Vietnam's Prime Minister calls for National Housing Fund this month

The Hanoi Times — Prime Minister Pham Minh Chinh this month instructed the Ministry of Finance to set up a national housing fund to mobilize resources for social housing.

The request was made at an online meeting on social housing development held on March 6 in Hanoi.

It is part of a broader strategy for affordable housing in major urban areas, following a recent meeting with the Central Policy and Strategy Committee, where Party General Secretary To Lam emphasized the need for its establishment.

Vietnam aims to build one million social housing units by 2030, but only 7% or nearly 67,000 units completed. Currently, 137 projects totaling 114,618 units are underway while 415 projects with 412,200 units have been approved.

At the meeting, businesses and experts urged the creation of a national social housing fund to overcome development barriers. The Urban Infrastructure Development Investment Corporation (UDIC) emphasized that credit remains a key obstacle and suggested piloting a fund or financial institution to support long-term, sustainable social housing growth.

Hoang Van Cuong, former Vice Chancellor of the National Economics University, proposed that the National Housing Fund be established using 2% of land use fees from social housing projects. The fund would be allocated for future social housing investments.

He suggested that the fund should allow citizens to contribute before registering to buy a home. Priority would be given to those with more contributions and long periods of participation, helping mobilize capital and categorize potential buyers, renters, and tenants.

A representative of Becamex suggested that the fund should be linked to data on population and income to help planners proactively develop housing strategies.

Developers urged to prioritize social housing

The Ministry of Construction reported that Vietnam has met only 16% of its social housing development targets for 2024. In Ho Chi Minh City and Hanoi, progress is even slower, at just 4% and 20%, respectively, with only one rental project approved this year.

Moreover, the rollout of preferential loan packages for social housing has fallen short. Of the 90 projects registered for the VND145 trillion (US$5.7 billion) credit package, less than 2%, or around VND 2.8 trillion ($109.4 million), has been disbursed due to cumbersome procedures.

The prime minister has therefore instructed the Government Office to cut at least 30% of administrative processes by 2025 to accelerate project execution.

The Ministry of Construction is tasked to review the regulations and procedures to facilitate the construction of social housing, and submit a report to the prime minister in March or April. It should also overhaul the standards applicable to social housing, including height and construction materials.

Local governments are expected to adjust land use plans in the second quarter, allocate land to investors and consider reclaiming underutilized projects for social housing.

A representative of the Housing and Urban Development Investment Corporation (HUD) urged the government to prioritize social housing projects by streamlining the investor selection process. He recommended that the government resort to direct contracting of projects with qualified investors. In addition, investors could be ranked based on a scoring system that evaluates their capabilities, experience and project scale.

Meanwhile, Vingroup suggested that the prime minister allow municipalities to award contracts and select investors. They should also be allowed to shorten procedures or conduct them simultaneously. 

Hoang Quan Group proposed that direct contracting should be applied for social housing projects under VND2 trillion ($78.2 million), while larger projects should use competitive bidding. It also suggested government assistance for land clearance through public funds and market-based assessments for existing land.

Currently, companies face a 2% sales fee, but market rates can reach 5%-8%. Nam Long officials believe that bringing the fee in line with market rates would attract more investors.

The profit margin for social housing developers is currently capped at 10%, which is considered insufficient. A UDIC representative noted that rising material costs and lengthy procedures increase expenses and threaten profitability. They urged the government to increase the profit margin to 15%-20%.

In response to the issue of direct award of projects, the prime minister instructed that projects could be awarded directly to companies without competitive bidding, provided that transparency is maintained. He emphasized the need to prevent corruption and waste, and to ensure coordinated allocations between social housing and infrastructure projects.

Regarding the financing of social housing projects, Nguyen Thi Hong, Governor of the State Bank of Vietnam, said this is long-term capital, while banks typically mobilize short-term funds from the public. Therefore, a balance between lending and funding is crucial while bank financing is just a complementary solution.

Hong suggested using budget funds channeled through banks or establishing a trust fund through credit institutions to facilitate long-term loans at more favorable interest rates.

Increase social housing goals in localities

The Ministry of Construction reported that 10 localities have integrated social housing development targets into their economic and social development plans. About 30 regions have issued plans to implement the goal of building one million social housing units, allocating nearly 9,740 hectares for this purpose.

Prime Minister Pham Minh Chinh has ordered localities to set up steering committees for social housing development. They must also revise and finalize social housing plans by the end of the second quarter.

Local governments are expected to proactively allocate land to investors, recover wasted projects, and resolve existing obstacles. Specifically, the prime minister has tasked Ho Chi Minh City and Hanoi with completing 67,000 and nearly 45,000 units, respectively, over the next five years.