Social housing: retardation as "entangled"

People are having huge demand for social housing. Photo: Thu Hien.

Many kinds of difficulties

Recently, the Ministry of Construction reported on the results of implementing the social housing program and showed that, as of November, 2016, the country completed the construction of 179 social housing projects in urban and industrial areas (equivalent with 71,150 units), providing housing for about 500,000 low-income people. However, compared with the National housing development strategic target, the actual figure is 28% while the Government's target for 2020 is to provide 250,000 social housing apartments.

According to experts, the conditions for the development of social housing is enough, but the implementation of the social housing program with results as its target is quite slow. In fact, society's demands for this segment is still very large, with about 80% of people in need of social housing, meanwhile, we have enough land and policies, even a lot of land is being abandoned, or has been assigned to the project, but not implemented. Besides, part of residential savings can be mobilized in this field. The question of what obstacles need to be removed for social housing, especially in urban areas, to be implemented effectively.

The main obstacles that were mentioned by companies in recent years are the cumbersome, complex and prolonged administrative procedures for investors, that take a lot of time for businesses. Procedures for approval of the social housing investment projects must go through several steps such as compensation for site clearance, land delivering, assessment time, planning approval, project approval, leading causing housing prices to increase, and the investors themselves are disillusioned and discouraged.

In administrative procedures for the social housing investment licensing, a matter of complaint by enterprises is price valuation. Mr. Truong Anh Tuan, Director of the Hoang Quan Real Estate Trading Services Consultants JSC, said the local government’s current regulations are that businesses must commit the prices before the sale, meanwhile, enterprises draw up the estimated cost units according to the cost units that the Ministry of Construction issued by time period. But prices in the building materials market are constantly fluctuating, many important inputs such as steel and cement prices have risen sharply, even rising to 30% which affects the product prices in comparison with the authorities’ registered prices. This leads companies to consider when choosing to invest in this segment. Investors also said that, while the profit of the segment is only 10%, if such price increases, the profit will be reduced significantly, even if the input material price keeps increasing, then investors will be lose. This is a barrier for businesses to join in this segment. To overcome this limitation, company representatives proposed State authorities to have ways to support businesses, and the social housing market. For example, to introduce stable material supply sources for investors.

Apart from difficulty of the procedure, the current credit policy for social housing is in temporary stagnation, lack of stability, not creating incentives for investors, thus this segment’s supplies are very limited. The social housing target only reached 28% which means that there are many low-income households not having stable housing. Not to mention, people are now facing difficulties because the State cannot arrange preferential loans for this sector, the housing purchase of many families was delayed and this also affects the business of the enterprise .

The profit is less attractive

Many comments also said that apart from the cumbersome procedures, and funds are not stable, the profit is also not attractive to investors. Currently, the norm profit for social housing is capped at 10% for houses for sale and 15% for rental housing making enterprises reluctant to invest, because when trading in commercial housing, the investor can take the initiative on this issue.

Recognizing this is the difficulty of the enterprise, an expert in the field of real estate said that the profit level needs to be regulated because otherwise the interest rate policy will be vulnerable, the control of the profit will guarantee the consumers’ interests, without control, the interest rate will affect the house prices. With the social housing policy, consumers receive a discount, but businesses themselves are also entitled to various incentives from the policy, such as reducing corporate income tax, decreasing VAT etc. With such reductions, businesses must accept the interest rate according to the law.

The expert said that the operation of the current procedures provisions are cumbersome, lack of flexibility, and proposing to still control the interest rate at 10%, but the price assessment could be considered to be ignored. After getting the product into the business, the tax office still has the right to examine, cost accounting and tax auditing for social housing projects, if enterprises sell their products under the rate of 10%, they will be entitled to incentives such as reduced corporate income tax, VAT, etc., and if more than 10%, the State will have to apply the regulations and mechanisms to be the same with the commercial housing projects. "If the post-inspection stages are implemented, the process of investment and consumption will be more open, creating a continuous flow, attracting investors and the investor’s’ responsibilities will be raised because if they do something wrong, the State will reconsider preferential conditions for them. I think it is unnecessary to evaluate the prices beforehand, since this is also a 'fence', that hinders the investors, and discourages enterprises ", the expert suggested.

Besides, nowadays, social housing is also facing some difficulties because of the mandatory provisions to set aside 20% of land in the commercial housing project to develop social housing is unfulfilled, leading to a lack of clean land funds for deploying social housing projects.

Focusing on removing barriers

Relating to the measures to remove difficulties for social housing, Mr. Nguyen Van Duc, Deputy Director of the Dat Lanh Real Estate Company, said that the forms of tax support from the State are necessary, but the reduction of VAT is not easy because it is not only related to reducing VAT for businesses but also the suppliers of materials and equipment. Mr. Nguyen Van Duc proposed to assign businesses to build social housing in the commercial housing manner, they can build social housing with more stages, more apartments, to encourage more enterprises to participate in this program.

These barriers make businesses uninterested in investing therefore creating a huge shortage of social housing. In particular, a lack of supply leads to extremely regrettable consequences such as low-income people with limited finance have to spend a sizeable amount to be in the list to buy houses by many different ways. Even, in many social housing projects, the price difference have been up to hundreds of million of VND per apartment. This paradox has existed for many years and can only be dissolved when supplies are adequate and access to social housing is easier.

Recently, at a conference on national social housing, Prime Minister Nguyen Xuan Phuc stressed that he will soon issue a directive on the development of social housing, local authorities must follow the Directive to enact the social housing programs. Viewpoints of the Government are to develop social housing is the responsibility of the State, society and people and should respect and encourage investors to invest their capital to develop social housing. To successfully develop social housing, localities should focus on resources, addressing the difficulties that block social housing development, this may enable investors to build more high-rise construction in the suburbs, far from the center, and choosing qualified investors. In addition to research, organize, and allocate the State’s support funds, the administrative procedures reform of local authorities to facilitate the investors is crucial for the success of social housing.