Affordable housing program in limbo after money runs out
Vietnam rolled out an affordable housing program, but when its billion dollar allocation ran out, many projects stalled.
Hundreds of buyers of an affordable housing project on Ho Hoc Lam Street in Binh Tan District, HCMC, in early October demanded that local authorities find a solution to the failure by the developer to hand over houses it should have two years ago.
Since last year they have been protesting like this from time to time, carrying banners to express their impatience and anger.
The 718-unit apartment complex was the first affordable housing project in HCMC to be developed by a public-private partnership between the city’s housing fund and real estate company Hoang Quan.
But after Hoang Quan finished 80 percent of the construction, it was unable to borrow further from the VND30 trillion ($1.29 billion) fund the government had set aside for affordable housing since the line of credit was closed at the end of 2016.
The project is one of hundreds of affordable housing projects around the country that have not been completed for years due to a lack of government funding though low-income people are in dire need of housing support.
As of last year 206 affordable housing projects with 168,700 apartments remained unfinished, according to the Ministry of Construction.
These projects have struggled to find funding since the government credit line closed, and so construction has stopped or is tardy.
A new credit line of VND1.26 trillion ($54.5 million) the government has approved for 2018-20 only meets 13 percent of the need, Minister of Construction Pham Hong Ha said in a report last month to the National Assembly.
This has left many low-income buyers in distress.
Nguyen Duy Hien, a buyer of the Ho Hoc Lam project, said Hoang Quan had so far promised eight times it would hand over his house.
"My family has been living in a rented place for the last three years, and we cannot continue to do so with our limited income," he told local media.
Nguyen Van Danh, deputy director of the city construction department, said the city needs VND21.83 trillion ($945 million) in 2016-2020 for affordable housing, but the government could only provide 10 percent of that amount.
There is a shortage of long-term capital for affordable housing though demand for this type of accommodation is very high, he said.
Le Hoang Chau of the Ho Chi Minh City Real Estate Association said: "Some real estate businesses focus on premium projects but ignore the affordable housing segment."
Analysts say that as land prices account for 40 percent of the cost of a housing project, developers prefer to invest in premium projects as land become increasingly scarce in major cities.
The problem has been worsening since housing prices in Vietnam’s biggest cities have been surging in recent years.
The average apartment price in HCMC rose by 45 percent since 2014 to $1,600 per square meter in 2018, while in Hanoi it rose 30 percent to $1,300, according to real estate consultancy Savills
Some affordable projects which have been finished fail to attract customers because they are located far away from central districts. Hanoi authorities said projects located far from factories are not convenient for workers who prefer to stay near their workplace to save on transportation.
Administrative procedures are also a hassle. Le Huu Nghia, CEO of real estate company Le Thanh, said his company applied for a license for an affordable housing project in Binh Chanh District in March, but has not got a response from the city’s department of planning and investment..
Experts have called for creating a mechanism that would involve the private sector in affordable housing.
Real estate analyst Dang Hung Vo said affordable housing projects fail because they rely on government support, which is limited. "The government should not provide funding for affordable housing as this is not sustainable."
Instead there should be policies to encourage local and foreign developers to invest in affordable housing, benefiting both them and low-income home buyers, he added.
Meanwhile, it is unclear when all the delayed affordable housing projects will be finished.
Last month director of the HCMC Housing Development Fund, Nguyen Ngoc Thach, apologized to buyers for the two-year delay in the Ho Hoc Lam Street project.
But he did not mention a date for the handover.