The comprehensive reforms introduced through the Law on Housing 2023, which will come into force on January 1, 2025, are poised to address long-standing challenges and promote sustainable development in both the social and commercial housing sectors, wrote Anh Dang, a senior partner at VILAF law firm.
The National Assembly on November 27, 2023 approved the new Law on Housing which will come into force and replace the current Law on Housing No. 65/2014/QH13 from January 1, 2025.
The Law on Housing 2023 is being warmly welcomed by experts in the field of real estate and is believed to be the best since the Ordinance on Housing No. 51-LCT/HĐNN8 was introduced in 1991.
Compared to the Law on Housing 2014, the Law on Housing 2023 does a better job in ensuring the consistency and uniformity of the laws on housing with other legal regulations, such as laws on land, real estate business, investment and the Civil Code.
The Law on Housing 2023 has further introduced new regulations and policies which promptly address people’s concerns related to housing such as regulations on multi-story multi-household residential buildings. Discussed below are key points of the Law on Housing 2023.
No restriction on ownership period of apartments
During the drafting process of the Law on Housing 2023, it was proposed that the ownership period of apartments would only be limited to the useful life of construction works set out in the apartment building design documents and appraised by competent authorities, and would start from putting apartment buildings into use in accordance with construction laws.
This proposal was criticized by both experts and the public due to its inconsistency with current policies on ownership of assets in general and other types of residential houses in particular, and for its potential tremendous impact on the real estate market.
After much consideration, the stated proposal has been left out of the Law on Housing 2023. Instead, the Law on Housing 2023 now focuses on the duration of use of apartment buildings, which pursuant to Article 58 of the Law on Housing 2023, would be determined based on the apartment building design documents and the actual duration of the use of such apartment buildings according to inspection conclusions by competent authorities and would start from the acceptance and putting such apartment buildings into use in accordance with construction laws.
When (i) the duration of use of the apartment building has expired or (ii) the duration of use of the apartment building has not expired but the apartment building is damaged, at risk of collapse, or poses risks to owners and users of the apartment building, the provincial-level people’s committee must direct inspections and assessments of the apartment building’s quality pursuant to Article 61 of the Law on Housing 2023 and decide whether the apartment building needs to be renovated or reconstructed.
Conditions to become commercial housing project developers
Article 35 and Article 36 of the Law on Housing 2023 set out conditions that one must fulfil to become a commercial housing project developer as below:
(i) Being a real estate enterprise (a) having sufficient equity capital as required by the laws on real estate business to carry out the relevant commercial housing project, and (b) having capacity and experience to carry out the relevant commercial housing project according to the provisions of laws; and
(ii) Having been allocated or leased land after winning the auction of the land use rights (LUR) or winning the bidding to select an investor to implement a project using land or in other cases where the investor is approved when auction or bidding is organized according to the laws on investment; or
(iii) Having the investment policy approved concurrently with the approval of the investor of a commercial housing project when the investor obtains the LUR through an agreement on receiving the LUR with respect to the type of land eligible for implementation of commercial housing projects or when the investor holds the LUR on types of land eligible for implementation of commercial housing projects according to the provisions of the Law on Land.
Different from the regulations related to commercial housing project developers under the Law on Housing 2014, the regulations under Article 35 and Article 36 of the Law on Housing 2023 ensure the consistency and conformity with regulations on selection of investors for projects using land under the applicable laws.
Previously, instead of referring to the applicable laws on investment and laws on land, the Law on Housing 2014 provided separate provisions on selection of investors for commercial housing projects and forms of land use to implement commercial housing projects, which confused both authorities and enterprises as to whether regulations under the Law on Housing 2014 or regulations under the applicable laws on investment and laws on land should prevail.
Development of multi-story multi-apartment houses for sale, lease-sale, and lease
In response to the call for stricter management of mini-apartment blocks after recent incidents regarding their fire safety, the Law on Housing 2023, under Article 57, has for the first time introduced a separate legal framework for development of multi-story multi-apartment houses for sale, lease-sale, and lease.
Generally speaking, individuals are allowed to build multi-story multi-apartment houses on residential land on which they hold the LUR. However, they need to fulfil certain additional conditions depending on the type of multi-story multi-apartment houses they build. In particular:
(i) If individuals wish to build (a) a house with two floors or more where on each floor there are apartments for sale, for lease purchase, or for combined purposes of sale, lease purchase, and rent, or (b) a house with two floors or more and with a size of 20 apartments or more for rent, or (c) a house with two floors or more and with a size of less than 20 apartments for combined purposes of sale, lease purchase, and rent, they must meet the conditions to become investors of housing projects under Article 35 of the Law on Housing 2023 and must comply with provisions of laws on construction and other laws.
On this point, given Article 35 of the Law on Housing 2023 states that only real estate enterprises can become housing project developers, it is unclear how individuals building multi-story multi-apartment houses can fit into this condition. It is hoped that the government will resolve this divergence in the upcoming time when regulations detailing the Law on Housing 2023 are issued.
(ii) If individuals wish to build a house with two floors or more and with a size of less than 20 apartments for rent, they are not required to meet the conditions to become investors of housing projects under Article 35 of the Law on Housing 2023 but must meet (a) the requirements for building multi-story multi-apartment houses by individuals according to regulations of the Minister of Construction, (b) the requirements for fire prevention and fighting according to the provisions of the law on fire prevention and fighting applied to multi-story multi-apartment houses built by individuals, and (c) the conditions prescribed by the provincial-level People’s Committee on roads for fire-fighting vehicles to perform fire-fighting tasks in places where there are multi-story multi-apartment houses built by individuals. Following the recent incidents regarding fire safety of mini-apartment blocks, this regulation forecasts more tightened management towards mini apartments in terms of construction and fire safety requirements.
Further, Article 57 of the Law on Housing 2023 clearly provides that owners of apartments in (a) a house with two floors or more where on each floor there are apartments for sale, for lease purchase, or for combined purposes of sale, lease purchase, and rent, or (b) a house with two floors or more and with a size of 20 apartments or more for rent can be granted ownership certificates pursuant to the laws on land.
This idea is not brand new as Article 46.2 of the Law on Housing 2014 already stipulates that the state would recognize the ownership over each apartment in a house with two floors or more where on each floor there are two or more self-contained apartments, each of which meets the minimum construction floor area standard, and with areas under private ownership and areas under common ownership of condominiums as prescribed by the Law on Housing 2014. Still, Article 57 of the Law on Housing 2023 makes it clearer as to how the state will recognize the ownership over each apartment in mini-apartment blocks and this will definitely open up many housing opportunities for low-income groups.
Development of social housing
To realize the goal of building one million social housing units under Resolution No. 33/NQ-CP dated March 11, 2023 of the G=government, the Law on Housing 2023 has established a comprehensive policy framework for the development of social housing with several new points compared to the Law on Housing 2014.
First, Article 78 of the Law on Housing 2023 no longer requires individuals to fulfil residency conditions to enjoy social housing support policies. Previously, pursuant to Article 51.1 of the Law on Housing 2014, qualified individuals must register for permanent residency in the province where the social housing is located or, in case of not having permanent residency, must register for temporary residency for at least one year in the province. This change is reasonable and flexible to accommodate population movements and attract labor between regions, adapting to practical situations in different periods.
Second, pursuant to Article 80.4 of the Law on Housing 2023, the Vietnam General Confederation of Labor has been officially designated as the managing agency for investing in social housing projects for workers and laborers to rent, using the trade union’s financial resources.
While it is widely agreed that there is a need to increase investment in social housing projects and expand the number of social housing project developers, there were many skeptical opinions during the drafting of the Law on Housing 2023 as to if the Vietnam General Confederation of Labor, being a political-social organization rather than a state authority, has sufficient capacity and resources to develop social housing projects. It is hoped that this concern can be cleared in the upcoming time when the government issues implementing regulations for the Law on Housing 2023.
Last but not least, the Law on Housing 2023 no longer requires developers of social housing projects to allocate certain areas for lease. Previously, pursuant to Article 54.3 of the Law on Housing 2014, developers of social housing projects in areas not approved for their development for lease must allocate a minimum of 20% of the social housing area in the relevant project for leasing and are only allowed to sell houses in this area to current tenants after a lease period of five years. This change is encouraging as in practice, many developers fail to lease this designated area, leading to apartments remaining vacant and or unsold and developers being unable to effectively recover the capital from these projects.
Development of housing for workers in industrial zones
To cope with the high housing demand of workers in industrial zones, the Law on Housing 2023 has introduced a separate policy for the development of dormitories.
Accordingly, with respect to an industrial zone, the infrastructure developer in the industrial zone shall identify the workers’ demand for renting dormitories in the industrial zone, organize the formulation of and obtain approval for the planning, and invest in the technical infrastructure and social infrastructure needed for workers’ dormitories.
Upon completing the technical infrastructure and social infrastructure linked to workers’ dormitories, the infrastructure developer in the industrial zone can either (i) independently engage in the construction of workers’ dormitories, or (ii) lease the land to enterprises, cooperatives, or cooperative unions operating within the industrial zone for the construction of workers’ dormitories within the industrial zone. Enterprises, cooperatives, or cooperative unions operating within the industrial zone that do not wish to build workers' dormitories by themselves can lease dormitories from the infrastructure developer to allocate for their workers to rent.
Entities investing in the construction of workers’ dormitories are entitled to enjoy several incentives under Article 98.1 of the Law on Housing 2023, including, among others, declaring the costs for constructing workers’ dormitories as deductible expenses when determining taxable income according to laws on corporate income tax. Enterprises, cooperatives, or cooperative unions leasing workers’ dormitories to allocate for their workers are also entitled to declare the costs for leasing workers’ dormitories as deductible expenses.
The rental price of workers’ dormitories within an industrial zone is agreed upon between the lessor and the lessee within the pricing framework established by the provincial-level People’s Committee.
Management and utilization of maintenance funds of multi-owner apartment buildings
Articles 152, 153, and 154 of the Law on Housing 2023 specify that developers of residential housing projects are responsible for establishing a separate account to manage maintenance funds. These funds cannot be used for any purpose other than transferring them to the Apartment Building Management Board.
If the developer does not hand over these funds to the board upon its establishment, the board can formally request the district-level people’s committee (as opposed to the provincial-level people’s committee as stipulated under the Law on Housing 2014) to instruct the developer to hand over the funds. If the developer fails to comply with such instruction from the district-level people’s committee within 10 days after issuance, the committee will issue a coercive decision and organize the collection of maintenance funds to hand over to the Apartment Building Management Board.
It is expected that these regulations will resolve long-lasting disputes between developers and owners of apartment buildings regarding maintenance funds. As the Law on Housing 2014 only requires developers to put the maintenance funds in a bank account, developers often put the maintenance funds into their business bank accounts which leads to a lack of transparency in management and use of the funds. In many cases, developers delay the hand-over of the funds to the Apartment Building Management Board or improperly appropriate or use maintenance funds for the wrong purposes.
To conclude, the enactment of the Law on Housing 2023 marks a milestone in shaping the future of the housing market. The comprehensive reforms introduced through this new law are poised to address long-standing challenges and promote sustainable development in both the social and commercial housing sectors. The Government is expected to soon resolve certain ambiguities of the Law on Housing 2023 when issuing implementing regulations in the upcoming time.