Investments to improve the energy efficiency of existing residential buildings in countries of the former Soviet Union (FSU) are an important adjunct to fundamental housing-sector transitions that have been underway since the demise of the centrally planned Soviet economy in 1991. This report analyzes the linkages between energy efficiency investments in multifamily buildings in FSU countries and the institutional, policy, and social aspects of those housingsector transitions. Energy efficiency improvements can have a large impact on the speed and extent of these transitions; conversely, many features of these transitions enable or constrain energy efficiency investments. There are large technical opportunities to improve the energy efficiency of multifamily residential buildings with attractive financial returns. These returns are not difficult to achieve technically; the key challenges are financial, social and institutional in nature. As energy efficiency investments in residential buildings are considered and implemented, several types of energy-related policy development and capacity building may be necessary to create the proper incentives, overcome transaction barriers, and provide the maximum returns from those investments. Investment project designs should provide flexibility, controlled experimentation, tenant participation, and adequate technical, institutional and social monitoring and evaluation. A "systemic view" of district-heating systems is necessary, in which technical and policy changes on both the supply and demand sides are considered simultaneously. Future research and project preparation activities are also needed. This report captures the substantial experience accumulated by the World Bank during preparation of several lending projects in FSU countries from 1994 to 1996. This experience covers both the broader housing-sector transitions taking place in these countries and the specific technical, economic, social, and institutional aspects of energy efficiency improvements. The report is intended for policy makers, multilateral and bilateral agency staff, private-sector managers, and others tackling housing and energy problems in FSU countries.