Affordable housing is almost "extinct", is social housing needed for rent?

Affordable housing prices range from 2 billion VND/unit

Sharing at the Spring Real Estate Forum on the morning of March 15, Mr. Doan Van Binh, Vice President of the Vietnam Real Estate Association and Chairman of CEO Group, said that the market understands affordable housing as commercial housing with a total asset value paid for by a household's accumulated income of 7 years or more.

This is a class C apartment, the price for a basic completed apartment is under 1,000 USD/m2, meaning a 2-bedroom apartment with an area of ​​65m2 costs about 65,000 USD, equivalent to 1.6 billion VND.

However, according to research by the Vietnam Real Estate Association, the reality is that apartments with this price are almost "extinct" in the Hanoi and Ho Chi Minh City markets. Currently, the "standard" price of affordable housing in these two cities has increased by 20-30%, at 2-2.4 billion VND/apartment.

“If we let the invisible hand of the market mechanism regulate, it will be very difficult to have affordable housing for people. The continuous increase in housing prices in recent times is proof. Therefore, the State should directly participate in creating affordable housing and social housing for rent to guide and regulate the market in a certain period of time,” Mr. Binh suggested.

Following market information, Mr. Le Viet Hai, Chairman of Hoa Binh Construction Group, also said that in the Ho Chi Minh City real estate market, from before the pandemic to 2023, the high-end segment accounted for 82%; affordable housing decreased by 40% and affordable housing also "disappeared". That is a sad thing.

Meanwhile, Mr. Hai said that the core issues of incentives for social housing such as project approval, design approval, buyer target, project scale, selling price... are still very complicated.

He cited that about 2 years ago, the group had the opportunity to work with the social housing investor and found that the project had an investment license but the procedures for implementation had only been temporarily completed at the beginning of this year. Along with that, the State's incentives on land use tax, VAT, credit, and management costs were not in line with market rules, so it was not possible to reach an agreement between the State and the investor.

Therefore, Mr. Hai proposed that there should be incentives on land use rights, VAT, and credit for investing enterprises. In addition, it is also necessary to promote the demand side, which is the buyer.

“There are social housing projects with a scale of 4,000-5,000 units but they cannot be absorbed because people who do not have a house and want to buy it do not have enough conditions to enjoy it. When the products cannot be consumed, investors will not dare to invest boldly. Clearing the supply but blocking the demand side will also block it,” Mr. Hai commented.

Should social housing only be for rent?

Giving his own opinion, Dr. Vu Dinh Anh, an economic expert, said that the current social housing program is being designed based on the mindset of buying and selling, not renting. It is necessary to clearly identify the target audience for social housing with issues of real income instead of nominal income. Along with that is the income distribution and the ability to pay of home buyers.

Mr. Anh proposed that with social housing, policies should aim to promote construction for rent rather than for sale to meet demand and better suit people's ability to pay.

However, Dr. Phan Duc Hieu, Standing Member of the National Assembly's Economic Committee, said that social housing should be developed for both sale and rent, those who have the ability to buy will buy, those who do not have the ability to rent.

Regarding the issue of accessing capital, Mr. Hieu emphasized that the pilot of accessing other land funds to develop commercial housing will create a better mechanism for businesses to access land to develop housing. In the Land Law, the State takes over land for businesses to build social housing, which is more favorable for businesses than building commercial housing.

With the pilot policy of “other land” in commercial housing development, Dr. Nguyen Minh Phong, an economic expert, also believes that this regulation will increase the ability to access land funds for housing development enterprises. However, it is necessary to pilot and focus on the low-cost housing and social housing segments.