Flexible policies needed for social housing mega-project
More flexible policies will help create incentives to attract investors and unlock the potential for expanding the social housing sector in Việt Nam.
To achieve the Government’s ambitious goal of constructing at least one million social housing units for low-income earners and industrial park workers by 2030, experts have recommended implementing more flexible policies and mechanisms to address ongoing issues related to procedures and financial matters.
They suggest that this approach will help create incentives to attract investors and unlock the potential for expanding Việt Nam's social housing sector.
The mega-project, approved in April 2023, targets the construction of at least one million social housing units during the 2021-30 period, with approximately 428,000 units to be completed by 2025.
The project is estimated to cost VNĐ849 trillion (US$36.1 billion), funded from various sources, with the aim of making housing affordable for low- and middle-income families in urban areas as well as workers in industrial complexes.
However, over the past three years, only 75 projects, comprising 39,884 units, have been completed nationwide, achieving less than 10 per cent of the five-year plan.
For 2024, the Government has set a target of completing 130,000 social housing units. Yet, by the end of the first quarter, only eight projects had been completed, reaching less than 30 per cent of the target.
The gap between target and achievement necessitates a fundamental shift in both mindset and implementation to meet the set goals.
Significant challenges
In Directive 34-CT/TW, aimed at strengthening its leadership in social housing development, the Việt Nam Communist Party Central Committee acknowledged the limited supply of social housing compared to actual demand, while prices remain high relative to beneficiaries' incomes.
Additionally, the management of social housing is still weak. The proportion of land allocated for social housing development in urban areas and state budget support for preferential credit programmes are insufficient, and there has been a lack of mobilisation of social resources.
These issues have hindered social housing development, despite substantial policy support, posing significant challenges to achieving the set goals.
Hoàng Hải, director of the Ministry of Construction’s Department of Housing and Real Estate Market, pointed out that some localities had yet to prepare adequately for the plan's implementation or clearly identify the land needed for social housing. This shortcoming impeded proper planning and land allocation for social housing projects.
Additionally, many companies investing in social housing faced difficulties accessing land due to issues with land planning and project transparency. Despite some projects receiving approval and investors being selected, actual construction progress had not met expectations.
Disbursement of the preferential credit fund of VNĐ120 trillion (US$4.77 billion) had been slower than anticipated. Moreover, few commercial banks were participating in lending to support social housing development, Hải noted.
Huỳnh Thanh Khiết, deputy director of HCM City’s Department of Construction, highlighted that the biggest challenge was the lack of budgetary investment, which prevented the full allocation of necessary funds for the State-owned social housing plan for policy beneficiaries, including public employees.
Currently, HCM City has allocated only 10 per cent of the required funds for social housing programmes. By 2025, the city needs $1.5 billion, but can only allocate about $150 million from the budget. By 2030, the city will need $3.43 billion but can only allocate $342 million, with the remainder needing to come from social capital sources.
Some experts argue that the plan's failure is partly due to selling homes to those who cannot afford them. Nguyễn Văn Đỉnh, a real estate legal expert, suggested that in addition to selling and lease-to-own social housing products, there should be policies promoting rental social housing development.
He said that the Housing Law 2023, effective from August 1, removed the requirement for social housing developers to allocate 20 per cent of the floor area for rent. This means if all units are sold, the Government needs to increase rental housing supply as a substitute.
The law specifies that housing for industrial park workers should be for rent, limiting access to rental social housing for other low-income groups such as manual workers or freelancers in urban areas.
Trịnh Quang Minh, head of the Union Project Management Board at the Việt Nam General Confederation of Labour, said that building social housing for sale was very challenging due to lengthy procedures, high selling prices compared to low-income workers' earnings, and unattractive regulations for investors, with profit margins capped at just 10 per cent.
Therefore, developing rental social housing seemed more feasible, meeting actual needs and aligning better with workers' incomes. The demand for rental housing was high, while supply was limited and market rental prices were elevated.
The Union Project Management Board has proposed a rental social housing model with rates set at or below market levels. For instance, the board’s pilot social rental housing project in Hà Nam Province was fully rented out quickly upon its launch.
The rental rates range between $47-55 per month, compared to $80-119 per month on the open market.
Lê Hữu Nghĩa, director of the Lê Thành Construction and Trading Company, said that investing in 1,000 social housing units, each costing around $19,890, would amount to an investment of $19.8 million. With rental rates of $119-139 per month, the investor could potentially earn between $1.19 million and $1.32 million per year.
However, if the investor takes out a commercial loan with an interest rate of 10-13 per cent per year, the interest on VNĐ500 billion would be about $1.98 million, leading to certain losses for the investor.
Moreover, under the 2023 Housing Law, the profit margin for rental social housing is limited to 10 per cent, discouraging investors from undertaking such projects, according to Nghĩa.
Policy changes
While many localities face difficulties in implementing social housing policies, Hải Phòng City has achieved notable success.
The city has approved and selected investors for 31 social housing projects with a total of 36,600 units. Of these, nine projects, comprising approximately 15,000 units, have begun construction. Hải Phòng is expected to complete around 16,200 units during 2021-2025, surpassing the Government's target of 15,400 units.
Hải Phòng’s experience serves as a model for other localities. The city closely adheres to real estate and housing regulations, with the Party Committee providing guidance, the People's Council [Assembly] passing five resolutions, and the People's Committee [Administration] issuing 13 decisions related to implementation.
The city has effectively utilised existing policies to improve the investment and business environment, particularly regarding housing procedures. This approach has created a transparent, efficient, and investor-friendly environment, attracting numerous large-scale investment projects that meet the demand for buying and leasing social housing.
Hoàng Hải, director of the Ministry of Construction’s Department of Housing and Real Estate Market, acknowledged that challenges remained in developing social housing.
The Ministry of Construction is currently focusing on implementing and guiding localities on decrees, decisions, and circulars detailing the 2023 Housing Law and the 2023 Real Estate Business Law, according to Hải.
The ministry continues to urge localities to develop specific plans for investing in social housing projects, aligning with the Government’s goals of building at least one million social housing units for low-income people and industrial park workers during the 2021-2030 period, and meeting the social housing targets for 2024.
As part of the 2024 National Assembly supervision programme, there will be a high-level review of the implementation of policies and laws related to real estate market management and social housing development from 2015 to 2023.
This review aims to assess achievements, identify limitations and challenges, pinpoint causes, and clarify the responsibilities of agencies, organisations and individuals to enhance the effectiveness of policy and legal implementation in real estate management and social housing development.
Recommendations would be made for improving related policies and laws, Hải said. VNS
