Corruption is festering and gangrene has set in Iran’s housing market, which condition became symptomatic in the fiscal 2016-17, when the number of vacant homes exceeded two million and prices increased by 100%, Kamal Athari, an expert in urban economics and housing policy, told ILNA in an interview. A translation of his views is as follows:
The government’s approach in housing market is erroneous. Iran’s housing market has been suffering from its rentier, monopolistic system for 15 years now, triggered by the practice of issuing the so-called ‘holograms’ to contractors of urban projects as a way to settle municipality debts.
[The hologram system, a self-styled creation of former mayor and current parliament speaker, Mohammad Baqer Qalibaf, who was in charge for 12 years, enabled the municipality to settle its mounting debts to contractors through a non-cash arrangement and at the same time generate income by selling holograms, which in turn were used by builders to pay their fines for illegal constructions to municipalities.]
The integrity of urban law was compromised; the price of the land was adjusted to rentier rates such that the housing market was hemmed in on all sides by speculative activities whereas a majority of citizens do not have a rentier income. Such a trend rendered the housing market corrupt and dysfunctional, infecting the whole economy because this rentier system drove up interest rates, making loans unaffordable for producers.
Iran’s housing market has been suffering from its rentier, monopolistic system for 15 years now, triggered by the practice of issuing the so-called ‘holograms’ to contractors of urban projects as a way to settle municipality debts
When producers can’t avail themselves of loans, employment rate falls, pension funds go bust and the economy fails to add new jobs.
The axiom that housing is the locomotive of development in Iran is fundamentally incorrect, because it has crippled the housing sector.
The reformist government of former president, Mohammad Khatami, managed to do some damage control; it tried to stem the tide of rentier growth in housing by keeping interest rates low but regrettably its successors fell back on upholding old policies. The axiom was maintained for years despite the fact that the Fourth Five-year Development Plan was centered on the knowledge-based economy.
The government-sponsored Mehr Housing Plan failed to even support middle-income households. You can find individuals who have purchased 3,000 housing units built under the project while only 6-9% of households living in outlying areas have managed to buy these so-called affordable homes. Lack of social support policies for low-income deciles has led to a decline of below 1% in population growth.
[The Mehr project was a large-scale construction program initiated in 2007 by the previous administration to provide 2.2 million low-income people with housing units through free land and cheap credits.]
The increase in rents has led to an increase in the number of people living in slums. The proportion of urban population living in slums has increased from 5 to 30%.
The 50% rise in rent rates, announced by the Central Bank of Iran, would increase delinquency rate. For example, during the administration of former president, Mahmoud Ahmadinejad, the surge in rent rates resulted in a threefold increase in delinquency rate. As many as 300,000 jobs were lost only in Tehran.
The rise in unemployment, housing prices and informal settlements would eventually lead to the proliferation of social ills in Tehran.
