Can social housing development rescue the real estate market?

(Baonghean) -On January 7, 2013, the Government issued Resolution No. 02/NQ-CP “On some solutions to remove difficulties for production and business, support the market, and resolve bad debts”, which included solutions to remove difficulties for the real estate market and create conditions for the development of social housing. Public opinion believes that this is a signal of “thaw” in the real estate market.

According to this Resolution, all commercial housing development projects can adjust the structure and type of housing to switch to social housing development projects. The State encourages enterprises and individuals to participate in social housing development with many preferential policies. State-owned commercial banks reserve a reasonable amount of capital (at least about 3% of total outstanding loans) to lend at low interest rates to the following subjects: low-income people who need to buy social housing, enterprises building social housing, enterprises converting commercial housing functions to social housing. The State Bank reserves from 20-40 trillion VND through refinancing with reasonable interest rates and a maximum term of 10 years to serve the lending needs of the above subjects.

The above solutions create favorable conditions for the development of social housing from both sides: social housing construction enterprises and those eligible to buy social housing. However, this is not a comprehensive solution to rescue the real estate market. Currently, most commercial housing development projects are large-scale with villas, shopping malls, offices for rent, and modern apartment buildings. Converting the function into social housing to suit the budget of low-income people means destroying modern urban architectural works.

A long-standing unresolved problem is that social housing, although cheaper than commercial housing, is still not affordable for low-income people. The reason is that the State has not invested in building social housing, but only has preferential policies for businesses building social housing such as: low-interest loans, land rent exemptions, and infrastructure investment support. Businesses building social housing enjoy preferential policies but still have to calculate profits to avoid losses, so the cost of social housing always exceeds the financial capacity of low-income people, making it difficult to sell.

Social housing is invested in and built by the State or organizations and individuals of all economic sectors to implement social policies. Therefore, enterprises and individuals participating in the development of social housing do not aim for profit. Only then can social housing be priced in accordance with the financial capacity of the majority of low-income people. The solutions proposed in Resolution 02 of the Government to encourage the development of social housing are also a way to remove difficulties for the real estate market. However, that is not a comprehensive solution to rescue the real estate market.

The prolonged freeze of the real estate market has many causes, the main cause of which is the development of urban areas and housing areas without planning and without market survey; buyers need affordable housing but investors compete to build expensive high-end housing. This leads to an imbalance in the real estate market, with a large gap between supply and demand; when the economy is in difficulty, the State implements a tight monetary policy, leading to an unsolvable deadlock. Therefore, to rescue the real estate market, it is necessary to solve the root problem of strictly managing the planning of urban areas and housing areas, at the same time surveying and grasping the real estate market demand in each locality to develop housing that meets social needs. It is necessary to thoroughly prevent speculation and put an end to real estate investment and business chasing short-term profits, causing long-term consequences.

TRAN HONG CO