Expectations from a proposed housing development strategy

Vietnam’s housing market continues to be burdened by a range of chronic ailments - soaring prices, supply-demand imbalances, rampant speculation, and a shortage of long-term financing; all of which require an effective treatment plan. The proposed National Housing Development Strategy aims to address the root causes of the current housing system’s shortcomings through a new approach grounded in the “developmental State” model. 

This is a long-term, large-scale program with far-reaching impact, requiring the highest level of political commitment and coordinated action across all levels of government and sectors. Its core objective is to restructure the housing market so that the vast majority of people can afford to own or rent homes aligned with their income levels, while also transforming housing into a driver of Vietnam’s sustainable socio-economic development. 

Current problems

In reality, Vietnam’s housing market continues to suffer from deep-rooted structural problems, most notably severe imbalances reflected in the following.

Housing prices far outpacing incomes: In major cities around Vietnam, the house price-to-income ratio has climbed to 20-30 times annual income, far exceeding internationally-accepted affordability thresholds, where a ratio of roughly 5-7 times is considered healthy. As a result, home ownership is increasingly slipping out of reach for ordinary citizens, particularly younger generations in large urban centers, who face unprecedented financial pressure. This has raised concerns over the emergence of a “three-no generation” (not able to a buy a home, not wanting to marry, and not wanting to have children) with potentially negative implications for economic growth and social stability.

Land increasingly financialized, with speculation prioritized over real demand: Vietnam’s real estate market has long been shaped by speculative behavior, treating land as a financial asset for short-term gain rather than a place to live. Even unverified planning rumors can trigger land fever, as brokers and speculators inflate prices far beyond intrinsic value. As a result, capital is increasingly diverted into real estate instead of productive sectors and innovation, reinforcing a short-term, less sustainable economic model. This growing financialization of land has significantly distorted the market and heightened the risk of asset bubbles.

Housing supply heavily skewed toward the high-end segment: Developers have largely prioritized mid to high-end housing projects in recent years with higher profit margins, resulting in a severe shortage of affordable housing for the broader population. Since 2021, virtually no new commercial housing projects have introduced apartments considered “affordable” - priced below VND30 million ($1,155) per sq m. This imbalance is undermining the long-term stability and sustainability of the housing market.

Infrastructure lagging behind urban expansion needs: Urban transport infrastructure has not expanded quickly enough to open up new urban areas and create reasonably-priced land supply in suburban districts. Infrastructure bottlenecks continue to constrain housing supply growth, intensifying price pressures in central urban areas.

A lack of a large-scale, long-term rental housing market: Vietnam’s rental housing market remains underdeveloped and has yet to become a sustainable housing solution for the population. Rental rates remain relatively low - only around 10 per cent in urban areas, compared with more than 50 per cent in some developed countries - and are dominated by short-term, privately-arranged rentals. Professional, long-term rental products remain scarce, partly because Vietnam lacks a national policy framework and housing stock dedicated to long-term rental markets.

These structural shortcomings cannot be resolved through short-term administrative interventions or piecemeal support packages. Rather, they require a comprehensive, long-term strategy grounded in a new approach to fundamentally restructure the housing market. Addressing these systemic root causes will require adopting a “developmental State” model in housing policy.

Five principles

The “developmental State” model in housing policy is one in which the State plays a proactive role in guiding and shaping the market, rather than merely acting as a passive regulator or leaving the market to self-correct. This philosophy is reflected in five guiding principles for housing policy.

First, the State acts as the chief architect of the market, but does not replace it: The State serves as a supporter that fosters a healthy market environment, rather than subsidizing or replacing businesses. Under this model, the private sector remains the primary engine of growth, while the State provides direction and support through long-term planning, market-based tools, and macro-level oversight. In housing, this principle requires the State to proactively redesign the playing field, correcting existing distortions while allowing the market to operate according to competitive principles within a new framework.

Second, strategic land control for long-term development: In Vietnam, land is collectively owned and managed by the State. As such, the government must play an even more proactive role in ensuring land is allocated and used fairly and effectively. The planning and allocation of land for housing, particularly social housing, rental housing, and new urban areas, should be led by the State.

Strategic land areas, including public land and sites linked to future infrastructure plans, must remain under State oversight to prevent them from falling into the hands of speculators. This principle helps ensure land prices are not inflated far beyond real value by speculative booms, while safeguarding sufficient land reserves for long-term housing development programs.

Third, “Infrastructure first, housing follows”: A developmental State should proactively plan and build infrastructure, including roads, utilities, and public transport, in suburban and satellite areas with development potential. Once infrastructure is in place, businesses and residents will be more willing to relocate and settle there, helping create affordable new urban zones that ease pressure on inner cities.

Fourth, clearly separating the three housing markets: Commercial housing should operate at market prices, serving higher-income groups and developed by private enterprises under appropriate regulation. Social housing should provide low-cost options for lower-income households, supported by the State through land, financing, or incentives. A long-term rental housing market should meet the stable housing needs of young workers, migrants, and other groups. Such a segmented approach ensures that each housing category develops in a healthy manner, fulfills its intended role, and avoids overlap.

Fifth, mobilizing long-term capital to replace short-term credit: Large-scale and stable housing development requires long-term, low-cost capital rather than reliance on volatile short-term bank lending. The developmental State philosophy encourages the creation of long-term housing finance channels, including the issuance of 20-30-year bonds and mobilizing capital from insurance funds, pension funds, and long-term institutional investors. These funding sources are better aligned with housing’s long investment cycles (10-20 years) and can lower borrowing costs for homebuyers.

To translate this philosophy into practice, the Strategy proposes a series of new institutions and breakthrough policy tools aimed at restructuring the housing market in line with the developmental State approach.

 Key institutional components include:

Establishing the National Housing Corporation (NHC): This body would concentrate resources to develop strategic housing projects, particularly 5-8 satellite cities surrounding major economic hubs. Specifically, the NHC would be tasked with managing and utilizing public land as well as land recovered through restructuring processes, such as stalled projects or urban redevelopment sites. Based on this land bank, the NHC would plan affordable large-scale urban developments, build essential infrastructure first, and then collaborate with private developers to construct housing. Through the NHC, the government expects to proactively deliver tens of thousands of reasonably priced housing units each year, helping guide housing prices toward more sustainable levels.

Tax reform and anti-speculation measures in real estate: This group of solutions seeks to “reset” market behavior, shifting incentives from speculation toward genuine housing demand. The Strategy proposes a progressive property tax on multiple-home ownership, with higher tax rates applied from the second home onward. At the same time, taxes would be imposed on vacant or underutilized land to penalize land hoarding and speculation, forcing owners either to put land into productive use or transfer it to others.

Conversely, first-time homebuyers purchasing for genuine residential use would receive tax reductions or exemptions, directly reducing the cost burden of home ownership. These tax policies would both generate budget revenue for reinvestment into social housing and help rebalance the market toward greater fairness.

Beyond taxation, a transparent and synchronized nationwide land database is also needed. Together, these measures could cool speculative activity, bring housing prices closer to their real-use value, and redirect social capital toward productive investment and genuine housing demand instead of speculative real estate cycles.

Segmentation and development of each housing market segment: As outlined in the philosophy, the Strategy will establish separate legal frameworks and dedicated programs for each housing segment. For commercial housing, the State will focus on refining legislation, including the Law on Housing, the Law on Real Estate Business, and the amended Land Law, to simplify investment procedures and improve planning transparency. This is intended to boost project supply, lower development costs, and help bring commercial housing prices to more reasonable levels. At the same time, market regulations (such as credit rules and risk-weighting ratios) will be strengthened to prevent the recurrence of speculative bubbles.

To support these institutions and housing development programs, the Strategy proposes a foundational medium to long-term financing model. This model is designed to address the capital challenge for affordable housing development through low and stable interest rates, while avoiding excessive reliance on the State budget or short-term credit.

The key components of the financing model include:

Issuance of National Housing Bonds: These bonds would carry maturities of 20-30 years, with target interest rates of 5-6 per cent annually; lower than conventional commercial lending rates. All funds raised would be channeled into the National Housing Development Fund to finance social housing projects and satellite urban developments, or provide preferential mortgage loans to homebuyers.

Preferential installment credit for homebuyers: Eligible groups (for example, buyers of social housing) would be able to borrow from the Fund at fixed interest rates of around 5-6 per cent over extended repayment periods of 20-25 years. The guiding principle is that monthly repayments should not exceed 30-35 per cent of household income, ensuring affordability. With low fixed rates, middle-income households would be able to purchase homes without facing the burden of high floating commercial interest rates.

Diversified funding sources and capital recycling: Beyond bonds, the Strategy encourages mobilizing an additional approximately 30 per cent of capital through voluntary savings schemes and other sources. These savings would not only encourage better financial habits among citizens but also contribute to the Fund’s resources. The model would operate through a closed-loop financing mechanism: revenues from housing sales or rentals, along with mortgage repayments from homebuyers, would flow back into the Fund to cover annual bond principal and interest payments, before being reinvested into new housing projects.

Implementation roadmap

To turn the strategic vision into reality, the Strategy sets out a phased implementation roadmap over ten years, accompanied by assessments of the feasibility of each step to ensure both rapid execution and sufficient flexibility for adjustment to changing circumstances.

Phase 1 (2026-2027) - Preparing the Legal and Institutional Framework: During the first two years, the priority will be to complete the legal framework and establish new institutions. Specifically, by 2026, laws and decrees on property taxation (including taxes on second homes and idle land) should be submitted and passed, while amendments to the Law on Housing and the Land Law (if not approved during 2024-2025) should be introduced to create a legal foundation for new policies. At the same time, the NHC should be established in 2026, with capable leadership selected and a specialized operating charter developed for the corporation.

In parallel, investment and construction procedures should be reformed by introducing streamlined approval mechanisms for social housing projects, allowing certain sub-procedures to be bypassed if projects are already included in government-approved plans. During this phase, the national land system should also be synchronized, integrating housing and property information with tax authorities.

Phase 2 (2027-2030) - Piloting and Launching Major Projects: Over the following three to four years, the Strategy will shift to implementing flagship projects in practice. By 2030, the goal is to launch 3-5 large satellite urban developments on the outskirts of Hanoi, Ho Chi Minh City, and several other major urban centers. The NHC, together with local authorities, will identify locations, prepare detailed master plans, and begin infrastructure construction for these developments.

At the same time, large-scale social housing and worker housing projects, particularly in industrial parks and export processing zones, will also be implemented with support from the National Housing Development Fund. This phase will be decisive in demonstrating the model’s effectiveness in practice. A key benchmark would be the completion, by 2028, of the first affordable apartment complexes developed by the NHC, with citizens able to purchase homes at preferential interest rates. If bottlenecks arise, the government should prioritize timely intervention and resolution.

Regarding financing, the first issuances of housing bonds will take place during this phase, beginning with smaller pilot offerings, approximately VND10-20 trillion ($385-770 million), to test market demand. If the bonds are well received, issuance could then be expanded.

Phase 3 (2030-2035) - Expanding and Completing the System: From 2030 onward, once pilot models have demonstrated results, the Strategy will be expanded nationwide. By 2035, the target is for 60 per cent of new housing supply to fall within the “affordable” segment (including social housing, NHC-developed housing, and mid-priced commercial housing).

Satellite urban areas launched in earlier phases will gradually be completed and begin welcoming residents, while additional urban developments may be planned in other key economic regions. The rental housing market will also begin to take shape: after 2035, Vietnam could develop a large-scale long-term rental market, supported by professional rental companies and REITs (real estate investment trusts) focused on rental housing, collectively providing hundreds of thousands of rental apartments.

Overall, the ten-year roadmap is designed to be practical and gradual. Quantitative targets, such as 1 million social housing units and 60 per cent affordable housing supply, are ambitious but realistic. For example, achieving 60 per cent affordable supply is entirely possible if policies successfully attract a large number of businesses to the segment alongside TNHC-developed products.

Most importantly, feasibility depends on sustained government commitment across administrations. This is a long-term strategy that requires consistency and perseverance in implementation. If policy priorities and resources are maintained, Vietnam could see a fundamentally-transformed housing market within a decade.

Combined coordination

To realize the Strategy, coordination across all levels and sectors will be required, particularly strong support from the government through the following measures.

Approving the strategic proposal and directing the issuance of a new legal framework: Immediately after the proposal is approved, relevant agencies should be tasked with drafting and submitting a law or resolution on property taxation (housing and land) in 2026 in line with the Strategy. At the same time, amendments to the Law on Housing, the Land Law, and the Law on Real Estate Business should be prioritized during the closest National Assembly session to establish the legal basis for implementation.

Piloting key flagship projects as demonstration models: The government should immediately select one or two locations near Hanoi (for example, Dong Anh or Hoa Lac) and one or two others near Ho Chi Minh City to launch National Housing Urban Area projects led by TNHC. By 2027, at least one pilot project, consisting of several thousand housing units with complete infrastructure and amenities, should break ground. These projects should receive maximum priority in financing and administrative procedures to complete the first phase within 2-3 years, creating public confidence and spillover momentum.

Issuing the first National Housing Bonds in 2027: The Ministry of Finance and the State Bank of Vietnam should coordinate preparations for the first issuance of housing bonds, proposed at around VND20 trillion ($769 million) with a maturity of 20 years. National leaders should approve a 100 per cent government guarantee for these bonds to reassure investors. At the same time, domestic insurance and pension funds should be directed to prioritize purchasing these bonds as part of their mandatory investment portfolios. Smooth mobilization of long-term capital will determine the Strategy’s financial success or failure.

Issuing a directive on rental housing market development: The Prime Minister could issue a dedicated directive instructing the Ministry of Construction to draft a Rental Housing Development Program for 2026-2035, including specific incentives for businesses investing in rental housing, frameworks for rental REITs, and legal reforms to strengthen tenant protections. This would be an important preparatory step toward developing a large-scale rental market after 2030.

Strengthening communications and building consensus: Public consensus will be essential for smooth implementation, particularly regarding the introduction of new taxes and the mobilization of resources.

Regular monitoring, evaluation, and flexible adjustments: The Ministry of Construction should lead the development of a KPI framework to assess the Strategy’s results, including indicators such as reductions in house price-to-income ratios, the number of affordable housing units built, and buyer satisfaction with social housing. Annual reports should be submitted to the government and National Assembly, allowing policies to be adjusted in a timely manner.

Housing should not only be viewed as a social welfare issue but also as essential infrastructure for national development, comparable to roads and electricity grids. Restructuring the housing market through a developmental State model would lay the foundation for sustainable economic growth, social stability, and higher long-term productivity in Vietnam.

With the decisive actions outlined above, Vietnam can confidently embark on comprehensive housing market reform. The next decade will be pivotal in enabling millions of Vietnamese families to secure stable housing, contributing to a more prosperous and equitable society. The National Housing Strategy 2026-2035 represents the Party’s and the State’s commitment to ensuring that no one is left behind in the country’s development journey, and that every citizen has the opportunity to secure suitable housing and a better quality of life.

This is not merely an economic and social policy, but also a humanitarian mission for the country’s future. We respectfully urge the government to consider approving the proposal and directing the coordinated implementation of the measures outlined above to bring the Strategy into reality.