Proposal for localities to determine affordable commercial housing prices

Amid significant disparities in housing price levels among provinces and cities, setting price caps for affordable commercial housing requires a more flexible mechanism. Accordingly, regulatory authorities are recommended to empower localities to decide maximum selling prices, installment selling prices, and rental prices based on the actual conditions of each market.

Need for Location-Specific Pricing Mechanisms

One of the key issues raised during the policy-refining process for affordable commercial housing is the method of price determination. The Housing Law should not rigidly prescribe a single nationwide price cap, but rather grant initiative to local authorities.

Specifically, the Housing Law could merely set out general principles regarding "maximum selling prices, installment selling prices, and rental prices for affordable commercial housing as specified by the Provincial People's Committee."

Another option is to delegate authority to the Provincial People's Council to decide the "maximum selling prices, installment selling prices, and rental prices for affordable commercial housing" for implementation by the Provincial People's Committee.

The core of this proposal is that affordable commercial housing prices should be determined based on local housing price levels in each province or centrally-governed city. This is viewed as a crucial element to ensure that the policy reflects actual market conditions when implemented, rather than creating a uniform yet unsuitable price level.

In reality, housing markets across localities differ significantly in land costs, investment expenses, housing demand, local income levels, and urbanization rates. If a rigid pricing mechanism is applied everywhere, implementation could face major hurdles, particularly in markets with high price levels and development costs.

Conversely, in areas with lower housing prices, a price cap modeled on major metropolitan standards might no longer reflect the concept of "affordable" relative to local purchasing power.

Decentralization to Align Policy with the Market

Granting local authorities pricing power also demands accountability and transparency during implementation. If empowered, Provincial People's Councils and Committees must rely on clear criteria to set maximum sales, installment, and rental prices.

Decentralizing pricing decisions is expected to make housing policy more flexible and suited to individual market conditions. Photo: DH

This approach will help the policy adapt to dynamic market realities. Housing prices in major cities with high land and investment costs can be determined under a different framework than in provinces or cities with lower price levels.

At the same time, decentralization enables localities to actively boost the supply of affordable commercial housing instead of depending on a fixed national price floor.

However, for this mechanism to be effective, controlling the price calculation methods is vital. Empowering local authorities does not mean letting prices be determined without basis; it must be tied to a unified set of criteria and principles defined by law.

Specifically, maximum selling prices must balance citizen affordability with corporate investment efficiency. If prices are set too low relative to project development costs, businesses will lack the incentive to participate, risking the goal of expanding affordable housing supply.

On the flip side, if prices are set too high, products labeled as affordable commercial housing will remain out of reach for the policy's target audience. Thus, the pricing mechanism must be designed to create sufficient leeway for developer participation while ensuring citizens can access housing at prices matching local income and economic conditions.

Assigning the Provincial People's Council to determine prices and the People's Committee to execute them could also establish an additional oversight mechanism, ensuring that decentralization comes with accountability.

In the long run, building an affordable commercial housing policy oriented around local pricing can foster greater market flexibility. More importantly, it allows policies to stay closely aligned with reality instead of relying on a single uniform standard across vastly different markets.

To achieve the goal of expanding affordable housing supply, the solution lies not just in setting a price ceiling but in creating a flexible mechanism that encourages enterprise participation while keeping homes genuinely accessible to the public.