Incentives for Developing Low-Income Housing in Vietnam

The issue of affordable housing has long been a pressing concern for many countries, and Vietnam is no exception. As urbanisation continues to accelerate, the demand for low-income housing has surged, putting immense pressure on both the government and the private sector to find viable solutions. Recognising the urgency of the situation, the Ministry of Construction has recently submitted a comprehensive proposal to the government, aimed at incentivising property developers to invest in low-income housing projects. This proposal, which includes a range of attractive measures such as tax breaks and simplified administrative processes, marks a significant step forward in addressing the housing crisis. In this article, we will delve into the details of the Ministry’s proposal and explore the potential impact it could have on the development of low-income housing in Vietnam.

One of the key components of the Ministry of Construction’s proposal is the offer of tax breaks to property developers who choose to invest in low-income housing projects. This measure is designed to offset the financial risks and challenges that developers often face when undertaking such projects. By providing tax incentives, the government hopes to make low-income housing development more attractive and financially viable for private companies. According to the proposal submitted on January 15, these tax breaks would be substantial enough to encourage developers to prioritise low-income housing over more lucrative commercial projects.

In addition to tax breaks, the proposal also envisions repealing land use and lease charges for developers who invest in public housing. This move is particularly significant, as land acquisition and leasing costs often represent a major barrier to the development of affordable housing. By eliminating these charges, the government aims to reduce the financial burden on developers and make it easier for them to build low-income housing units. This measure is expected to have a direct impact on the affordability of housing, as developers will be able to pass on the savings to low-income families in the form of lower rent or purchase prices.

Another important aspect of the Ministry’s proposal is the allowance for developers to build 50 percent more on a square meter of land. This measure is particularly relevant in cities like Hanoi and Ho Chi Minh City, where land prices are extremely high. By increasing the permissible density of low-income housing projects, developers will be able to maximize the use of limited land resources and build more units within the same area. This not only helps to address the shortage of affordable housing but also makes economic sense, as it allows developers to achieve economies of scale and reduce the per-unit cost of construction.

Deputy Minister of Construction Nguyen Tran Nam has acknowledged that the current administrative process for public housing investors is overly complex and time-consuming. The process involves 33 steps, covering various aspects such as land acquisition, national security, construction, fire prevention, and more. This bureaucratic red tape often discourages developers from investing in low-income housing projects, as it adds significant costs and delays to the development process. To address this issue, the Ministry has submitted a proposal to simplify the administrative process and streamline the approval procedures. The government is expected to approve this proposal in the first quarter of this year, paving the way for a more efficient and streamlined approach to low-income housing development.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, has highlighted another important issue that needs to be addressed to promote the development of low-income housing. According to the current Housing Laws, social housing blocks in Hanoi and Ho Chi Minh City must not exceed five or six floors in height, and each unit must be between 30 to 60 square meters in size. While these regulations were initially put in place to ensure the quality and livability of social housing units, they have inadvertently created a barrier to the efficient use of land in these densely populated cities.

Chau argues that restricting the number of floors in social housing blocks is wasteful, given the high land prices in Hanoi and Ho Chi Minh City. By limiting the height of buildings, developers are unable to maximize the use of available land, resulting in fewer housing units being built. To address this issue, the Ho Chi Minh City Real Estate Association has asked the Ministry of Construction to modify the existing regulations. They believe that allowing taller buildings would enable developers to build more units on the same piece of land, thereby increasing the supply of low-income housing and making it more affordable for those in need.

The proposal submitted by the Ministry of Construction represents a significant step forward in addressing the low-income housing crisis in Vietnam. By offering tax breaks, repealing land use and lease charges, increasing permissible density, and simplifying the administrative process, the government aims to create a more favorable environment for developers to invest in low-income housing projects. Additionally, the potential modification of the Housing Laws to allow taller buildings in Hanoi and Ho Chi Minh City could further enhance the efficiency of land use and increase the supply of affordable housing units.

As the government moves forward with these initiatives, it is crucial to ensure that the benefits of these measures are passed on to low-income families in the form of truly affordable housing. The success of this proposal will depend not only on the implementation of these incentives but also on the cooperation and commitment of both the public and private sectors. By working together, it is hoped that Vietnam can make significant progress in providing safe, decent, and affordable housing for all its citizens.

For more information on the Ministry of Construction’s proposal and related initiatives, you can refer to the following external links: