The need for social housing in industrial zones is vital

Partner Le Nguyen Huy Thuy and legal assistant Ton That Hoang from Indochine Counsel explain incentives for developing social housing in industrial zones

As a result, millions of workers from north to south were quarantined for a long period of time in cramped quarters and lacked amenities or faced high rents in guest houses and motel rooms. This increases population density and the burden on social infrastructure.

According to Pham Duc Hai, deputy head of the COVID-19 Prevention and Control Steering Committee in Ho Chi Minh City, before October 1, IZs in Ho Chi Minh City had about 288,000 workers, including more than 70,000 using various stay-at-work models. This number has since fallen to around 45,000 people. The total number of workers in such zones has dropped by over 50 per cent, creating more obstacles for enterprises to meet orders. Therefore, the need for social housing in these IZs is vital.

The regulations regarding this are scattered within many documents. Specifically, the tasks and solutions on ensuring minimum housing for workers were first set out in Resolution No.15/NQ-TW from 2012, which "step by step addresses the demand for housing for workers in industrial parks".

The 2013 constitution also stipulates that "Citizens have the right to own his/her legal residence" and "The state has a policy on housing development to allow people to have a place to live." These provide an important legal basis for creating a favourable environment for housing development to meet the demand for housing workers in IZs.

Setting standards

In addition to the constitution, the issue of social housing for workers in IZs is also stipulated in the 2014 Law on Residential Housing, Decree No.100/2015/ND-CP, and Circular No.20/2016/TT-BXD from the Ministry of Construction (MoC). In order to ensure fairness, avoid conflicts of interest, and improve the management efficiency on housing issues, workers in IZs must have policies on assistance for buying social housing.

However, in order for them to enjoy the benefits of these policies, they must specifically have no housing, no participation in any transactions or support for housing, and a housing area lower than the minimum set by the government. They must also have a registration of residence in the provincial-level locality where social housing is located, and poor and near poor households must be in categories as prescribed by the prime minister.

In addition, the state also sets design standards for the technicalities of building social housing to ensure the safety and quality of workers' residences.

The Law on Housing and Decree No.49/2021/ND-CP dated April, amending and supplementing a number of articles of Decree 100, have preferential mechanisms and policies to encourage the development of social housing for workers (such as land use fee exemption, 50 per cent reduction in VAT and corporate income tax, support for investment in technical infrastructure in and outside of projects, low-interest preferential loans, and more).

Specifically, Decree 49 stipulates that investment projects for building commercial houses and urban areas with land use scales of 2 hectares or more in special and type I urban areas or 5ha or more in Type II, Type III urban areas must spare 20 per cent of the land fund area to build social housing. The option of payment of money or transferring the housing fund equivalent to the value of the land fund of 20 per cent for the development of social housing in Article 5 of Decree 100 is no longer effective. Thus, more land funds will be created for the development of social housing.

Secondly, it also enables loans for low-income people to buy social housing. For social housing, the maximum loan amount is equal to 80 per cent of the value of the contract for purchase or lease purchase of houses; the minimum term of preferential loans to buy social housing is up to 25 years (an increase of 10 years compared to the old regulations). Currently, the lending interest rate at the Social Policy Bank (SPB) is decided by the prime minister at the request of the board of directors of the SPB for each period.

Decree 49 clearly stipulates that, in order to build social housing synchronously with social infrastructure, based on the needs of social housing and approved housing development programmes and plans, the authorities must specify the location.

Bottlenecks for development

Despite all the incentives listed, there are two main reasons that social housing development has not reached the targets set out in the National Housing Development Strategy.

First, in urban planning in some localities, the IZs have not clearly defined the land fund for social development. Nor have they strictly implemented the regulations sparing at least 20 per cent of their land fund for commercial housing projects for social housing development.

Second, the restriction on preferential loans from the state via the SPB for social insurance development, in which the budget allocated to the SPB in the period of 2016-2020 was about VND2.16 trillion ($93.9 million), only met about 24 per cent of the need. Plus, capital sources to provide interest rate compensation to credit institutions for making loans regarding social insurance policies have not been allocated. There are many social projects that cannot be implemented due to this capital shortage.

Together with Decree 49, the MoC has promulgated Circular No.09/2021/TT-BXD dated August 16 to amend and supplement some articles of Decree 100. However, several problems persist due to problems prescribed by the Law on Residential Housing. Therefore, the MoC is continuing to study and report to the competent agencies in the process of amending the Law on Residential Housing and the National Housing Development Strategy.

It would be best to amend the Law on Residential Housing to promulgate separate mechanisms and policies on investment in social housing construction for workers in IZs – in particular, incentives for them to implement social housing projects to make them more attractive for enterprises to participate in. It is also necessary to amend the regulations on the allocation of land funds for the development of housing in the regulations regarding land, investment, and housing so the land funds for social housing can be directly located in the IZs and be considered as fundamental infrastructure.