Vietnam still has a substantial deficit of quality housing despite economic growth and the government’s efforts, said the World Bank
’s “Vietnam affordable housing – A way forward” report.
According to the report, the share of the urban population is expected to reach 50% by 2040, thus an estimated 374,000 additional housing units will be needed in cities each year to cope with demand.
Almost 20% or approximately 4.8 million households in Vietnam are still living in poor conditions. Meanwhile, the majority of new demand for housing will be concentrated in only a few major cities and industrial zones surrounding Hanoi and Ho Chi Minh City.
The need for temporary housing or rental solutions can be expected to increase as Vietnam becomes more urbanized, the population of students and migrant workers rise and the average age of marriage continues to increase, with many young people choosing to settle later in life.
However, the supply of formal affordable rental housing is limited, due to the low payment capacity of tenants, legal hurdles, and the difficulties for private sector to prepare financially viable projects, which prevents their participation and incentivizes landlords to remain informal, the report says.
The report points out that access to housing finance, land supply are major obstacles to affordable housing production. In addition, land tax rates in Vietnam are currently very low, which contributes to speculation and elevated land prices.
Existing housing programs, including the 30 trillion dong ($1.45 billion) home loan package, have had some positive outcomes, however, most are still ongoing and results are unclear.
Authors of the report put forward a number of recommendations to improve the affordable housing segment. They include (i) increase and reorient government spending in the housing sector, (ii) develop a National Affordable Housing Program, (iii) prioritize structural reforms and (iv) support market development.