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Tehran – IRNAPlus – Increasing the purchasing power of households, reducing the price of construction inputs, issuing housing bonds, using bank resources and accepting the cost of housing facilities by the government are the strategies that the government can use to fulfill its promise to house people.
According to IRNAPlus, the lack of housing supply and the decline in household purchasing power over time have led to an increase in rent-seeking, with the proportion of rent-seeking households increasing over time.
The results of the censuses of the Statistics Center show that in 1375, about 15% of the country’s households were renters, and this ratio has reached about 23% in the next census, in 1385.
The Mehr housing project, which began in the 2001s with the aim of providing affordable housing, failed to reduce or at least keep the proportion of rented households, and in the 2011 census, the proportion of rented households reached about 27 percent of all households.
The results of the latest census also show that in 2016, about 31% of households were tenants. The Mehr housing project began in the ninth government, and now the completion and delivery of its unfinished units is a legacy that has reached the thirteenth government.
The promise to build one million housing units a year is made by the 13th government, which inherits other parts of Mehr housing and, of course, the national housing project in the 12th government.
This has led experts to question the feasibility of fulfilling this benevolent promise to house people. Moreover, even if the promise of building four million housing units is fulfilled by the end of the 13th government, the consequences will affect other sectors of the economy for several years to come.
In an interview with Mehdi Sultan Mohammadi, a housing economics expert, IRNAPlus examined the possibility of fulfilling this promise and its consequences for the Iranian economy.
Unexpected events in the housing market
IRNAPLUS: The annual construction of one million housing units is one of the promises of the 13th government to provide housing and housekeeping for families. Given the country’s economic situation and the outlook ahead, how do you assess the fulfillment of this promise?
Sultan Mohammadi: In the current situation, it is very unlikely that the construction of one million housing units per year will be possible. Most housing construction in Iran is done by households and the private sector, and the share of government and public institutions in housing construction throughout the history of urban development in Iran has been about five percent. Therefore, the construction of housing in such a large volume depends on the ability of households and the private sector. The government can not play a decisive role in this regard. In addition, the unexpected event that took place contrary to the housing cycle casts doubt on the possibility of fulfilling this promise.
Normally, when the price of housing units increases, the tendency to invest in housing construction also increases; Because returns increase and more investors enter the market. As a result, the volume of construction increases, and consequently, the increase in supply over demand will lead to a relative decline in prices in the housing sector in the next period.
Housing cycles are formed in the same way in different years. However, an almost unexpected event that has occurred in the previous period, ie from the beginning of 1397 until now, is that despite the increase of housing prices by about 6 to 7 times, we did not see an increase in investment. Remains low.
Since we were not able to increase production during the boom, in the current situation, because we are in a recession and housing prices are not expected to grow as before, the investor’s incentive to invest will also decrease. Therefore, in such circumstances, the construction of residential units can not be multiplied.
Two reasons for the decline in housing construction
Sultan Mohammadi: The first reason is that during the last decade, the real household income has decreased by about 20% and households are not able to provide the necessary savings to receive credit and housing facilities, and household power has decreased significantly.
The second reason is that the prices of construction materials and inputs have increased significantly and during the last three years the prices of materials such as steel, cement, pipes and other construction materials have increased more than 6 to 7 times. This results in higher working capital being needed to build housing units, and the private sector and households are unable to provide the capital needed to build more housing.
