World Bank experts share experiences with affordable housing

World Bank experts share experiences with affordable housing

Vietnam’s fast pace of urban development is shifting toward affordable housing.

The country’s strategy, however, should be analysed carefully to avoid slums like other cities, experts have warned.

According to Victoria Kwakwa, World Bank country director in Vietnam, the country is undergoing a process of rapid urbanisation with nearly a million people moving to cities per year putting an immense pressure on housing demands.

“This growth is expected to generate enormous new housing demands, especially in the low and middle income segments due to large scale rural-urban migration,” said Kwakwa at a seminar held in Hanoi last week to share experiences with Vietnam about the development of affordable housing.

Kwakwa said Vietnamese authorities should better define and understand the housing deficit for poor urban households – the bottom 40 per cent or those below the median income.

“In this context we believe it is important to also consider the housing conditions of migrants, not only those of officially registered residents. It will also be important to think of ways of formalising those living in informal settlements. Vietnam is fortunate to not have the large slums seen in other large cities such as Manila or Jakarta,” she continued.

“Given the rate of rural to urban migration and the fact many new arrivals to the city work in the informal sector, there is a risk that informal settlements may grow rapidly. By addressing the issue of informality in the housing sector head-on, Vietnam would be able to avoid the expansion of slums,” she added.

Responding as to why the housing sector in Vietnam is currently embroiled in challenges, Kwakwa said there is an oversupply of high-end units and undersupply of lower cost units in urban areas.

“This mismatch suggests market failures in the housing sector. It is important to understand the causes of these market failures,” she added.

In countries where there is ample relatively affordable housing across income strata, the role of governments she said must be to ensure a level playing field for market participants with specific assistance provided to the poorest households.

“When governments focus on the enabling environment, resources from the private sector can be better leveraged to create a sound and sustainable housing sector,” she said.

Abhas Jha, sector manager of Urban, Disaster Risk Management and Transport, East Asia Pacific under the WB said that to avoid slumps, the government can proactively enable affordable housing without direct provisions by improving the land market and increasing accessibility and mitigating risk.

“Planning must be part of the integrated, long-term, risk sensitive land use and transportation planning,” Jha said.

Moreover, affordability should be considered including a range of interrelated expenditures, not just the cost of a housing unit, he added.

Construction Minister Trinh Dinh Dung said Vietnamese people have a high demand for accommodation but house prices are much higher than average income.

“Therefore, making houses affordable requires support from the government and even international organisations,” Dung added, noting that housing is determined as a priority in socio-economic development policy until 2020 with a view to 2030.

As such, a series of legal documents have been issued to support the development of the social housing market, notably the low interest VND30 trillion ($1.41 billion) loan package aimed at homebuyers and property developers.

The thing Vietnam must do first and immediately is increase the supply of affordable housing to disburse the above package from the government and therefore provide more and more affordable housing.

The second thing that must be done, Dung said, is continue reviewing the law related to this issue to transfer the package to the right receivers as soon as possible.

Vietnam has the goal of building 10 million square metres of social housing, mainly apartment buildings, by 2015 to meet low-income earners’ demands. It will provide support for 400,000 poor families in rural areas in need of houses.

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