures. To legalize the activity of tenants, the government should seriously revise the respective taxation treatment.
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