SMALL-SIZED APARTMENT SUITABLE FOR SOCIAL HOUSING?

 A large group of labor-class citizens in HCM City are in need of a place to live while social housing projects across the city are failing to meet current demand. However, HCM City has recently found another solution for this big issue as asking relevant organizations to build apartments of 25-35sq.m with price of VNĐ100 million (US$4,500) like in the Bình Dương. But according to most of experts, it seems that this is not a right solution for HCM City.

A new plan for social housing in HCMC

The HCM City Department of Construction found, more than 476,000 households (accounting for 23.46%) have not had housing or live with their parents or relatives and about 13,000 households were displaced by the city’s urban restructuring projects. ¹

According to Nguyen Hoai An, Director of Professional Services at CBRE Vietnam, the demand on social housing and affordable housing in HCMC is still very high, but property developers do not show much interest in these segments. In 2016, the number of new projects in these ones has declined year-on-year. ²

In order to meet demand, the Department of Construction has planned to develop 39 projects with a total of 45,000 units by 2020. About 20% of this will be for lease, 60% will be paid for in installments and 20% will be sold outright ³ Recently, referring to Bình Dương’s success in building very cheap social housing with price of VNĐ100 million, HCM City Party Secretary Đinh La Thăng said HCMC would study the neighbouring province’s determination and creativity, but apply it flexibly, based on the city’s own ground realities. ⁴ However, Lê Hữu Nghĩa, Director of Lê Thành Commerce & Construction and many experts felt $4,500 houses are not achievable in HCMC. ⁵

Why is this model not achievable in HCM City?

HCM City wanted to provide more housing to lower-income workers, but that implementation had been difficult due to many reasons from different factors.For instance, investors were often reluctant to pour money into such projects as the regulated maximum profit for investors in social housing of only 10% was too low to attract investors, said Lê Văn Khoa – the vice chairman of HCM City People’s Committee. ⁶

Moreover, Nguyễn Hồng Hải, Chief Architect of Becamex IDC Corporation told, the socio-economic conditions of each locality are different, and HCMC cannot expect to copy Bình Dương. ⁷ In addition, an executive from a property company joked for VNĐ100 million you can only build a kitchen because the price of a flat is decided by land prices, which is very high in HCMC. ⁸ According to economist Đinh Thế Hiển, the other big problem with low-priced social housing was that it would attract more immigrants to HCM City, whose infrastructure is already creaking under the weight of the demands placed on it. And it means residents commute to office is set to get longer and more difficult. ⁹ Furthermore, at such low prices could not expect to build the good quality housing. Even if by a miracle the government manages to build good quality ones at these prices, it will have a big headache on its hands managing them. How will it be able to identify low-income workers and prevent speculation as the vultures move in? Besides, Lê Hoàng Châu, Chairman of HoREA pointed, HCMC can only build 15,000 to 20,000 $4,500 apartments because its land reserves are very limited. ¹⁰ Finally, there is a real threat that putting many low-income people in one place could give rise to a new slum.

HCM City should seek other stable solution

HCMC can build affordable houses, but in the $13,200 – 22,000 range, since the land and development fees are much higher than in Binh Duong model, said a municipal construction official. ¹¹ There also has another solution, the representative of one company proposed, the best way would be to build 15-20sq.m apartments for long-term leases of up to 50 years. “This is the best way to avoid slums,” he explained “when leasing, the quality of projects are still under the control of developer. People who do not obey regulations will be kicked out.” ¹²

And the city should focus on social housing development in ​​districts Thu Duc, 9, 12, Go Vap, Hoc Mon, Binh Chanh and Saigon South where there is good infrastructure.

However, the areas that are chosen for low-cost housing development should meet 4 criteria. First, they have sufficient social and technical infrastructure such as roads, schools, hospitals and parks. Second, they are near industrial parks. Third, they have a solid foundation. Finally, there is available land for budget housing development. ¹³

Supports from government and enterprises

How to bring down prices of budget homes with their size unchanged and all same utilities as commercial ones is a matter of concern for the HCMC government and enterprises.

HCMC Party Secretary Dinh La Thang said the city should offer low-cost housing developers favorable conditions by perfecting the mechanisms and policies and relaxing legal procedures. ¹⁴ In particular, it is necessary to create a chain link with cost reductions in many stages such as construction, design and completion so as to lower the price of the final product. In response, a number of building material manufactures and technology & design companies said they would offer lower prices for affordable housing projects such as Ha Tien Cement Company and Precast Concrete Co. Ltd., ect. ¹⁵ 

Besides that issue, low-income people in cities and those benefiting from State support need such cheap loans. Thus, preferential interest rates were offered to lure homebuyers. For instance, according to the Government’s Decision 48 dated January 13, 2017, credit institutions shall apply an annual interest rate of 5% to loans for low-cost homebuyers this year with the lending term of at least 15 years. ¹⁶ The same way, a couple of realty developers have launched programs in which their customers can take out home loans with annual interest rates of 5-6%. 

 

¹ http://english.vietnamnet.vn/fms/society/172556/nearly-480-000-households-without-housing-in-hcm-city.html
²http://www.cbrevietnam.com/Vietnam-Property/which-premise-for-social-housing-in-2017.cbre
³Vietnam News, March 1, 2017 – City aims for high-quality low-cost housing
Vietnam News, Feb 26, 2017 “HCM City’s VND 100m housing gamble”
http://vietnamnews.vn/society/city-life/351406/city-plans-super-cheap-homes.html#QjcgtG6HZgOu1tsq.97
http://www.vir.com.vn/city-seeks-new-social-housing-models-47270.html
Vietnam News – Not easy for City to build supper cheap home
Vietnam News – Feb 26, 2017 “HCM City’s VND 100m housing gamble”
Vietnam News, Feb 26, 2017 “HCM City’s VND 100m housing gamble”
¹⁰Vietnam News – Not easy for City to build supper cheap home
¹¹ Vietnam News – Not easy for City to build supper cheap home
¹² Vietnam News, March 1, 2017- City aims for high-quality low-cost housing
¹³ The Saigon Time Daily, HCMC can build cheap homes – HoREA
¹⁴ The Saigon Times Daily – HCMC seeks ways to make budget homes affordable
¹⁵ The Saigon Times Daily – HCMC seeks ways to make budget homes affordable
¹⁶ The Saigon Times Daily – Preferential interest rates offered to lure homebuyers