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Exploring solutions to the affordable housing crisis

Update: September, 21/2018 - 09:00
Illustration by Minh Trí
Viet Nam News

By Mai Hiên

HÀ NỘI — For years, social housing has been a hot issue in Việt Nam. Living in decent, affordable housing in a reasonable location is one of the most important goals for all Vietnamese people.

It is undeniable social housing can help provide for basic housing needs, especially for those with low incomes. But experts say it can have adverse effects on society if it is not planned and executed properly.

Hoàng Thị Loan, a resident of Viglacera Corporation’s Đặng Xá social housing project, said she is satisfied with her apartment.

“Thanks to a preferential loan from the government’s housing stimulus package, I can own an apartment for just VNĐ350 million ($15,000),” she told Việt Nam News. She added that buying a house was out of reach on her monthly salary of VNĐ5 million.

Loan also said social housing was a practical option for young couples and those with low incomes. As the Vietnamese saying goes, “an cư thì mới lạc nghiệp” – a rolling stone gathers no moss.

After finding stability in the apartment, Loan found a job with a higher income and began saving money.

She does not intend to live there for the rest of her life, saying she hopes to move to a larger space.

Loan was lucky, but many low-income people cannot afford a house even with preferential loans, and many are not eligible for traditional bank loans.

How can we help these people buy houses of their own at a reasonable cost?

The issue was addressed in a recent panel in Hà Nội, titled “Social and affordable housing at a low price.”

According to Nguyễn Trọng Ninh, director of the Housing and Real Estate Market Management Department under the Ministry of Construction, demand for social housing in Việt Nam is very high, especially in big cities like Hà Nội and HCM City.

He estimated the two cities need one million more houses to meet demand.

The government introduced a VNĐ30 trillion housing stimulus package in the wake of the 2008-09 financial crisis. At the time, the real estate market faced high inventories and bad debts.

Some 70 per cent of the package was provided to home buyers at preferential interest rates. The package helped more than 56,000 people fulfill their dreams.

To satisfy increasing demand, the government created a special mechanism whereby social housing developers are exempted from land use tax and receive low-interest loans. In addition, they enjoy 10 per cent of profits and can reserve 20 per cent of the land for commercial housing projects.

Despite the government’s efforts, Ninh said social housing projects have only reached 30 per cent of the target set for 2020.

Development has been slowed by land shortage and a lack of capital, especially since the stimulus package ended after 2016.

Given Việt Nam’s budget deficit, it has been difficult for the government to attract investors willing to commit to social housing.

HCM City Real Estate Association chairman Lê Hoàng Châu suggested encouraging private investment in low-cost housing for rent.

One potential way to attract more investors, he said, was to revise the regulation capping investor profit from social housing projects at 10 per cent.

Nguyễn Vĩnh Trân, chairman of real estate development company MIK Group, agrees. He said there should be a mechanism that rewards businesses for creating cheap housing.

For example, if an enterprise built affordable housing for workers in an area far away from the city centre, the State should invest in the area’s education infrastructure.

Việt Nam can also take some lessons from other social housing developments in the Asia-Pacific region.

According to a social housing expert from the Republic of Korea, Noh Jae Keuk, successful projects in his country were supported by the government.

The RoK government rents houses to low-income workers for 10 years. After 10 years, residents can buy the houses as social housing.

The government divides people into 10 income brackets, with a different policy for each group.

Those who cannot afford to pay the normal rent for a house are offered a rate 30 per cent below market value. The next income group can rent a house at 15 per cent below the normal price. Those classified as middle-income workers are entitled to lower interest rates if they want to buy a house.

The RoK government has also established a housing fund which draws from two sources: the state budget and tax contributions. Each month, each citizen contributes anywhere from US $100-500 to the fund.

“There are a number of people with such low income that they can’t contribute,” Noh told  e-newspaper Zing. “However, contribution to the housing fund is required if you want to buy or rent a low-cost house. We have a mechanism to encourage people to save for the housing fund.”

A similar method is being applied in Singapore.

Each citizen of working age has to contribute 20 per cent of his or her monthly salary to the country’s Central Provident Fund. As a result, over 80 per cent of Singaporeans are living in apartments with some support from the government.

According to Thai housing expert Vichai Viratkapan, his government also provides incentives for low-income workers.

The Thai government plans to build one million more affordable houses.

These apartments are often cheap – less than one million Thai Baht ($30,700). He added individuals who wish to buy an apartment only pay three to four per cent annual interest during the first three years.

To encourage the development of new low-income housing projects, the government has preferential policies for development firms that participate.

While each country has its own methods of developing social housing, a housing fund or a central provident fund could be a good choice for Việt Nam moving forward. It would have the potential to resolve the severe affordable housing shortage. — VNS

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