Workers’ rentals: unrealistic policies don’t help

When municipal authorities issued a Decision No.18 in 2011 on granting preferential loans to landlords for building and upgrading houses to rent to workers, it was widely welcomed.

When municipal authorities issued a Decision No.18 in 2011 on granting preferential loans to landlords for building and upgrading houses to rent to workers, it was widely welcomed.

A boarding house for construction workers in District 2, HCM City. (Photo: VNS)
A boarding house for construction workers in District 2, HCM City. (Photo: VNS)

However, six years later, the number of landlords accessing this facility has been very limited, despite the fact that they provide 85 per cent of workers in the city with a place to live.

Phu Nhat Phuong, who owns a boarding house for workers on 46-48 Riverside Street, was among the first one to build such a facility in Tan Tao A Ward, Binh Tan District.

She recalled the problems both she and her tenants faced when waters rose knee-high in her house during high tide. Workers returned home after exhausting eight or nine-hour shifts only to fight the flood waters that threatened to ruin their possessions.

“Even at 9-10pm, my worker tenants were still busy bailing out water. There was no way I could sleep with all the ruckus, so I got up and joined them,” Phuong told the Lao Dong (Labour) newspaper.

Like a family

“So I said to them, ‘Seriously, why do you have to suffer like this, find some new place.’ But no one moved. I had lived with them like family for a long time now, so I thought I’d do some renovation to ease their difficulties,” she said.

Upon hearing her decision to invest nearly a billion dong on rebuilding her house, many people tried to discourage her, saying “rent money from workers is just too little, compared to what you’re pouring in.”

They also told her that if she had that kind of money, she should just put in the bank and live off the interest, it would be much easier than running a boarding house for workers.

Despite the city’s loan package, she borrowed from other sources – from the bank, from the tenants, relatives and friends – to fund the construction.

After all this effort, “I’ve only recently been able to repay the cost of materials alone. It’s stressing, really,” Phuong said.

After the upgrade was completed, nearly all her former tenants returned.

“After all the time we’ve known each other, I couldn’t bring myself to raise the rent, even with newer, more spacious rooms, and the flooding being a thing of the past,” Phuong said.

That she kept the rent unchanged was something she did not tell her husband, with whom she’d discussed how to repay the loans.

Of course, she couldn’t keep it under wraps forever, because other landlords in the area jokingly chastised her husband about her ‘price dumping practice.’

“Once the secret was out, I had to convince my husband that the tenants and our family have been living together on good terms for a long time now. Even if we keep the rent a little low and the payback period gets longer, we can still get by. But a few hundred thousand dong more would be a burden on these poor workers,” she said.

Her struggle, however, didn’t end there. Repaying construction loans with high interest rates was one thing; after the building was finished, many taxes rushed in, driving her into another round of repayment.

Fear of debt

Another landlord in Binh Tan District, Doan Van Quang, said he used only the money he had to upgrade the old and dilapidated eight-room boarding house he bought from the previous owner.

He did not borrow any money, because he did not want to get caught in debt.

However, Quang could only afford to do a proper upgrade of four rooms, outfitting them with sturdy staircases, new kitchens, new flooring and ceilings. Then he ran out of money, so the remaining four rooms could undergo very small renovations like repainting.

Quang said that even though the rent for the newly furnished rooms is double that of the old ones, most tenants would be willing to pay it.

“Seeing that workers’ demand for comfortable living is high, I have considered borrowing money to upgrade the other four rooms, building a garage, a public space, new approach roads, etc.

“But the whole thing has remained in my head for years now,” he said, citing high interest rates and the resultant need to raise rent as discouraging factors.

Asked about the preferential loan packages that the city authorities have offered, Quang said grimly, “Too hard. I asked around but hardly anyone has been able to get those loans.

“You can only get them after meeting a slew of requirements and criteria. So most other landlords I know just go straight to the bank, and present their house as collateral to borrow money.”

Quang said if he were to get preferential loans, he wouldn’t raise the rent. In fact, he would anyway be interested in keeping the rent low; “if I dared to demand high rents, State agencies will come knocking on my door.”

Unrealistic policies

In a recent meeting between workers and the city authorities, Nguyen Thi Quyen, an employee of Dinh Cao Co. Ltd, told the HCM City People’s Council Chairwoman, Nguyen Thi Quyet Tam, that since even affordable housing is still out of her reach, renting is the only viable option.

“I make VND4.8 million (US$211) a month, minus spending, I save up about VND1 million ($44) a month, or VND120 million in 10 years, while the cheapest ‘social house’ costs between a few hundred million to a billion dong, how am I supposed to afford this?”

Her struggle is shared by many others, and it’s more difficult for workers who have family to take care of, saving or working overtime is all but ruled out.

“Having our own house is the best, but with current wages, we are fine with the next best thing, renting. We just want to live in clean, airy rooms, and not worry about hiked up electricity and water fees,” Quyen said.

Deputy Party Secretary of Binh Tan District, said the reason that Decision 18 has not realised its potential was other “unrealistic” regulations on rented housing for workers.

For example, the mandated average space for one person is 3sq.m (not including toilets or public spaces), and a boarding house with more than 10 rooms should have a green space and a minimum area of 10sq.m for each room.

Given such rules, it is not surprising that the HCM City Housing Development Committee, tasked with managing workers’ housing loans, has said that the number of landlords receiving loans in the last six years was “too low to be made public.”

Nguyen Tan Dinh, deputy head of the management board of HCM City’s industrial zones (IZs) and industrial parks (IPs), cited a similar situation back in 2011 when the board attempted to build several nurseries in IZs for the first time. It faced so many strict national standards and criteria that if forced to follow these by the book, there would not be a single nursery today, he said.

Dinh said he argued with the inspectors that regulations for nurseries located within IZs must be flexible compared to ordinary nurseries, with the priority being care and education of workers’ children.

Similarly, policies on loan packages for landlords must also be made less rigid and ‘closer to reality,’ Dinh said.

He also urged quick measures from the authorities, since managing a dwelling space for workers hailing from different localities is not easy, and many landlords are already leaving the business, opting to rent their land to factories and workshops instead – easier money and less stress.

“This will further compound the lack of accommodation for workers in the city. The assistance that the authorities provide for the landlords will indirectly benefit workers, giving them a chance to live properly,” Dinh said. 

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