Building a market for reasonably priced commercial housing in Vietnam

DNHN - According to the analysis of the Vietnam Real Estate Association (VNREA), the real estate market currently has no specific concept of “affordable housing”.

This housing product needs to be separated, affordable housing is commercial housing, while social housing has been issued a policy by the Government to support construction and development.

International experience

According to Dr Doan Van Binh, Lawyer, Vice Chairman of VNREA, the term “housing” is mentioned only 196 times in Land Law 2013, and up to 291 times in Land Law 2024. Similarly, in the Housing Law 2014, the term “housing” is mentioned 1,832 times and up to 2,491 times in the Housing Law 2023. In the Real Estate Business Law 2014, the word “housing” is mentioned 49 times and the Real Estate Business Law 2023 mentions it 365 times…

The issue of housing has always been of interest to the Government in terms of development, along with work, healthcare, and education, because it not only directly relates to people’s “settlement” but also affects the economy’s spending. If the cost of housing is high, people, especially those with low incomes, will have no money left to spend on consumption and other essential needs. Therefore, the Government issued Decision No. 2161/QD-TTg dated December 22, 2021, approving the National Housing Development Strategy for the period 2021 - 2030, with a vision to 2045, developing housing for people with average and low incomes, suitable for the affordability of the majority of people.

VNREA’s analysis also shows that the current real estate market in Vietnam understands “affordable housing” as commercial housing, belonging to segment C with a price for a fully finished apartment under VND 25 million/m2, equivalent to a 2-bedroom apartment of 65 m2 with a price of about VND 1.6 billion. However, in reality, apartments with this price have almost disappeared in Hanoi, Ho Chi Minh City, and have raised the standard price of affordable housing by 20 - 30%, equivalent to a price of VND 2 - 2.4 billion per apartment.

At the recent Government conference to remove difficulties for the real estate market, VNREA proposed allowing houses priced under VND 3.5 billion to access the VND 120,000 billion package. In the context of the economy and urbanisation constantly developing, the concept of affordable housing has now changed significantly and urgently and needs to be addressed by state management agencies, ministries, sectors, and localities.

In many countries today, the issue of affordable housing is implemented with many appropriate solutions, creating conditions for people to access it. For example, the Chinese real estate market is facing a crisis, and the Chinese government has been and is adding about 6.5 million new low-income rental housing units in 40 cities by 2025; at the same time, it has put forward 17 solutions to address this issue, including directing banks to channel financial flows to affordable housing.

In Canada, the government has issued a housing affordability index, the higher the index, the lower the affordability. The Canadian government has increased construction density, granted permits faster, and applied new technologies, to focus on building 100,000 new affordable homes in the next 3 years; at the same time, it has issued a HAF fund worth USD 4 billion, with the following criteria: Any city that wants to access this fund must propose solutions and initiatives; the solution or initiative that is most beneficial will be the city that receives the most funding…

In OECD countries, 11 countries are receiving government capital support, 9 countries provide tax incentives, 10 countries provide non-refundable grants, and 5 countries receive land subsidies. The solutions put forward by OECD countries are to allow increased construction density, support construction costs, guarantee the purchase of future homes, and provide direct support to homebuyers…

Dr LS. Doan Van Binh added that the development of affordable housing is of interest to many countries. The laissez-faire approach to affordable housing according to the natural supply and demand laws of the market is being replaced by orientations, policies, and incentives to develop this segment globally.

Policy Proposals in Vietnam

In light of the above, VNREA has announced the implementation of a scientific research topic and scientific workshop: “Creating an Affordable Commercial Housing Market: International Experience and Policy Proposals for Vietnam”. The topic has the participation, advice, and critique of leading experts in the fields of real estate, economics, finance, law, statistics, and journalism to survey the reality and propose policies to develop the affordable commercial housing market in Vietnam.

From the research and experience of countries that have developed this real estate product model, VNREA proposes 4 groups of solutions to suggest policies for Vietnam. Specifically, the group of solutions to complete policies and laws, focusing on issuing criteria to determine affordable housing; harmonising regulations on affordable housing in the legal system, focusing on developing policies to encourage the development of affordable housing; developing policies to support investors in creating affordable housing when choosing investors to do commercial housing projects in higher segments; issuing policies to control the ceiling price for selling and renting affordable housing.

Regarding the standards and norms for affordable housing, VNREA proposes the need to develop and issue a system of standards, norms, procedures, new technologies, and model designs for affordable housing, contributing to reducing construction investment costs and lowering housing prices.

For planning, VNREA proposes a group of solutions focusing on planning and developing land funds for affordable housing development; planning to increase construction density in high-rise housing projects; structuring the proportion of affordable housing in the overall housing development plan by year/phase; specifying the proportion of affordable housing in urban areas; encouraging the conversion of commercial space into affordable housing.

Specifically, for the group of solutions on finance and tax, VNREA proposes using tax tools to regulate high-end housing segments, limit speculation, and direct the market towards affordable housing with real demand, adding financial resources to develop affordable housing; developing preferential policies on taxes and fees for investors and buyers, renters of affordable housing; encouraging foreign investment in affordable housing; strengthening public-private partnership in affordable housing development.

In addition, VNREA has proposed a group of solutions to simplify the system of administrative procedures; apply technology; decentralise and delegate authority to minimise the burden of time and procedural costs for businesses; shorten the licensing time for affordable commercial housing projects, and exempt licensing in certain cases in mixed-use urban areas.

Real estate and economic experts have stated that to create an affordable commercial housing market in Vietnam, in addition to policy solutions to facilitate management, the Government and relevant ministries and sectors need to directly regulate the market for a certain period.

Van Son / Newspaper