Does social housing need a price cap?

With the simultaneous launch of numerous large and minor social housing projects nationwide, 2025 is expected to be a boom year for this type of housing. The Hanoi Department of Construction estimates that at least one social housing project will go up for sale every month, with an average price per square meter of VND 16–25 million.

In addition to Hanoi, a number of real estate companies have entered the social housing market with tens of thousands of units, including those that specialize in creating mid- and high-end projects. However, pressure on resale prices is a significant worry in addition to expectations of improved supply.

Useful or "disruptive" to the market?

The Ministry of Justice has suggested that the Ministry of Construction look into price caps for social housing for sale and rent in order to guarantee people's access to housing in light of the sharply increasing price of social housing. Additionally, rather than allowing enterprises to self-approve, there are ideas for post-inspection and verification of social housing buyer information.
However, opinions on the plan to cap the price of social housing are divided. Many experts think that this legislation may make social housing projects less appealing to developers if it is not properly thought out.

In Bac Ninh, for instance, several social housing developers have concurrently suggested increasing selling prices because of the high cost of investment, while profits are kept to a maximum of 10%. Due to losses, several businesses even asked to cease selling apartments in social housing. The reason is that the authorities did not consider the 9.6% annual interest rate that they must pay on bank loans when approving selling prices.

A strict price cap on social housing is impractical, according to Mr. Le Huu Nghia, Director of Le Thanh Real Estate Company. In Nghia’s opinion, there are two kinds of social housing projects: one is constructed on land that the state allots, and the other is constructed on ground that businesses buy. In addition to the disparity in land prices between provinces and big cities, as well as between the center and the suburbs, there is a significant differential in input costs between these two types.

According to Mr. Nghia, it is impossible to apply only one price cap to all social housing projects. He also mentioned that the cost of developing social housing is significantly influenced by design, building height, basements, and finishing materials. Businesses that wish to construct high-quality social housing will be unable to do so if they are subject to an unreasonably high price constraint.
Lawyer Le Cao, CEO of FDVN Law Firm, agrees that a price cap on social housing isn't always a good idea from a legal standpoint. Price control makes sense for social housing projects funded by the state budget. However, it is challenging to implement a single selling price criterion for social housing developments created by businesses because the building costs vary.

"The 2023 Housing Law is a suitable control mechanism since it set a maximum profit of 10% of the entire cost of social housing investment. Instead of directly intervening with a price cap on social housing, the government can evaluate the design and regulate the investment scale if it wishes to control the prices of social housing," Mr. Cao stressed.

Motivation instead of restriction

Many experts believe that the purpose of social housing projects is to give low-income individuals access to affordable houses. However, in order to achieve this, social housing investment must be regulated and promoted. Although a price cap on social housing can be viewed as a tool, it will become a barrier for social housing developers if it is not adaptable and appropriate for every kind of social housing project and every region.

"In the context of constantly increasing input costs, fixing a price cap on housing is no different from tightening the already tight profit margin," stated Le Huu Nghia. According to him, this not only causes companies to abandon social housing projects, but it may also lower the standard of social housing if developers are compelled to lower the cost of building social housing in order to maintain financial stability.

The lesson from reality is that we need regulations that incentivize developers in order to have a plentiful supply of social housing. Maintaining social housing's appeal to developers is crucial as the market anticipates a fresh "wave" of social housing developments in 2025. Because social housing projects cannot be completed without developers, regardless of how acceptable the price cap is.
Market realities showed that the challenge would not just be with social housing developers' earnings but also with the years-long administrative processes that make enterprises wait impatiently.

Every step of the process, including establishing investment policies, allocating property, and obtaining building permits, is extremely intricate and overlaps. Social housing projects have been pending administrative processes for years without ever being put into action, according to lawyer Le Cao.
Mr. Le Huu Nghia argues that rather than tightening the policy with a price cap on social housing, the Government should make it easier for developers to get land, expedite administrative processes, and promote transparency in project approval procedures. Real social housing benefits will increase as project implementation time and input costs are shortened. This will motivate them to participate in social housing projects.