Proposal for the State to directly create and own social housing

Dr. Doan Van Binh, Chairman of CEO Group, Vice Chairman of the Real Estate Association, has just proposed that the State directly create and own social housing for sale, lease, and lease-purchase.

VTC News quoted Mr. Binh's opinion.

In recent times, the development of social housing in our country has received attention and achieved many successes. According to reports from localities, as of June 18, 2023, the whole country has completed 41 social housing projects in urban areas, with a construction scale of about 19,516 units; 294 projects are continuing to be implemented, with a construction scale of about 288,499 units.

However, to achieve the goal of the Project "Investing in the construction of at least 1 million social housing units for low-income people and industrial park workers in the period of 2021-2030", it is necessary to further strengthen the role of the State in providing social housing for people in the direction that the State directly creates and owns social housing for sale, lease, and lease-purchase.

Especially leasing to proactively regulate social housing for low-income people and people in housing emergencies. At the same time, the State also needs to encourage private enterprises to build social housing.

Proposal that the State should directly create social housing for rent. (Illustration photo: chinhphu.vn).

Currently, to create a social housing fund in Vietnam, the State has policies to support private enterprises through incentives on land use fees, taxes, bank interest rates and controls on profits, costs, selling prices, infrastructure connections, etc.

Thus, the State is providing indirect support through enterprises investing in social housing. However, the State needs to increase its direct support to the people instead of providing indirect support as it does now, through the State directly creating and owning social housing.

Specifically, exemptions from land use fees, taxes, fees, interest rates and incentives for private enterprises could be enough for the State to create a large amount of social housing, especially social housing for rent according to the New Zealand social housing model.

According to research by the Vietnam Real Estate Research Institute, the support includes land use fees (exemption), 50% reduction in VAT, reduction in corporate income tax (10%), bank interest support... at about 17-20% of the total project investment. This rate is quite similar to the level of support the New Zealand Government provides to its people.

A luxury social housing project in New Zealand

If the maximum support level is up to 20%, then for a social housing project with a total investment of about 1,000 billion VND, the State support portion accounts for about 200 billion VND.

According to the estimate of the Vietnam Real Estate Research Institute, with more than 300 completed social housing projects in urban areas, assuming an average investment of about 500 billion VND per project, the total investment of the projects is about 150,000 billion VND, the amount of State support will be about 30,000 billion VND.

This money can completely help create and support social housing rental under a new model.

The estimated cost of building a 1-2 bedroom social housing unit for workers is from 250 million to 500 million VND. With the current support, the State can build a social housing fund of 60,000 to 120,000 units.

In the market, the rental price of a 1-2 bedroom social housing unit is commonly around 5 million VND/month. If the State supports 20% of the rental price, it is equivalent to around 1 million VND/unit/month. Each year it is 12 million VND/unit. Thus, the State can support the rental price for 2.5 million units each year.

If you lease for 30 years following the Brunei model, the support amount is about 360 million VND/unit. With the State support of 30,000 billion VND to build social housing, it is possible to create a housing fund of over 83,000 units.

In addition, the support period also determines the social housing fund for rent. Germany's rental subsidies for low-income people are limited to a certain period of 12 - 20 years for renovated houses and 20 - 40 years for newly built apartments.

After this period, the apartments will be rented out or sold at market prices. The government will only subsidize to cover the gap between the cost of constructing an average social housing unit and the selling price for low-income people, as is the model applied in some countries.

This is also an experience that Vietnam can learn from to both ensure social security and ensure the harmonious use of support resources.

Dr. Doan Van Binh

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