Development of social housing: Need to add specifically to the Draft Housing Law (amended)

The Law on Housing 2014 and the guiding Decrees issued have created a relatively complete legal corridor, ensuring support and encouragement for businesses to participate in housing development.

However, the implementation of the provisions of the Housing Law 2014 still has some shortcomings and limitations. The Ministry of Construction, executing the function of the State management agency, has developed and proposed to amend and supplement many new regulations in the draft Law on Housing (amended) in accordance with reality and remove difficulties for people, and businesses in housing development.

Prof. Dr. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment

Sharing with vusta.vn, Prof.  Dr. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said that social housing is a difficult problem, especially when the price of commercial housing is too high today. All government incentives bring great benefits. Poor management of social housing will lead to various forms of corruption that are not achieved with the main objective.

Additionally, Prof. Vo said that in this revised Draft Housing Law, neither the policy of commercial housing projects to reserve land for social housing development nor the policy of providing interest rate compensation for commercial banks is not included. This draft is generally only allowed to get concessional loans at the Bank for Social Policies or a bank designated by the State, there are places where only concessional loans are generally allowed. Thus, the problem of capital for social housing development still has no feasible solution.

The budget capital for public investment in Vietnam is very limited, and it is difficult to expect the next preferential credit package of the Government. This draft contains additional regulations to create a budget of 10% of land use levy collected from commercial housing and urban area development projects in the area, which is collected by the provincial People's Committee to supplement a a separate item in the local development investment fund to invest in the construction of the project's technical infrastructure, social infrastructure, and traffic connection infrastructure; compensation and ground clearance for social housing construction investment projects in the locality. Currently, too much money depends on land revenue (including the revised Draft Land Law), it is necessary to see if it is in sync with the Budget Law and the opinion of the Ministry of Finance on state budget revenue and expenditure.

The policy of taking land from commercial housing projects for social housing development has been replaced by a policy for social housing projects to use 20% of the land fund for commercial housing development. The determination of land fund for social housing development is still based entirely on the planning and decision of the People's Committee of the province. Thus, nothing has changed compared to before. The story now revolves around the question of why the plan has land for social housing but not implemented. This is also the disadvantage of the land allocation mechanism without payment, the benefits are causing difficulties for implementation due to strict management, avoiding taking advantage of the allocated land fund without collecting money to make profits for the wrong purpose.

This draft revised Housing Law addresses groups of social housing including: Housing for low-income people in urban areas; Accommodation for workers working in industrial zones; Housing for the armed forces; Housing for households and individuals entitled to housing policies that they build or renovate or repair themselves to live in. Thus, there is no longer a social housing group for students, and separate housing for the armed forces into a separate group. Accommodation for workers working in industrial zones and housing for the armed forces are regulated in detail and reasonably. The problem is still housing for low-income workers, both in terms of land and financial resources.

Regarding social housing, from the initial version (Law on Housing 2005) there was no place in the provisions for cases where people in rural areas are separated from their households. They must be equal to other vulnerable groups. The Housing Law often considers them to be eligible for targeted rural housing programs. The program is a mechanism to enforce the law, so the law must provide for social housing for rural areas, even upland, remote areas, ethnic minority areas, etc. Housing for rural areas must also be calculated according to the ratio of income to the average house price, not based on the criteria of poor or near-poor households. The calculation is similar to the urban income that is not subject to income tax as low income and eligible for preferential social housing.

In addition to suggestions for social housing development policies, there is much more to be done on a macro level. Firstly, it is still necessary to reform the salary system in parallel with the reform of the administrative apparatus to improve the income of workers. Vietnam cannot keep low wages forever to attract investment. When wages are higher, the problem of housing for low-income people will naturally be less difficult.

Secondly, it is necessary to reform the property tax to create a real estate market with lower housing prices, then the market mechanism will create the impetus to solve the housing problem. If there is still the formation of real estate giants, but the income of the majority of workers is still not enough to take care of housing, the problem of social housing is still difficult, Prof. Vo said.

Based on the above analysis, Prof. Vo said that, there should be management procedures for the area where social housing projects need to go in the direction of administrative reform, so that it can attract investors. In other words, it is necessary to stipulate in the Law simple administrative procedures for social housing projects. Only the key points on procedures related to the State's incentives and other contents are needed to operate according to the market mechanism.

Regarding tax incentives, value-added tax is quite large, the Draft Law also only has incentives according to the provisions of the tax law. This way of regulation will not bring practical effect. At this time, it is necessary to discuss with the Ministry of Finance to exempt value added tax and corporate income tax for the social housing investment and development sector.

It is necessary to add a regulation on the quality of social housing associated with the application of new construction technology and new construction materials. After that, the regulations on preferential policies will increase when the quality of the works is better. In addition, it is necessary to regulate the quality management of social housing to ensure that regrettable things do not happen in the future.

Adding the Social Housing Section in the countryside to the Social Housing Chapter, which regulates the policy on settlement of residential land and housing for the case of separation of farmer households. In the past, we had a regulation on "relaxed" land to build houses for newly separated households, now no longer. This policy should be reinstated in the Housing Law.

For the construction of accommodation spaces for workers working in industrial parks, the new Draft Law specifies investment units and land associated with industrial park infrastructure. Here, it is necessary to specify the responsibility of who is in charge of finance, who is the investor, who is looking for land. If you don't make it a responsibility, no one will do it. Note that our Enterprise Law has provisions on corporate social responsibility. Developing worker accommodation is a social responsibility. In industrialized countries, there is also a regulation of “responsible investment”.

Also, regarding housing for workers working in industrial zones, the provisions of the revised Draft Housing Law are still based on the old thinking about industrial zones. On that basis, on May 22, 2018 the Government issued Decree 82/2018/ND-CP regulating the management of industrial parks and economic zones, which has introduced mechanisms to encourage the construction of urban - industrial - service complexes. Social housing for workers is now associated with urban areas and industrial parks. Thus, the form of social housing for workers is not only for accommodation but in more diverse forms. On May 28, 2022, the Government continued to issue Decree 35/2022/ND-CP regulating the management of industrial parks and economic zones, which allows to adjust industrial zone land into housing development land.