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Consequences of 50-70 year apartment ownership are foreseeable: Expert

Professor Dang Hung Vo speaks with The Hanoi Times about the Ministry of Construction's recent proposal to limit the leasehold term for apartment owners to 50 to 70 years. The proposal, he says, is not new since it was included in the draft Housing Law in 2014 but rejected by the National Assembly (NA).


Not an optimal solution

What is your opinion about the proposal of limiting the ownership time of an apartment to 50 to 70 years?

Controversy arises surrounding this proposal. Some people have called me expressing disagreement with it. Some said their asset, the fruit of their lifetime savings, would be gone when the property reaches expiration. I think their concerns are completely justifiable. If this proposal only aims to facilitate the renovation of old buildings, in my opinion, it is not an optimal solution. Because, for many Vietnamese, a house is a great asset, not only for living but also could be left as an inheritance to their offspring for them to settle down and make career progress.

You mention " settle down and make career progress " but in fact, a serious deterioration of old apartments is threatening the lives of the dwellers. For example, Hanoi authorities said 42 old apartment buildings have been facing danger since 2016, but so far nothing has been done to deal with the situation and there is a certain inertia. Does this inertia have to do with the current regulation on unlimited time leasehold?

We must consider the issue of "settle down and make career progress " on the basis of Vietnamese culture, customs, and thinking, not on a specific issue of renovating old apartments.

I still remember during 2010 and 2011, the Ministry of Construction (MoC) once raised the issue of home ownership, considering the option of owning houses for a limited time, especially apartment buildings. The regulation on the limited duration of home ownership would create favorable conditions for upgrading and renovating old houses.

In addition, various housing types should be developed for sale and rent to meet the needs of the market as well as be suitable to the population's incomes, towards limiting and stopping the construction of individual dwellings. The MoC also explained that the increasing housing prices made it difficult for a majority of people to own a house, so it is necessary to promote the development of house rentals.

Until 2013, while the draft Housing Law 2014 or the Housing Law 2005 amendment was being developed, the MoC continued to provide two options on apartment ownership but the NA rejected them both.

The NA's disapproval is not just due to many unfavorable opinions and insecure feelings. I think, in addition to listening to people's opinions, the NA had decided based on the Vietnamese people's cultural background.

 Professor Dang Hung Vo. Photo: The Hanoi Times
Could you be more specific?

In our country, the family is a 'cell of society'. Therefore, it should have stable and sustainable residence from generation to generation to create a secure environment for work. If we do it differently, society will be unstable and unsustainable. Applying an expiration date for apartment buildings may mean the family's lifelong assets are at risk of being lost and people would have nothing to leave to their descendants, creating insecurity for people and instability for society.

To formulate a law effectively, the NA also has to consider the basis of culture, customs, habits, and internal socio-economic conditions, not just for the sake of convenient management. That is the reason why it did not agree with the previous proposal.

This time, the MoC said it had referred to some countries around the world but I think not everything can be learned from the world, even from countries that are similar to ours in terms of institutions. For example, in industrialized countries with socio-economic conditions very different from ours, individuals are considered as cells of society. They grow up first to be able to take care of themselves. Thus, they are ok with living in a rented house, and house rent is affordable.

Meanwhile, in our country, the salary is still not enough to live on, even many adult workers have to rely on parents or siblings for economic support. For them, buying a house or an apartment is hard. So, if the ownership time of a home is limited, there will be instability in society leading to inevitable consequences.

 Confusing the legal system

 As you said, it seems the MoC's proposal will cause consequences?

 I think there will be two consequences if the proposal is approved. First, it will create instability in society by breaking a traditional family structure with the thinking of "settling down to advance in career" as mentioned above.

Second, it will lead to ineffectiveness in the implementation of urban development goals. As we all know, in planning large urban areas, apartment buildings are globally considered a solution to the housing problem in densely populated cities.

If this proposal is put into practice, people may not live in cities but move to other areas with landed properties to optimize their financial resources, with their thinking of "settling down to make career progress". Thus, housing development will be fragmented. It is impossible to build a compact and smart city, and resolve issues of traffic jams and environmental pollution ... in big cities with the regulation of limiting the leasehold term to 50-70 years.

Our habit of living in apartment buildings has only been shaped in the last decade, if this proposal comes true, it will place apartments in an inferior position compared to townhouses as the latter ensures the long-term value. This will affect the sustainable development of the real estate market, creating an imbalance between supply and demand.

Moreover, there is no guarantee that the fixed-term use of buildings will lead to a decline in apartment prices. Now that there are both long-term and fixed-term uses, it is clear that the price of apartments for fixed-term use would be reduced by about 20-30%.

I think it is unsubstantiated to say when the regulation on limiting the leasehold term of apartments to 50 - 70 years becomes effective, the price of apartments will be cheap and affordable for many people.

Perhaps, the MoC has been confused between the ownership time of an apartment building and its service life.

Building and amending the Housing Law should focus on housing, not on land. How land is used for building houses and what is the time limit for ownership should be considered in the ongoing amendment of the Land Law. Using the Housing Law to adjust the Land Law only makes the legal system a mess while it does not help solve the crucial issues.

So, what are the effective solutions for renovating the old condominiums?

The renovation and rebuilding of old apartment complexes have been slow, mostly due to bottlenecks in regulations on construction investment procedures.

In fact, it’s hard to reach 100% of the consensus of the dwellers for the renovation of an apartment building. Two-thirds of the consensus would be enough for a decision to become effective. This is also the principle of centralized democracy in economic development for decisions to be made, as long as the rehabilitation plan established is objective, transparent and with enough thorough financial analysis and benefits of the stakeholders ensured. Other countries which face similar situations have been doing the same, very effectively.

To avoid facing the same difficulties in old building renovation as we are facing now, we should assign rights and responsibilities to the resident community in mobilizing resources for maintenance and renovation of the buildings. Everything related to the building should be planned in advance and stated in the apartment purchase contract.

For example, instead of paying the current 5% one-time maintenance fee, we will stipulate the annual maintenance fee of each apartment should be wired to an account of a legally-determined bank (project insurance bank).

This amount is small but the accumulation will be large. When the service life of an apartment building expires, the money can be used for financing the rebuilding and there should be specific regulations for this.


 

 

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