Why Vietnamese Private Conglomerates Are Venturing Into Social Housing

At a conference on 1 August 2022, Vietnamese Prime Minister Pham Minh Chinh set the ambitious goal of constructing by 2030 at least 1 million social housing units, which are affordable apartments subsidised by the state. The response from representatives of private real estate developers present at the conference was highly positive. Conglomerates such as Vingroup, Sun Group, Him Lam, Bitexco and Novaland have registered to build a total of 1.2 million social housing units within the next eight years.

The plan aims to meet the housing demand of workers and low-income earners amid rising housing prices and supply shortages. A recent report by the Vietnam Association of Realtors shows that real estate prices have been trending upward since 2014, with an annual average increase of 10 per cent. In April 2022, the average price of new apartments in Ho Chi Minh City, the country’s commercial hub, reached VND64 million (US$2,780) per square meter (psm). In Hanoi the corresponding figure was VND45 million (US$1,960). Given Vietnam’s per capita GDP of US$3,694 in 2021, the soaring property prices mean that owning an apartment in major cities is a far-fetched dream for most workers and low-income people. Building budget apartments, which are sold at an average price of VND15 million (US$640) psm, is therefore an urgent task for the Vietnamese government. Yet, only 104,200 units, or 41 per cent of the planned social housing projects for the period 2011-2020, were completed.

The Communist Party of Vietnam (CPV) has been able to retain its power despite the introduction of liberal market reforms since 1986 partly thanks to its emphasis on the construction of a “socialist-oriented market economy”. While the meaning of this concept is still subject to debate, the socialist orientation is normally associated with the party’s desire to balance economic development with social justice and income equality. As General Secretary Nguyen Phu Trong noted in a 2021 essay, Vietnam must pursue economic development in tandem with social progress and equality, not to widen the rich-poor divide. This vision is encapsulated in the slogan “leaving no one behind” frequently touted by CPV leaders in their recent speeches about Vietnam’s socio-economic development strategies.

Ensuring housing affordability will therefore help strengthen the CPV’s political legitimacy, especially among workers and low-income urbanites. It will also burnish the political credentials of Prime Minister Chinh, who is seen as a contender for the Party’s General Secretary position at its 14^th National Congress in 2026. Indeed, he has urged private conglomerates to follow through with their commitments to develop the 1.2 million social housing units made at the conference.

What has emerged is a form of “symbiotic relationship”, whereby Vietnamese political elites and business tycoons support each other’s respective goals: political legitimacy for the former and capitalist expansion for the latter.

This is not the first time the private sector has proven helpful to the state’s endeavors. During the Covid-19 pandemic, for example, numerous private conglomerates, including Vingroup, Sun Group, Sovico and Van Thinh Phat, sponsored the construction of field hospitals, donated and manufactured medical equipment, or contributed funding to national vaccination programs.

Nevertheless, the absence of state-owned enterprises (SOEs) at the social housing conference is striking, given that SOEs have long been considered by the party-state as an essential tool in promoting its socio-economic goals. It undoubtedly reflects the growing importance of the private sector in Vietnam and the increasingly close relationship between Vietnamese political elites and private entrepreneurs. In 2017, the CPV Central Committee issued Resolution No. 10 on developing private enterprises as a key driving force of the socialist-oriented economy. Documents of the 13th CPV Congress in 2021 also underlined the need to grow internationally competitive private conglomerates — a Vietnamese version of Korean chaebols. These domestic champions are expected to help spur growth through innovation and technology adoption, reduce the country’s overreliance on foreign investment, and take over the role of the ailing state-owned sector in leading the country’s economic development.

Vietnamese tycoons owe much of their business success to connections with political elites, who can facilitate their access to preferential policies or resources, especially land. Their wealth and position are protected as long as they remain loyal to the Party, contribute to its socio-economic and political goals, and avoid practices that could undermine the country’s economic security.

What has emerged is a form of “symbiotic relationship”, whereby Vietnamese political elites and business tycoons support each other’s respective goals: political legitimacy for the former and capitalist expansion for the latter. Thus, the party-state is comfortable with private conglomerates assuming an active role in advancing national goals that cement its right to rule, whereas rent-seeking entrepreneurs are willing to get involved as long as they could get some economic rewards and political favours along the way. This quid pro quo underlies Prime Minister Chinh’s ambitious plan for the public-private partnership on social housing.

However, the plan’s prospect remains uncertain. Business leaders present at the conference have urged the government to remove regulatory bottlenecks and bureaucratic hurdles that are hindering social housing development. But even if the government manages to address these concerns, it is unlikely that changes will occur fast enough. Hence, construction delays should be expected. Vietnamese policymakers will also need to revamp urban planning in social housing compounds. While affordable apartments inside cities have been in high demand, those in suburban areas where the physical and social infrastructure is less developed have failed to attract buyers.

Given the profit-seeking instinct of private enterprises, their long-term commitment to the government’s social housing development programs is also questionable. As a result, in addition to mobilising private resources, the Vietnamese government should also come up with state-funded and government-run mechanisms to ensure the success of its social housing development plan. In this regard, Singapore’s efficient and time-tested Housing & Development Board can be a good model for the Vietnamese government to learn from.

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