Building 35,000 social housing units in HCMC an ambitious goal

HCMC’s recently announced target of 35,000 social housing units from 2021 to 2025 doubles its actual achievement of 16,000 units in the 2016-2021 period.

The city has found 33 commercial housing projects that have set up 20 percent of their land fund for social housing as legally required. This equals around 70,000 social housing units, according to HCMC Construction Department.

But complications in various laws are preventing developers from building more social housing units, said Tran Hoang Quan, director of HCMC Construction Department, at a forum Friday.

“This does not only concern real estate laws but also investment and asset management laws.”

The requirement of setting out 20 percent of land funds for social housing units is impractical for commercial project developers in central districts where land prices are high and they cannot give away one-fifth of their land for no profit or even a loss, developers told the forum.

Le Huu Nghia, director of Le Thanh Real Estate and deputy chairman of HCMC Real Estate Association, said even social housing real estate developers struggle to make a profit, since although they are allowed to build commercial units on 20 percent of their land fund, the combined profit of the project is capped at 10 percent, which is unattractive.

Developers also struggle to have low-interest capital for social housing projects, since although the government has stated the incentive interest could go down to 5 percent, the actual rate is 11 percent as banks do not have funds for this type of housing, Nghia added.

HCMC, the biggest city in Vietnam where around 13 million people live and work, has been struggling to deal with the low ratio of social housing projects amid surging real estate prices and rising interest of real estate developers in higher-range and more profitable commercial projects.

From 2011 to 2019, social housing accounted for only 5.4 percent of housing units in the central districts and 6.9 percent in the suburb, according to a study by the University of Economics and Law under the Vietnam National University HCMC.

In 2020, low-income people demanded 16 million square meters of affordable housing, but the actual supply was less than 10 percent of the figure, it said.

“Administrative procedures for social housing is the same and sometimes even more complicated than commercial projects and this discourages developers.”

To resolve the issue, real estate developer Hung Thinh proposed that the city establishes more land funds dedicated only to social housing projects and organize bidding for construction.