WB Expert: The State should provide financial support to upgrade private rental housing

Da Nang – The State could provide financial support to private landlords to upgrade and renovate accommodations to meet quality standards for workers, instead of solely focusing on building new projects.

This recommendation was made by Ms. Dao Harrison, Senior Housing Specialist at the World Bank (WB), at the international workshop “Inclusive Housing – Experience and Practice in Vietnam and Internationally,” held in Da Nang on June 24.

Ms. Harrison stated that despite Vietnam’s impressive economic growth, rising land and construction costs are pushing housing prices beyond the affordability of workers. Meanwhile, market supply is mainly concentrated in the mid-range and high-end segments.

She suggested expanding the concept of “affordable housing” to include the private rental segment. Instead of only focusing on building new projects, the Government could provide financial support for landlords to upgrade and renovate existing accommodations. This solution helps utilize central land funds, allowing workers to live closer to their workplaces rather than having to move to the suburbs.

Ms. Dao Harrison sharing her opinions at the workshop. Photo: Nguyen Dong

According to Ms. Harrison, Vietnam could apply a management platform model similar to Indonesia’s Mamikos to connect with banks and provide capital for landlords to renovate their properties. All monthly rent payment transactions through the app would turn into alternative data, helping freelance workers build credit histories.

Mr. Le Van Tuan, Deputy Director of the Da Nang Department of Construction, evaluated the proposal for the State to provide financial support to upgrade private rental housing as “having practical value and being a breakthrough.” According to him, this could utilize the existing land fund, rather than the State wasting time and site clearance costs to provide clean land for investors.

From a local perspective, Mr. Tuan said that Da Nang’s preferential credit capital for investors and buyers of social housing currently does not meet actual demand. The increasingly high costs of construction investment, site clearance, and infrastructure investment are also challenges for the locality.

Many social housing apartment buildings in Son Tra Ward, Da Nang City. Photo: Nguyen Dong

In the 2021-2025 period, Da Nang completed 6,352 social housing apartments. The locality has reviewed 113 land plots with an area of about 390 hectares to build 36 social housing and rental housing projects by 2030. Once completed, these projects will provide the market with about 31,029 apartments.

Rental housing is a segment prioritized for development by the Government up to 2030. On June 22, the Prime Minister requested localities to proactively clear sites and prepare clean land funds to develop rental housing.

In addition to preparing clean land funds, the Government requested ministries and sectors to research and develop appropriate land, credit, financial, and tax policies to rapidly develop the rental housing market at reasonable prices, while encouraging private sector participation in investment. The Ministry of Construction is researching preferential mechanisms for land and finance to develop this type of housing.

Deputy Director of the Da Nang Department of Construction Le Van Tuan proposed that the Central Government maintain stable long-term preferential credit programs for both investors and homebuyers, and soon perfect the operating mechanism of the National Housing Fund and local housing funds.

He also proposed that international organizations provide preferential capital support for social housing development programs and vulnerable groups in the locality.

On the WB’s side, Ms. Dao Harrison suggested that besides preferential support resources, Vietnam could also establish a national mortgage refinancing agency or credit guarantee funds to share risks, helping banks unlock 15-20 year capital flows for the affordable housing segment.

Nguyen Dong