Affordable Housing: A Complex Challenge, A Complex Solution

The challenges of developing social housing in Vietnam: A case study of Ho Chi Minh City.

Developing social housing in Ho Chi Minh City has not been an attractive proposition for businesses due to its low profitability and cumbersome procedures, coupled with a lack of incentives. Mr Le Huu Nghia, General Director of Le Thanh Production Trading Service Co., Ltd., who has been involved in social housing projects for many years, emphasized the difficulties in both selling and renting such properties. The first hurdle is capital and profitability. Without preferential interest rates, a company investing in a project of 1,000 social housing units for rent with a capital investment of VND 500 billion would incur a loss of at least 10-15% annually. Therefore, without supportive mechanisms, it is impossible for businesses to undertake these projects. Le Thanh has been able to successfully rent out their social housing units by offering flexible payment options to buyers and bearing the burden of interest rates on their behalf.

A social housing project in Ho Chi Minh City. Photo: Tan Thanh

Mr Nghia also pointed out the challenge of meeting the demand for social housing due to the low-profit margin, which is set to decrease to 10%, and the daunting procedures that deter potential investors. He suggested that the government should streamline the processes and allow for parallel execution to help businesses expedite project progress and increase supply in the market. Additionally, there should be a relaxation of restrictions on the resale of social housing, allowing buyers to sell their properties after a certain period, just like regular housing. This would incentivize both investors and buyers. Mr Nghia highlighted that other countries only consider whether citizens own a house when offering social housing opportunities, without delving into further details, unlike the current situation in Vietnam, where there is a lack of openness toward businesses.

Mr Le Nguyen Minh Quang, Director of Nam Long ADC Joint Stock Company, shared similar sentiments, stating that the continuous increase in input costs and labor expenses has put immense pressure on businesses, pushing up the prices of social housing units. The complex legal procedures and policies, along with lengthy resolution processes, also contribute to increased costs and delays in project implementation. Moreover, the lack of clean land for social housing development in urban areas remains a persistent issue.

Accessing preferential capital for both businesses and individuals interested in renting or purchasing social housing is another significant challenge. Some buyers are also hesitant due to concerns about the quality of construction, living environment, and associated services.

Urgent Need for Mechanisms to Boost Social Housing Development

Mr Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), pointed out that the cumbersome procedures for social housing development are more complicated than those for commercial housing. As a result, during the 2016-2020 period, Ho Chi Minh City only achieved approximately 15,000-16,000 social housing units, equivalent to 41% of the country’s target, averaging 3,000 units per year, which falls short of the society’s substantial demand. Nationwide, from 2021 to 2023, only 72 social housing projects with 38,128 apartments were completed, accounting for less than 9% of the five-year plan for 2021-2025, which aims for 446,000 units. Ho Chi Minh City, in particular, has completed and put into use only two social housing projects with 623 apartments and has started construction on seven projects with 4,996 apartments, but these are facing legal obstacles and have almost stalled.

HoREA has proposed several solutions to overcome these challenges and promote the development of social housing in Ho Chi Minh City, including suggestions regarding the approval process for investment policies and urging the Ministry of Construction to direct the Department of Construction in localities to appraise and approve detailed planning at a scale of 1/500 for social housing projects, even for commercial housing projects that have already obtained investment approval. They have also recommended that the selection of investors be conducted according to the provisions of Point b, Clause 3, Article 6 of Resolution 98/2023/QH15 of the National Assembly.

Over the years, HoREA has sent numerous documents to the Government, ministries, and branches regarding the removal of obstacles in social housing development, including a proposal for the Prime Minister to direct the State Bank to allow credit institutions designated by the State to provide preferential loans for the purchase and rental of social housing.

Mr Bui Van Son, Deputy Director of the Ho Chi Minh City branch of the Social Policy Bank, attributed the shortage of social housing since 2020 partly to the absence of policies offering preferential loans to investors for social housing development. Consequently, the bank has focused on providing loans for purchasing and renting social housing. According to Mr. Son, the bank is willing to lend up to 80% of the house value at preferential interest rates if the borrowers meet the eligibility criteria.

There is a pressing need for the Government, ministries, branches, and local authorities to improve the construction procedures and legal processes, collaborate closely with businesses to alleviate the burden of legal procedures, and assist in finding and developing land funds for social housing projects. Additionally, they should provide financial support through preferential loans, tax reductions, or the establishment of special assistance funds for businesses. Encouraging businesses to adopt new technologies and innovations to minimize costs and enhance efficiency in the construction and management of social housing is also crucial.

Son Nhung