PRIVATIZATION IN LOW-INCOME HOUSING PROVISIONING

IN HOCHIMINH CITY, VIETNAM

Abstract

The urbanization and industrialization are the causations of population growth due
to migration in HCMC. Housing shortage is still the big problem for the majority of low
income people.
By the mix of qualitative and quantitative methods, this study describes, compares
and analyzes the public and private sectors’ roles and their relationships in efforts of
promoting low income housing.
Public sector has tried to increase the housing stock, their housing services are
small volume, low quality and no housing management. Private sector’s role is still
limited, though; their low income housing services are more productive, better quality and
good housing management.
It is argued that private sector could provide the better housing service and fill the
gap of housing shortage for low income people. Their co-operations could raise the capital
investment and gather resources to develop. Because the weak role of government on
urban planning and land and housing management, private sector was hardly to access the
high price and scarce land resource. Government intervention by supporting private sector
to access land and provide low income housing was unattractiveness.
Land resource is the main factor for developing low income housing. Land price is
determinant to private sector’s ability in land access. Government commitment is
important to establish the low income housing market and encourage private sector for
their greater role in low income housing provisioning.

Key words: Privatization, private sector, public sector, housing shortage, low income
housing building, government intervention, etc.

1
 Table of Contents

1. Introduction .
1.1. Background …………………………………………………………. 1
1.2. Privatization in low income housing programs in HCMC ………….. 1
1.3. Statement of the research problem ………………………………...... 3
1.4. Rationale ……………………………………………………………. 3
1.5. Research questions ………………………………………………...... 3
1.6. Research objectives …………………………………………………. 4
1.7. Scope and limitation ………………………………………………… 4
1.8. Summary ……………………………………………………………. 5
2. Literature Review
2.1. The low income housing in less and developing countries …………. 6
2.2. Privatization in low income housing provisioning …….. 7
2.3. Constraints of private sector in low income housing provisioning …. 12
2.5. Government’s intervention in low income housing ...………………. 14
2.6. Summary ……………………………………………………...……... 16
3. Research methodology
3.1. Type of research …………………………………………………...... 18
3.2. Study area …………………………………………………………… 18
3.3. Data collection ………………………………………………………. 19
3.4. Data analysis ………………………………………………………… 21
3.5. Summary ……………………………………………………………. 22

2
 CHAPTER I
INTRODUCTION
This chapter gives an initial overview of the study. It discusses the brief
information of Hochiminh City and introduction to the privatization in low income housing
in Hochiminh City (HCMC). Based on this research situation, the knowledge gap is
identified as the reason to carry out this study. Research questions and objectives are stated
as the skeleton for the study. Scope and limitation of the study is also noted.
1.1. Background
Urbanization and industrialization cause the population growth in urban areas and
lead the housing problem in many developing countries (Sajor, 2003; Yap, 1992b;
Goldblum and Wong, 2000; Setchell, 1995; Vincent and Joseph, 2001). Though
government’s efforts in raising the housing stock, it cannot respond to the housing demand.
Many studies in developing countries showed the private sector is very important in
housing development, especially in low income housing. Government has shifted their role
to private sector (Pugh, 1994; ADB, 2000; Yap, 1989, 1992b; Robert and Jan, 1992), so-
call privatization in low income housing development.
In HCMC, it is the same situation (World Bank, 2001; Chuyen and Tran, 1997;
Lanh, 2000; French Embassy, 2003). However, the transition in housing development has
been done since 1986. But in low income housing, this transition is still the big concern to
the government (Huong, 2000; Lanh, 2000).
1.2. Privatization in low income housing programs in HCMC
Decentralization in housing development increased the significant amount of
housing in HCMC. Through decentralization, City government in housing construction is
reduced and focused on establishing the legal framework for land and housing market. The
various investments are attracted to build the houses. The government provides lands and
infrastructures and tax system to encourage private sectors, individuals and organizations
to develop housing. In the low income housing programs, private sector has free tax of
land using to construct housing for the poor and the low income people (IUTD and NRI.
1999). The private housing development companies are rapidly increased in this period.
However, most of private construction companies are served for middle- and high-income
people (Huong, 2000).

3
 By 2003, City government has tried to improve the housing policies in Decree
71/2001/ND-CP1 to attract private investment building the houses for low income people2
by reducing the land using tax and all kinds of land fee, supporting incentive taxes for
infrastructure and low income housing investment, improving the process of investment
procedures in low income housing. Government at all levels is directly responsible for
supporting the low income housing development programs.
With the above government intervention, private enterprises have invested in low
income housing. Private construction companies invested land and constructed low income
buildings for selling or renting (included their self investment 30%, their loans from the
bank 40%, and the rest 30% from the consumers). The private construction companies also
associated with entrepreneurs, who want to build houses for their employees. Or they
associated with the banks to build low income housing (IUTD and NRI. 1999; ADB,
2001).
However, the government’s policy and institutions for housing development is not
appropriate to the housing need in HCMC. Lack of closely co-ordination between
government’s different functioned departments at different levels has affected the private
sector’s investment in low income housing. The procedure of housing investment is still a
big problem though there were many changes on it3.
At present, however, many low income people are living in the low-roofed houses
or sharing with other families in the same house (Katherine, 1998; Luan and Vinh, 2001).
After “Doi Moi”, government has been no longer subsidized housing for government
officials, who are unaffordable to buy the houses in housing market. The low income
housing need is increasing while the land fund and low income housing projects as well as

1
This Decree was issued on October 1, 2001 by the Prime Minister about “Prioritization in Housing Building
for Selling and Renting”.
2
The Ministry of Labor, War invalids and Social Affairs (MOLISA) had announced the margin of poverty in
the period of 2001-2005 that the average poverty threshold in urban areas is 150,000 VND/person/month
(equal to 9.5 USD/person/month, evarage price of 2004 by Tuoitre Newspapers). But the HCMC
Department of Labor, War invalids and Social Affairs (HCMC DOLISA) set the household monthly
income levels as follows: the very poor people with less than 250,000 VND; the poor people (also low
income people) with 250,000 to 450,000 VND; the middle income people with 451,000 to 750,000 VND
(28.6 to 47.5 USD/person/month, evarage price of 2004 by Tuoitre Newspapers); the high income people
with more than 750,000 VND. By this definition, HCMC had about 329,400 low income households (27%)
in 2004 (HCMC DOLISA, 2005). The low income people consists of privilege families, army sector,
administrative civil servants, newly weds, and working people with low income in all economic sectors.
3
HCMC Cadastral and Housing Land Department. 2001. HCMC Housing Development Program 1991-2000
and Orientation to 2010.

4
tax incentives are limited4. The solution of private sector in low income housing in HCMC
has become complicated and hardly implemented.
1.3. Statement of the research problem
From 1980s, the low income housing has been concerned for improving the living
condition to the poor. Many studies and researches in the world studied about the low
income housing, the low income housing conditions, the low income housing finance, and
the role of public-private sector in provisioning the low income housing. Most of those
studies are in the less developed and developing countries where there are a huge
concentration of the low income people.
In Vietnam and HCMC, since the policy reform in 1986, many researches focused
on low income housing demand. But most of them have focused on the upgrading program
and emphasized the role of the public sector. The private sector has been strongly acting in
the housing market but weak participation in low income housing provisioning. There were
very few studies on housing policies for private sector and their role in low income
housing provision in HCMC.
1.4. Rationale
The study will contribute to the understanding of the current situation and
conditions of private sector in low income housing provisioning and the implication for
greater role in this field in the context of HCMC.
1.5. Research questions
Four research questions are stated as:
Question 1:
What are the important contextual factors that have shaped the current profile
situation of low income housing in HCMC? What is the current role and relationship
between the public sector and the private sector in providing low-income housing in
HCMC?
Question 2:
How effective or not has been the public sector in providing sufficient low income
housing? To what extent, is the lack of private sector’s greater involvement in housing
contributing the gap in the supply of needed low-income housing?
Question 3:

4
HCMC Department of Land and Housing. (2001). Housing Development in Hochiminh City during Ten
Years (1991-2000) and Strategies for Housing Development in Hochiminh City to 2010.

5
 What have been the major constraints to private sector’s greater involvement in low
income housing provisioning in the City?
Question 4:
What may be the key elements towards an attractive strategy for private sector’s
greater involvement in low income housing provisioning in the City?
1.6. Research objectives
General objective:
The overall objective of the research is to analyze the characteristics and greater
ability of private sector in mobilizing the low income housing.
Specific objectives:
1. To describe the roles, the relevant contexts, and the characteristics of the public and
private sectors in providing low income housing.
2. To assess the extent of the low income housing shortage provided by public sector
and the need for private sector’s involvement in low income housing.
3. To explain the major factors determining current level of involvement of the private
sector in low income housing.
4. To create opportunities and strategies to enhance mobilization of private sector for
low income housing provisioning in the city.
1.7. Scope and limitation
The scope of the study is focused on the role of the private sector and their ability
in providing low income housing. Their ability can be capital investment and corporation
to supply more quantity and quality of low income housing. The scope area of the study is
in HCMC and the special study area is in District 8, HCMC.
The limitation of the study lied on data collection included primary and secondary
data. On the primary data, government intervention in low income housing program is the
sensitive issue that the housing enterprises as well as housing managers can be easy to
disclose all available information. It is also hard to access the public and private sectors
because of their working time. The data and information from the public sector may not be
true because they seldom talk about their weaknesses and insufficient housing provision.
On the secondary data, it is on the bureaucracy of government administration, especially
the data related to the financial activities and management. There is little information

6
collection on housing market (such as housing prices, land price, etc.) because of the
dynamic of the housing market.
1.8. Summary
There was little study about privatization in low income housing in HCMC. This
study is carried out to understand about privatization in low income housing provisioning,
the situation, the roles and problems of public and private sectors in this field.
The situation context, problems and development trends of low income housing
provisioning of private sector could be understood through literature review. Therefore, the
relevant situation, problem and policy implication of the study area could have clearer
description, analysis and evaluation.

7
 CHAPTER II
LITERATURE REVIEW
In this chapter, there is a brief introduction of current theoretical debates on issues
related to privatization5 in low income housing provisioning. These are discussed in four
thematic clusters including: (i) low income housing situation in developing countries; (ii)
public and private sectors in low income housing provisioning; (iii) constraints of private
sector in low income housing provisioning; and (iv) government intervention in low
income housing provisioning.
2.1. Low income housing situation in developing countries
The rapid economic growth of the urbanization and industrialization cities has had
the important consequences for the low income population and its housing conditions. The
low income households have undoubtedly benefited from the rapid economic growth
which resulted in an increase in real income. This income increase has made a growing
portion of the population (Yap, 1989, 1992a; David, 1992; Vincent and Joseph, 2001;
Sajor, 2003). At the same time, the rapid economic growth has increased the demand for
land. The increase has made it more difficult for the low income population to find
affordable land and housing in the urban areas (Yap, 1992a; Wolff, 1999; Sajor, 2003).
The housing demand is rapidly increasing and the housing supply always lags
behind demand. (Yap, 1989, 1992a, 1996; Sasha, 1996; David, 1991; David, 1992).
However, low income people are concentrated in the city center see their housing
opportunities increasingly threatened. Therefore, the pressure on available stock of housing
and the shortage of affordable housing for the growing urban population led the growth of
slum and squatter settlements (Charles, 1995; Robert and Jan, 1992). People lived in the
low quality of living conditions. These areas were over-crowding, disarrangement, lack of
ventilation, lack of light and sanitation facilities, or other harmful factors to health and
safety (Michael, 2004; Sundaram, 1987; Yap, 1989; Katharine, 1998).
Because of low income housing program and land limitation, housing developers
normally respond to higher land prices by increasing the density of development.
5
“Privatization, i.e. the transfer of assets or service functions from public to private ownership or control, has
been employed with increased frequency throughout most parts of the world since 1980. Its objectives vary.
The most frequently cited include: (1) improvement of the economic performance of the assets or service
functions concerned; (2) depoliticization of economic decisions; (3) generation of public budget revenues
thorough sale receipts; (4) reduction in public outlays, taxes and borrowing requirements; (5) reduction in
the power of public sector unions; and (6) promotion of popular capitalism through the wider ownership of
assets. The discussion here is limited to the first objective, the improvement of economic performance.”
(John et al, 1987). Privatization is also a broad term that an embrace a wide array of policy instruments. It
refers to a transfer of functions or assets from the government to the private sector (Peter and Isaac, 1994).

8
Therefore, the patterns for housing programs in developing countries are mostly the high-
rise buildings because of high density population (David, 1992; Casey et al, 2002). The
low income housing payment is often down payment or payment in installment (Foo,
1992b; Sasha, 1996).
Housing deficit is explained in market term: there is sufficient demand for housing,
but numerous constraints make for weaknesses on the supply side. It is not properly geared
to the enormous existing demand (Sasha, 1996; Jan, 1986).
2.2. Privatization in low income housing provisioning
Privatization6 is a broad term referring to a transfer of functions or assets from the
government to the private sector (John et al, 1987; Peter, 1994). Privatization can be
guided to increase economic efficiency at the level of individual firms and markets; to raise
revenue for government activities; and to promote distributional and political ends (Peter,
1994).
2.2.1. Public sector as the pioneer in low income housing development
Because of slum clearance and resettlement, public housing schemes, sites-and-
services, settlement upgrading, housing provided by local authorities and housing
associations has had a key role in improving the circumstances of low income people. It
provided opportunities for individuals and families to improve their housing conditions
(Vincent & Joseph, 2001).
Most all of the public sector’s low income housing had been allocated to
government employees such as civil servants and the military, officials, intellectuals,
workers and other laborers in state organizations, while other low income people are still in
the housing problem (Choguill, 1990; Peter, 1994; Sasha, 1996; Victor, 1997; Huong,
2002). The housing normally has small sizes for single families or small family. The price
is low also. Therefore, there are inconvenienced households without enough rooms for
family members in different generations and sexes (Sasha, 1996, Victor, 1997). However,
it was not only the end problem that the government housing delivery system has
encountered. When the migrants come, they were faced with a difficult situation. Existing
houses on the market were beyond their economic reach and already in the city there was a
serious housing backlog (Choguill, 1990).
In most of developing countries, because of financial deficit, scarce resources,
realistic assessment of housing targets, and incomplete or non-existent strategies, public

6
The definition of Privatization was also discussed in the footnote No.1 of this chapter.

9
investment in low income housing is also low (Kumarasuriyar, 1990; Jan, 1986). This is
the reason of dilapidated housing refers to houses or apartments of damaged structure or
bearing components. For one thing, the volume of construction of different types of
housing may vary drastically for a given outlay of resources depending on where the
houses are built. For another thing, the cost of building one unit for the higher income
households it may be possible to provide more at the lowest level. Even with substantial
cost reductions, it is important that public expenditure is minimized. In view of the scarce
public resources and the enormous demand, reliance on subsidies would be sure to strain
replicability of any such undertakings (Yap, 1992b; Foo, 1992b; David, 1992; Jan, 1986;
Kumarasuriyar, 1990; Marwaha, 1990; Yap, 1992b; Victor, 1997; French Embassy in
Vietnam, 2003). The present capacity of public purpose housing providers is unaffordable.
It is unrealistic to expect them to develop an adequate supply of low income housing.
Generally, the local public agencies that provide low income housing play a role in
reducing the economic tension between the goals of increasing private ownership and long-
term access to low income housing. Obviously, the overall capacity of these organizations
to affect the housing delivery system is currently limited (Marilyn, 1989).
The public sector is both the regulator and supplier of low income housing. It aims
to provide a reasonable standard of living and promote social integration for the multi-
ethnic community in the long run. The joint venture between government and private
sector have launched the special housing program in which, government provided the
facilities and the incentives for the approval and implementation of development programs
and established the less strictly planning standards. The new housing area will be helpful
and increase the opportunities for low and middle income households to extend their
homes rather than small and narrow. This program may cause problems in the competition
between low income housing and other uses for the relatively expensive land around the
cities. However, low income people can be expected to have more such housing provided
by government with the open space for future private expanding (Graham & Salim, 1999;
Batley, 1991, 1996).
The public sector should not act alone. There must be a new partnership among
governments, the private sector, the third sector and the homeless themselves. Each has a
role, each has limitations, each must strive to understand and cooperate with the other
(Willig, 1993). There is much creative interaction underway among groups and innovative
solutions are being developed.
2.2.2. Private sector in low income housing provisioning

10
 Private sector is the entrepreneurs. They buy and organize the factors of production
such as land, labor and capital, get the houses built and sell the products at a profit which
represents their returns for organizing production and taking business risks. Although they
invests some equity capital, his investment activities per project are short term for he wants
a relatively liquid form of wealth and thus they are not essentially a normal long term
investor unless they develop housing for the purpose of earning income through rentals
(Smith, 1971). Because of being entrepreneur, private enterprises can be various sizes of
organizations and various activities. Their operation and investment are based on the
response of the housing demand in the housing market. The actual production will depend
on the relative attractiveness of profits from low income housing, which vary over time
according to changes in key variable on both the supply and demand side of the housing
market (Paul, 2002; Alan, 1997; Foo, 1992a,b,c; Vincent, 1998).
The larger developers that employ teams of land buyers are also likely to have in-
house capabilities in respect of market research and analysis. Big entrepreneurs are not so
much in mostly of developing countries. Most of them prefer to concentrate on narrower
price ranges as the tasks of marketing when sales and project administration are more
manageable. However, they can implement the big projects with a wide spread of target
prices. Some of them can build with both low and middle costs. In general, the wide
spread of prices and the large size of the enterprises indicated a competitive product market
with other enterprises in virtually housing market (Foo, 1992b; Paul, 2002).
There are a lot of small and medium sizes of private enterprises in developing
countries (Foo, 1992b,c; David, 1992; Sasha, 1996; Pedro, 1999). The medium-size and
old entrepreneurs could be easy to entry the developer industry. They normally came from
the related fields (such as constructors, infrastructure developers, designers, etc.) and most
common previous business was the contractor (Foo, 1992b,c; Pedro, 1999). The smaller
developer is less likely to have the services of an in-house market research team and will
either have to appoint a specialist research organization, or rely on his or her own
experience plus the advice of other professional advisers, such as local estate agents. Many
developers possess almost a ‘sixth sense’ for knowing what will work in their marketplace.
They have either produced a will-tried and highly respected product, or they have the
knack of being able to identify a suitable place in the market (Paul, 2002). One of the most
disastrous things a developer can do, however, is to assume that just because a type of
development has worked before; it will work again, even in a similar or nearby location
(Alan, 1997; Paul, 2002).

11
 The low income housing provisioning of privatization can have the dynamic role
and be substantial in competitive formal housing market. Private sector is a possible
alternative to address the needs of low income groups. Profit motivation in low income
housing can be structured around the rewards for enterprise in successfully building,
developing, and managing housing (Jan, 1986; Marilyn, 1989; Foo, 1992a,c; Kioe, 1996).
Though the number of people living in slums and squatters is still high, the private sector
could have succeeded in accessing the housing need by producing the large numbers of
middle and low income housing units. This can be showed their willingness and ability to
supply more housing for lower-income groups. They can reduce the housing price by
producing new house types and designs, and by applying new marketing techniques. They
get the profit by selling with high volume of housing not by high price. Sometimes, prices
of inputs such as land can rise rapidly and are difficult to control, while other inputs such
as interest rates and the prices of building materials tend to fluctuated over time.
Developers can offset some of the changes in the prices of inputs by varying the form of
low income housing (Kioe, 1996; Foo, 1992a,b,c). The public resource should be
economized by reducing the financial burden on the public sector and shifting it towards
the private sector and the urban population itself. These devices have been chosen on the
basis of an analysis of the market forces of supply and demand. Therefore, other possible
approaches, such as building low income housing, get a low priority, but it is not a prior
excluded for reasons of principle (Kioe, 1996; Jan, 1986).
However, in some cases, private sector cannot access the low income housing
market. The rapidly accelerating shortage of housing and urban facilities, together with the
low income people of most developing countries, indicates that traditional solutions to the
housing problem are simply inadequate. The private sector has failed to meet the urban
housing needs of most countries. Housing programs must be conceived in a broader
framework of community and national policies, and just as there is no single program that
will eliminate poverty, so it is also unlikely that any single program will by itself
effectively eliminate the shortage of adequate housing and urban services (Robert, 1972).
Furthermore, the basic design and incentive structure of the programs emphasized front-
end profits and risk-avoidance for private developers and lenders at the expense of long-
term project viability. Through the limited partnership vehicle, developers could collect
their syndication proceeds and then shift ownership risk to passive investors who were
totally removed from project operations. Lack of private land markets, added to the

12
absence of mortgage facilities in commercial banks, limits the possibilities for the private
sector playing a greater role in solving the housing shortage (GNDS, 1996; Emily, 1989).
2.2.3. Public and private sectors’ low income housing services
Comparing to the public sector, housing products in private sector are more
affected than in public sector. The technical arguments about the requirement of
government involvement in services’ provision indicate that much more private sector
involvement would be possible than is practiced in developing countries (World Bank,
1999; ADB, 2000; George, 1999; Batley, 1996; Rati, 1996; Peter, 1992). Therefore, the
key for urban housing development in the future is to promote private sector more
mobilizing in this field (World Bank, 1999; Pedro, 1999).
Public services rarely achieve comprehensive coverage (ADB, 2000). Therefore,
people are forced or chosen to make their own arrangement. Private sector has involved in
most of services provision such as housing, infrastructure, education, health care, and
refuse collection, etc. The evidence of these provisions is the better private performance
(Batley, 1996; Peter, 1992). In some cases, private sector led the cost reduction and
productivity gain of the private services by increasing competition (Patrick, 1999; Antonio
et al, 2002; Ramina et al, 2002; Foo, 1992b,c). Furthermore, the housing management of
private sector is better than contracts with housing management and maintenance (Mary,
1999).
In housing provision, public housing often limits to access the low income
households, while private sector can provide the wide spread of target prices (Peter, 1992;
Foo, 1992b,c). With the government subsidy, the housing area of the public housing is
normally smaller than private housing and the housing price is incredibly expensive (Peter,
1992).
2.2.4. Relationship between public and private in low income housing provisioning
The relationship with the private sector can be through the simple sales of
government assets, contracting out (whereby the government enters into contracts with
private firms to provide goods and services used by government or demand by the public),
vouchers and subsidies. This movement has generally focused on perceptions of waste,
inefficiency, and poor quality of output in the operations of state-run enterprises, as
contrasted with expectations of dynamism, cost-effectiveness, high quality, and creative
productivity in the operations of private enterprises (Batley, 1991; Willig, 1993; Peter,
1994; Peters and Savoie, 1995).

13
 In the low income housing service, the relationship can be public ownership and
operation, public ownership and private operation, private ownership and operation, and
joint ventures. The public ownership and operation can be pure public provision by
government (Batley, 1991, 1996; Sasha, 1996); or pure public provision which has direct
and indirect provider roles between government or government and public agencies; or
partly contracting out to the private sector (Batley, 1991, 1996; Peter, 1992; Sasha, 1996;
Pedro, 1999). The public ownership and private operation is done when government keeps
ownership and private operator implements the provision. The private ownership is the
competitive situation among private enterprises with or without government intervention.
And the joint ventures can be beneficiaries participate in public provision or public and
private providers share different sources on the joint purpose (Batley, 1991, 1996; Paul,
2002).
Most of people prefer the alternatives move from public sector to joint venture and
then move towards freedom of relationship. Especially in infrastructure and services
development, joint ventures and private sector could be the proper delivers (such as water
supply, drainage system, sanitation, solid waste collection, etc.). In property development
for housing development, the suitable relationship can be public negotiation on land
acquisition or land compensation. Then private developers will reduce risk for doing the
contracts (Wolff, 1999; Paul, 2002; The Global strategy for shelter to the year 2000, 1991).
The housing construction can be alternative to joint ventures, private sectors, and
individuals. Though the private sector can provide those services at the first or earlier
stages, but it is possible for the public sector in the earlier stage (Alpana et al, 2001; Paul
(2002). They also prefer to develop projects that contain a mix of public and private
buildings. The better programs and more money for affordable housing will be found in a
mixed economy of private entrepreneurs, investors, nonprofits, tenant cooperatives, public
agencies, and families who cannot afford the full cost of housing in the private market
(Marilyn, 1989; Paul, 2002).
Private sector may play an important part in bringing the development project to
fruition. The cooperation among private sector is to raise resources and capital (Sajor,
2003). Public private partnerships may have the effect of reducing the cost to the public
purse, while still enabling both parties to meet their objectives (Batley, 1996; Peter, 1994).
2.3. Constraints of private sector in low income housing provisioning
2.3.1. Land for low income housing development

14
 Many studies argued that there is not enough brown land to satisfy demand, that
many of our old industrial sites have already been reclaimed, that the cost of reclamation is
too high or that sites are in the wrong places. While there may be some truth in these
arguments, it does not mean that opportunities to redevelop previously develop land should
be ignores or rejected (Paul, 2002).
[Link]. Urban land resource
Urban land in most of developing countries belongs to the government. The
government does planning for urban land use and environmental facilities. To ensure
flexibility and to share financial burden of housing sector, it is desirable to have multiple
options for land acquisition. In fact, the available land is the major obstacle in the low
income housing delivery system. There are many land regulation and legal tools on urban
land. This could be avoided by involving to other sectors to raise more land for low income
housing provision. By these approaches of land access, the housing development has not
incorporated into the city (Vincent, 1998; David, 1992; Alpana et al, 2001). This would
made ineffective development of housing and urban land resource.
Generally, in developing countries, when there is not enough land to satisfy
demands for residential and commercial developments, especially in the urban core area.
Housing land is shifting to outlying or sub-urban areas as well as infill locations to get
more profits (David, 1992; Paul, 2002). By the strong demand of land for housing and
commercial and industrial development, urbanization is clearly shifted to the fringe areas.
However, these areas are often limited infrastructure and support services (David, 1992;
Foo, 1992b).
Urban planning (including master plan, detail plan and planning tools) is the
important factor to government and developers in access of low income housing
development. The suitable planning will increase more land for affordable housing.
Additionally, lack of power on land control will reduce the impact of land and housing
prices through the informal land market and land speculation (Stella, 1993; Alexandra,
2001; Paul, 2002).
Because of land scaring and high land price, the developers will seek to secure land
well in advance of requirements and ensure that they are not competing with other
developers for the right to develop that land. Therefore, land banks can be divided into two
categories: current, usually land with planning permission and ready for immediate or short
term development; and strategic, where planning permission does not exist, major

15
infrastructure works may be required and development may be many years into the future
(Paul, 2002; Sasha, 1996).
[Link]. Urban land price
Another constraint of land in increasing low income housing demand needs to
increase the amount of housing investment; it is always likely to raise its price and the cost
of land. Then the cost of serviced plot would have become expensive. The rising land price
caused the big problems in cities with physical constraints on the supply of land.
Therefore, the cities’ government has difficulties to keep up the demand for services. Some
other additional constraints such as land speculation and inflexible or inefficient local
authorities in licensing procedures led the cities’ big problem in land shortage. The
government with the small housing subsidy scheme could not overcome with these
constraints. Thus, the affordability problems of housing would get worse (Alan, 1997).
In the urbanization areas, there is the fast conversion of land in the urban edge.
Because of no land-use controls, this rapid conversion of land in these areas has
contributed to increases in land prices. Furthermore, housing demand also pushes the urban
land price up (Foo, 1992b; David, 1992; David, 1991). The unsuitable land control or
restrictiveness of local land policy causes the increasing of informal land and housing
market and makes the land and housing price increased (Pugh, 1989; David, 1991; Sasha,
1996; Wolff, 1999; Casey et al, 2002). The major causes of price increase are land
speculation and a shortage of infrastructure (Sajor, 2003; Foo, 1992b; David, 1992; Stalla,
1993).
2.3.2. Finance for low income housing development
Financial approaches for low income housing provisioning in development
countries can be in different: Without government subsidies, the private sector was still
able to supply the low income housing with the high quantity. The private developers dealt
with banks to loan for housing development (Kioe, 1996).
The housing finance market was still depended on government’s role in the overall
financial sector. However, the government has tried to stimulate economic development by
controlling interest rates and directing credit to priority sectors. The housing finance
schemes for low income households need to take place simultaneously (Thavinpipatkul,
1997; Peer, 1997; Wang and Alan, 2000). Though the city has formal financing institution,
it is just for the majority of the population, not for low income people. The private sector’s
financial institutions are the principal source of housing finance. It provides the majority of

16
all mortgage lending. However, it is for short term lending. The commercial banks are
limited participants in long term housing finance (Robert and Mark, 1999; Sasha, 1996).
There are many different ways in which development projects can be financed. The
extent to which banks and other financial institutions will be prepared to provide finance
depends upon a number of different factors. Joint venture may provide an alternative to
bank finance and they may also be entered into for many other reasons (Sajor, 2003; Paul,
2002). A landowner may enter into partnership with a developer. Profits and losses, from
joint venture can be shared in a variety of different ways (Paul, 2002).
Private sector’s involvement in land development and housing construction would
increase efficiency and effectiveness and reduce the financial burden of the government. It
would change the single channel of the government financing system and expand the
financial sources of housing investment (Alpana et al., 2001, Paul, 2002).
2.4. Government’s intervention in low income housing
The policy and administrative process in developing countries are normally weak
and ineffective (Paul, 1990; Willig, 1993). Government commitment should play several
explicit and implicit roles in involving private sector in low income housing provisioning
(Willig, 1993). To enhance the private sector’s role in the housing market, government
must enable housing producers to have access to the needed inputs to housing production
(e.g. residential land, building materials and equipment, skilled labor, infrastructure
networks) as well as enjoy sufficient financing and easy entry into the housing sector.
Government also enables housing finance institutions to compete for deposits on equal
terms with other financial institutions and to land at favorable interest rates (Peter, 1994).
Housing for the low income people must be the big concern of the governments in
developing countries. The development still requires the government to play a key role in
planning, policy, subsidy, and regulation (ADB, 2000; United Nation, 1991; Robert, 1972).
To have the effective housing supply meet the low income housing demand, urban
agglomeration economies can link to wider macro economic growth and human
development. The social science links to economies of scale and scope, income and
employment generation multipliers and inter-sector economies and competitive production
(Pugh, 1997; Foo, 1992; Christopher, 1991; Sukumar, 2001; Leslie and David, 1978).
Government should encourage not only the regulated enterprises, but also all scale
builders, even small, large or entrepreneurs can develop housing effectively. By taking
subsidy and land price reduction from government, the developers will set the lower

17
housing price with the low profit margin so that the poor and low income people can afford
to access the house (John, 1995; Alan, 1997; Uche, 1997; Mark, 1998). Government has
supported financial institutions as the way to ensure their long term viability and to
stimulate the production of housing. Without tax incentives and direct subsidies, supports
to financial institutions would not have produced much low income housing on their own.
By these public incentives, private sector could have a longer lifespan in low income
housing provision (Rachel, 1989).
By providing land for housing development, private sector then acted as the
constructors rather than developers to limit their financial risk (Global strategy for shelter
to the year 2000, 1991; Mary, 1999). Land delivery would involve a combination of the
public sector, private sectors and other agencies. The government should have the role of
facilitator and monitor (Alpana and David, 2001; Global strategy for shelter to the year
2000, 1991; Mary, 1999).
To support the private developers in low income housing provisioning, other
important factor that government should be concerned to mobilize more housing is urban
land planning. The planning system must provide an adequate and elastic land supply for
housing to interest developers. Government should enhance the institutional structures for
land administration and land management to reduce the land speculation and increase more
urban land space for development (Cherry, 1980; Uche, 1997). It must also ensure that
established environmental policies are maintained and enhanced. This will reduce the
environmental and social impacts as well as the government’s burden (Cherry, 1980; John
and Michael, 1996; Uche, 1997)
In land control, the role performed by the private sector in the housing provision is
rather extensive. A control should be maintained to ensure that the private sector did not
capitalize the free land provided by government or local authorities (Global strategy for
shelter to the year 2000, 1991).
Thus, the housing supply needs to have a new paradigm to be adopted if the
housing challenge is to be met. Vincent and Joseph (2001) emphasized the necessity of
shifting from state provision towards the private sector participation in housing
development. When the cities expanded, the poor financial resources and the limitation of
public provision cannot persuade the housing needs. Instead of being the role of provider
in the housing sector, the government should concentrate on reforming and managing the
legal, regulatory and financial policy framework. In this way, the government creates the
environment to developers in providing housing.

18
2.5. Summary
The economic growth in the urbanized and industrialized cities in developing
countries caused the migration flows and population growth. This increased the housing
demand. Because of government’s financial deficit, public sector cannot provide more
housing for low income people. Housing shortage and affordable housing are mostly the
big problem in developing countries. Private sector, working for profit, as the potential
developers can provide low income housing with the better product. However, lack of land
market (such as land resource, high land price, etc.) and weak of government role (such as
subsidy, policy, etc.), private sector cannot play the greater role in this field. There are
various kind of relationship between public and private sectors, though; their relationship
is not strong in sharing the low income housing market. Government should have a greater
commitment to the private sector in involving private sector in low income housing
provisioning.
Through this chapter, the author discussed about the housing shortage and the roles
of public and private sector in low income housing market in HCMC. The comparisons of
low income housing services between public and private sectors were also implemented to
clarify the better private performance. The author also analyzed the important constraints
which restricted private sector to promote their greater role in low income housing
provisioning, such as urban land resource, urban land price, and government commitment
in this field. Then, some implications of government commitment were suggested to
encourage and support private sector in this field.
This chapter was the basic knowledge for the next chapter in determining the
methods and principles for the study research and for data collection. The type of research
and special study area could also be determined.

19
 CHAPTER III
RESEARCH METHODOLOGY
This chapter describes the system of methods and principles for carrying out this
study. It explains nature of study, phases of data collection. There is also description on
required data: what they include, from where and how they are gathered, and how they are
interpreted.
3.1. Type of research:
This is a descriptive, comparative and explanatory research on the private sector’s
involvement in the low income housing. The study tries to describe the private sector’s
characteristics and degree of involvement of low income housing provisioning. Then it will
attempt to explain why private sector cannot develop their greater involvement in low
income housing sector. Their potential investment in the future low income housing will be
also researched. This study also concerns about the relationship between the public and
private sectors and government intervention in the context of mobilization for low income
housing.
This is also the mixed method research of qualitative and quantitative research.
With the principally qualitative method, the research has discussed about the
characteristics of private and public sectors and their relationship to show the current
situation and problems in mobilizing the low income housing. The quantitative method
then helped to understand the quality of public and private sectors’ low income housing
services and housing demand. The qualitative was also used to analyze the main
constraints which have impeded private sector in low income housing provisioning.
3.2. Study area:
The study focused in HCMC, where the housing needs of the low income people
are very high and where there are the potential projects of low income housing. The
specific study area is in District 8, which has some low income housing projects of public
and private sectors built in the same period of time. This area was determined on the basic
information after consultation with the city authorities. This area could be a significant
example to illustrate the low income housing situation and the private sector’s participation
in providing low income housing in HCMC.

20
Map 1: Study area (HCMC) and Special study area (District 8)
Source: The Geography Information System Office of the University of Social Sciences and
Humanities, HCMC, created in April, 2006.
3.3. Data collection
The study needed to collect both primary and secondary data to describe and
understand the first three questions and support for the last question. The data collection
included five main factors related to the low income housing provisioning context in
HCMC. They were low income housing, low income people, public sector, private sector,
and government intervention on mobilizing low income housing in HCMC.
The data collection should be clear to make the study efficient. Therefore, the
methods of data collection must be identified as following:
3.3.1. Primary data collection:
Primary data was gathered through onsite observation, surveys and qualitative
interviews. Onsite observations included notes and photos empirically describing the study
area. The qualitative data was collected from the interview of public and private sectors’
key informants as well as the housing management officials. The quantitative primary data

21
collection is based on the survey questionnaires of the low income people living in the
public and private buildings and in the rental or relative’s houses. The quantitative data
was collected to support the qualitative data on the housing services’ comparison of both
sectors and the low income housing demand.
Direct observation included notes and photos, which were described empirically the study
area.
Unstructured interview (or non-standardized interview or in-depth interview) was carried
out on the public and private housing development companies’ managers, the City and
District level housing managers:
 In-depth interview was carried out on ten public housing development companies’
managers and twenty private housing development companies’ managers about their
characteristics, attitude and behavior on low income housing conditions, general
problems/constraints in provisioning the low income housing. Each of the key
informants was interviewed in approximately 30 to 45 minutes.
 The City and District housing program managers were in-depth interviewed on five
City level officials and five District level officials in 30 minutes about their attitude
and behavior on the current situation of the low income housing provision, the
problems and constraints to the private sector in provisioning the low income
housing.
Some public and private sectors’ key informants and government housing managers
were interviewed the several times (two or three times) to confirm or/and get more
information.
Questionnaire surveys as carried out on the low income households to understand the
quality of the low income housing services provided by public and private sectors (after the
in-depth interview of public and private sectors’ key informants). It was also implemented
on the low income people who live in the rental or relatives’ houses to know about their
current housing demand. These households were random chosen in the sub study areas.
The questionnaires were carried out on three samples:
 The first random sample of 60 households, who are living in the private housing
project. Each household was interviewed in 30 minutes.
 The second random sample of 60 households, who are living in the public
constructed housing. Each household was interviewed in 30 minutes; and

22
  The third random sample of 50 households, who have no house and live in the rental
or relatives’ houses. Each household was interviewed in 15 minutes.
The first two samples were used to make the comparison of the housing services
supplied by private and public sectors in terms of the physical quality of the buildings,
technical and social infrastructure system, sizes and housing prices, and housing
management services, etc. Then, there were some recommendations of the low income
households to the future low income housing needs. The last sample was used to
understand the current housing situation of the low income people in HCMC and their
expectation of the new houses as well as the way to buy the new houses.
To ensure the validity comparison of housing services provided by public and
private sectors, these samples were chosen in the same period of construction time (2000-
2005) in the same area (District 8).
3.3.2. Secondary data collection:
Secondary data and information including related quarterly and annual reports,
publications, documents, statistical data, maps, articles, journals, etc, were collected from
the following different sources:
The housing policy, law and regulations (such as Decrees, Directions and
Adjustment on low income housing program) were collected from the central and City
government websites. In the People’s Committee of district level, it provided the general
information and documents on low income housing program and its services of public and
private sectors. In the HCMC Cadastry and Housing Land Department, HCMC
Department of Construction, the general situation of low income housing, the role of
public and private sectors in low income housing as well as their low income housing
services. In these departments, the problem and conditions for public and private sectors in
providing low income housing, the reviews as well as the plans for public and private
sectors’ activities in providing low income housing were also collected. The information of
public and private housing development enterprises in HCMC were also collected in their
companies. The information of the State banks and commercial banks were also collected
to know about their situation, roles and supports for public and private sectors in low
income housing provisioning.
The previous researches were collected from the international journals, articles,
reports, and from the domestic journals, articles, and dairy newspapers (such as Saigon
Giaiphong, Tuoitre, Thanhnien, Mua&Ban, Vietnam Express, Vietnam Net, etc.,).
3.4. Data analysis:

23
 The data collection of the study area was analyzed with the mixed methods of
qualitative and quantitative. The quantitative analysis was used to understand the current
housing conditions, of the low income housing supplied by the public and private housing
companies. The households’ attitude and behavior about those factors were also identified
by quantitative analysis through questionnaires.
The qualitative analysis was used to know the attitude and behavior of the low
income housing producers and housing program managers about the current situation,
problems and constraints in low income housing provisioning, as well as evaluate their
attitude about the future conditions for private sector in mobilizing the low income
housing.
Secondary data was used to synthesize, analyze, mapping, and explain the
contextual issues and the impact factors such as the historical development of the low
income housing, the role of the public sector and the extent of the private sector’s
involvement in the current low income housing provisioning, the problems and constraints
private sectors in this field. The secondary data was also used to analyze the current
government intervention in mobilizing the low income housing.
In sum, the nature of this study is descriptive, explanatory and understanding with
addressing the research problems, identifying the research questions and objectives,
collecting data, analyzing data, and answering research questions.
3.5. Summary
The nature of this study is descriptive, comparative and explanatory with four
phases comprised of (i) addressing research problem and stating research questions and
objectives, (ii) collecting data, (iii) analyzing data, and (iv) answering research questions.
Primary data for research were from surveys and interviews. The surveys were conducted
on three random samples of low income households: two samples in the public and private
sectors’ housing services and one sample in rental and sharing housing area in District 8,
HCMC. Qualitative interviews are carried out on public and private enterprises,
government officials, housing managers, etc. Secondary data are from prior studies,
official records and legal documents. Both qualitative and quantitative methods of data
analysis are employed in this study.
The methodology was is the basic knowledge for determining the situation context,
problems and constraints, and the roles as well as characteristics of public and private
sectors for the following chapters. The methods for data collection must be determined to

24
find the problems, constraints, and capabilities of private sector in low income housing
provisioning.

25