Proposal to Build Social Housing Solely for Rent

Economic expert Vu Dinh Anh suggests restructuring the proportion of social housing development solely for rent to mitigate the issue of inappropriate sales.

Speaking at the Real Estate Forum on March 15th, Dr. Vu Dinh Anh, an economic expert, stated that it was "not surprising" to see many people buying social housing with cars because "they only have enough money to buy a house." He believes that the recent issue of misdirected sales of social housing is due to the current flaws in the social housing development program. He cited that the development of social housing currently focuses only on buying and selling transactions, while renting is restricted due to many complex regulations.

Additionally, the development of social housing and the implementation of the 120 trillion VND incentive package, according to him, have not been effective because low-income individuals lack the ability to repay loans. Dr. Anh gave an example of someone borrowing at a 7.5% interest rate per year for five years under the 120 trillion VND credit package. If they borrow 500 million VND, on average, they would have to repay about 11 million VND per month, including principal and interest. Even with preferential interest rates, buying social housing would make life more difficult for them because most of their income would go towards loan repayments.

Therefore, the expert proposes restructuring the proportion of social housing development: 100% of social housing for rent or 80% for rent and 20% for sale to support those who truly need access to housing.

Nguyen Manh Ha, Deputy Permanent Chairman of the Vietnam Real Estate Association, also suggests increasing the proportion of social housing development for rent to 30-40%.

Previously, the Housing Law of 2014 stipulated that investors must allocate a minimum of 20% of the social housing area in projects for rent. However, many projects are unable to rent out this space, leading to unutilized apartments. In many industrial hubs, there is very little demand for buying houses, resulting in many empty social housing units while there is high demand for renting.

The Housing Law of 2023 allows investors not to allocate a minimum of 20% of the social housing area in projects for rent, but does not specify the proportion of sales and rentals in each social housing project.

According to Mr. Ha, the goal of the social housing development program is to ensure that everyone has a home, but most Vietnamese people want to own their own homes. He believes that housing should be developed for rent because buying and selling social housing would be difficult to meet the needs of low-income individuals due to significant income disparities.

The expert suggests international experience in increasing the proportion of rental housing through Real Estate Investment Trusts (REITs). When investing in this channel, people's assets in building rental homes still exist, and although profits may be slightly lower, they are safer and more sustainable.

From a construction business perspective, Mr. Le Viet Hai, Chairman of Hoa Binh Construction Group, stated that procedures related to social housing such as project approval, design approval, buyer criteria, project scale, and selling prices are still very complex. Mr. Hai cited cases where Hoa Binh had been working with investors for two years but only "temporarily resolved procedures" to proceed at the beginning of this year, even though the project had an investment license. There are projects with thousands of social housing units, but the market cannot absorb them because people do not qualify to enjoy them.

"If projects are completed but products cannot be sold, businesses are also hesitant to invest," Mr. Hai said.

Regarding solutions to promote affordable housing, Mr. Doan Van Binh, Vice Chairman of the Vietnam Real Estate Association, proposes the need for policies and mechanisms to reward and accumulate points for investors who establish affordable housing. The expert also suggests issuing standards, processes, new technologies, and model designs for affordable housing to reduce construction investment costs and lower housing prices.

Since the beginning of the year, many meetings between government leaders, ministries, and businesses have been organized to expedite the progress of the one million social housing units construction plan. In a recent report, the Ministry of Construction stated that social housing investment in many localities is still limited. Compared to the targets by 2025 of the plan, many key cities such as Ho Chi Minh City, Hanoi have not achieved the 20% target. Disbursement of the 120 trillion VND package is still very slow, accounting for less than 1% despite being implemented for over 10 months.

To further expand on the issue of social housing development and its challenges, it's important to delve into the complexities faced by both policymakers and developers in Vietnam.

One significant challenge is the mismatch between supply and demand in the housing market. While there is a growing demand for affordable housing, especially rental units, the supply often falls short due to various factors such as land availability, construction costs, and regulatory hurdles. This mismatch exacerbates the housing affordability crisis, particularly for low-income individuals and families who struggle to find suitable accommodation within their budget.

Moreover, the issue of affordability extends beyond the initial purchase or rental cost of housing. Ongoing expenses such as maintenance, utilities, and property taxes can further strain the financial resources of households, especially those with limited incomes. Therefore, any comprehensive solution to the housing affordability problem must address not only the upfront costs but also the long-term financial burdens associated with homeownership or tenancy.

Another challenge is the lack of effective coordination and cooperation among stakeholders involved in the housing development process. Government agencies, private developers, financial institutions, and community organizations often operate in silos, leading to inefficiencies, delays, and missed opportunities for collaboration. Enhancing coordination and communication among these stakeholders is crucial for streamlining the development process, promoting innovation, and leveraging resources more effectively to meet the growing demand for affordable housing.

Furthermore, there is a need for greater transparency and accountability in the allocation and management of social housing resources. Instances of corruption, favoritism, and mismanagement can undermine public trust in government initiatives and deter private investment in the housing sector. Implementing robust oversight mechanisms, promoting transparency in decision-making processes, and fostering a culture of accountability are essential for ensuring the equitable distribution and efficient utilization of social housing resources.

In addition to addressing these systemic challenges, it's also important to recognize the social and cultural dimensions of housing affordability. Beyond providing mere shelter, housing plays a crucial role in shaping communities, fostering social cohesion, and enhancing quality of life. Therefore, efforts to improve housing affordability should consider the broader social and environmental impacts of housing policies and prioritize inclusive and sustainable development approaches that empower residents and promote community well-being.

In conclusion, addressing the complex challenges of housing affordability in Vietnam requires a multifaceted approach that combines policy reforms, institutional capacity-building, stakeholder engagement, and community empowerment. By adopting a holistic and inclusive approach to housing development, Vietnam can ensure that all its citizens have access to safe, decent, and affordable housing, thereby promoting social equity, economic prosperity, and sustainable urban development.