Social housing: 20 years and still in its infancy

According to the calculation of the Ministry of Construction in the Housing Development Strategy for the period 2011 - 2020, based on the estimate of 70% of workers; 60% of students; 20% of the population in need of social housing, there must be a quantity of 33.6 million m²social housing for workers; 18.9 million m²for students and 116.6 million m²for low-income people in urban areas; a total of 169.1 million m². But in reality, by 2015 only 5.4% of the requirement was met - about 7.5 million m². It will not be until mid-2022 that the floor area of ​​social housing will reach 7.8 million m², only 300 thousand m more than in 2015²!

Building a social housing area in Vinh City. Photo: Le Thang

Existing problems

A series of problems in the social housing segment have been pointed out, but there are no reasonable solutions. The main disadvantages include:

1. The average housing price index over the average income of people in our country is too high, the average for the whole society is 25, while in other industrialized countries it is only 2 to 4, in Thailand near us it is only 7.

We can imagine the meaning of this index: A worker can save 25% of his salary to buy a house; so after 4 years, he will save one year's salary; when the index is 25, it will take 100 years to buy a house. In this world, how many people can live healthy to 100 years old?

This index shows that in Vietnam, wages are low but housing prices are high. Therefore, the most fundamental solution is to have policies to increase workers' wages, and have appropriate tax policies to lower housing prices.

2. The housing market is divided into two segments that operate very differently, the high-priced housing segment has oversupply and lack of demand, while the low-priced housing segment has undersupply and overdemand. When the high-end housing segment falls into bad debt, the affordable segment is severely undersupplied. This imbalance can easily be exploited for personal gain from the market's instability.

3. The solution to social housing in our country is mainly based on the subsidy mechanism: The State subsidizes land, subsidizes credit, subsidizes the determination of housing beneficiaries, and subsidizes the housing management regime. The subsidy mechanism leads to many consequences.

The firstPeople want to receive incentives from the State to buy a house, but do not want to be constrained by narrow frameworks for housing transactions.

MondayThe free land allocation policy for social housing projects is also a factor that has caused housing prices to drop slightly, but it has also caused localities to only want to allocate land in remote areas. Many social housing projects have no residents, so they have had to apply to change to other uses. Many project investors want to use their land in good locations to build social housing but have not been approved.

Tuesday, waiting for preferential credit is almost "hopeless" because credit is only a source of capital for commercial banks to receive deposits and then lend, they cannot lend at interest rates lower than deposit interest rates. The preferential credit package of 30 trillion VND is also only a one-time effort of the State Bank and cannot be repeated (this is the amount of money collected from the equitization of Vietcombank, Vietinbank and BIDV).

Recently, the Ministry of Construction also proposed a similar package worth 110 trillion VND but had to stop. In fact, the State Bank can only mobilize a package of 120 trillion VND with an interest rate 1.5 - 0.2% lower than the commercial interest rate from 4 State-owned commercial banks (plus Agribank).

With interest rates decreasing but still higher than investors' expectations, the impact on social housing development is not much, probably only for those with higher incomes to borrow to buy houses. Even when the Government has a policy of subsidizing interest rates for commercial banks to provide preferential loans, it is not responded to because each commercial bank has its own customers with stable cash flow in the business system. The credit source is also only from the commercial activities of the financial and banking enterprise system, it cannot be a lifesaver for social housing.

Perspective of the social housing project for workers of Kim Thi Real Estate Company being cleared in Nghi Xa commune, Nghi Loc. Photo courtesy of Nghe An Newspaper

4. The issue of creating low housing prices for social housing is the key to solving the problem. Usually, people often think of using poor quality construction materials, while "savvy" people think of the plan of "gutting the project". Many construction consulting companies have researched and proposed solutions to use new construction materials and new construction technologies to make the quality of the houses higher and the price lower. This proposal is very interesting, but it is just a fun promotion, not yet put into practice.

5. The huge price gap between the luxury housing segment and the social housing segment is a huge obstacle to the development of social housing. Social housing receives a portion of the State's subsidy to have a low price, but then a few years later, the price gradually increases and becomes average-priced housing. Low-income people have no choice but to buy newly built social housing. The process of solving social housing is like an endless journey.

6. Vietnam currently has a rather low management infrastructure, unable to manage income, unable to manage accommodation, making it impossible to implement even the best policies. To benefit from social housing policies, state agencies must show actual income, actual accommodation and the amount of real estate they own. Our management system does not have enough of this information.

7. Our social housing policy still focuses on the non-agricultural sector. In rural areas, the issue of social housing is assigned to targeted housing programs. Meanwhile, the need for population dispersal due to the rapid increase in the number of households is a reality. Young households that have just separated cannot find housing at market prices because they are too expensive. They only hope that land for population dispersal as before will be resolved. Now, the land dispersal mechanism can be considered a mechanism for creating social housing for rural areas.

8. Administrative procedures for each social housing project are always a “horror” for investors. This situation leads to considerable apprehension for many investors who want to rush to solve the problem at its root. Enthusiastic at first, but then everything from reality leads to the thought “the long road ahead is scary to think about later”.

Social housing area for workers and low-income earners of Trung Do Joint Stock Company on Cu Chinh Lan Street, Trung Do Ward. Photo: Nguyen Hai

Changing perspectives on social housing development

From the above disadvantages, it is possible to visualize directions with sufficient arguments to prove, specifically including:

1. The subsidy mindset used to develop social housing must be completely eliminated, and the driving force for development should be found in the market mechanism. State assistance should only be calculated in terms of tax exemption and reduction; gradual payment of land use fees; allowing the use of low-interest credit sources from international financial and credit institutions through mortgages, especially at investment banks; allowing social housing owners to have the right to trade housing under certain conditions.

2. Use digital transformation to improve the management efficiency of land, real estate, and income, to clearly identify beneficiaries of State incentives.

3. Management procedures for social housing projects need to be reformed in the direction of administrative procedures, only then can investors be attracted. In other words, it is necessary to regulate simple administrative procedures for social housing projects.

4. It is necessary to mobilize the contributions of many parties to solve social housing, including the social responsibility of enterprises, the contributions of socio-political organizations, social organizations, socio-professional organizations, charitable organizations...

Perspective of a social housing project for workers in Hung Loc commune, Vinh city, but now not completed. Photo: Nghe An Newspaper

5. Financial resources for social housing development are a major bottleneck in development. Currently, everyone hopes for preferential credit sources, but as mentioned above, this hope is often in vain, when credit interest rates in Vietnam are among the highest in the world, and low-interest credit sources cannot be found. At this time, it is necessary to diversify financial solutions for housing development such as Housing Savings Funds, Real Estate Investment Trust Funds, etc. On the other hand, it is necessary to operate the real estate tax system with the mindset of reducing the possibility of getting rich from investing in housing, encouraging investment in production and business.

5. Regarding land, narrow down the mechanism of dividing plots and selling land, do not allow it to be implemented in real estate business, must be considered a land solution to develop the social housing segment. This year, there is only enough money to buy a house, 2 years later there will be money to pour the foundation, then each year, one or two walls will be built, and finally the house will be completed.

6. It is necessary to supplement regulations on the quality of social housing associated with the application of new construction technology and new construction materials. Then, regulations on preferential policies on financial obligations when the quality of construction is better and the price is cheaper.

7. Expand the scope of social housing to rural areas, including regulations on land allocation policies for cases of separated farmer households. The more economically difficult, especially difficult, areas need to pay more attention to social housing, because people cannot take care of themselves.

8. In solving social housing, it is necessary to proceed in parallel with the process of reforming the salary system so that the salary must include the cost of housing and solve the problem of high taxes on housing speculation. Only then will the total cost of housing be increased, creating financial capacity for the demand side; at the same time, preventing speculation will reduce housing prices in the market. The opportunity to develop affordable housing and social housing will be higher.

The policy of solving the social housing problem for low-income and poor people is always contrary to the desire to orient the development of modern cities. The problem is to provide a specific roadmap for the urbanization process so as to ensure both modern urban development in places with sufficient conditions and to solve the problem of low-cost housing for vulnerable groups in certain urban areas, including large cities.