Economy, Business And Markets

Home Ownership on Hold

Home Ownership on Hold Home Ownership on Hold

Governments have launched a host of initiatives to promote home ownership among low-income families in the past decade. Affordable housing projects like Mehr and the recent hike in mortgage ceiling have fallen short of their promises, leaving Abbas Akhoundi, minister of roads and urban development, with little encouraging news to deliver during his TV interview Tuesday night.

Akhoundi noted that Housing Affordability Index showed home ownership is on hold for Iranian households and the picture is even bleaker for families on a lower median income.  

“The typical first-time home buyer now rents for 11.8 years before buying a house while the global average for that period is only six years,” he said, warning of a crisis. “For the three lowest deciles, this period can be as long as 25 years.”

The top housing official added that while in the past, 60% of new housing units would end up being sold and 40% would be rented, now the trend has reversed, marking a decline in home ownership.

Akhoundi touched upon the density index for residential units and said while 1.05 density was not a bad figure, it becomes disturbing when applied to different neighborhoods.

“That is because we have 1.6 million vacant homes in the country which is indicative of imbalanced distribution of homes,” he added.

“We intend to turn the waiting period for buying homes back to six years this hinges upon many factors, including macroeconomic ones.”

 Strained Finances  

The minister remained pessimistic about the prospect of housing projects like Mehr and Social Housing Scheme, saying the stagflationary conditions of the economy made financing a herculean task.

“What we are seeing are the toughest financial years after the [1979] Islamic Revolution while banks are in their worst state with their lending resources at their lowest,” he said.

Akhoundi hoped the newly initiated “Public Property Management” plan would alleviate some of the financing woes hindering the development projects.

“The plan provides conditions for individuals or state-affiliated companies who possess substantial assets but are lacking in liquidity to receive funding through a mediator,” he explained. “Public Property Management is a feasible way to exit recession by injecting cash to enterprises and individuals lacking bank loans.”

He said one successful example of this financing has been achieved in the construction of New Pardis City (in Bumehen District, Tehran Province) where 10 trillion rials ($344 million at the official exchange rate) were solicited through Bank Maskan.  

 Regulation Reforms

As the housing stagnation continues to exert its adverse effects on the economy, a roads and urban development deputy minister warned about  “corruption” in home construction industry and announced plans to reform the system.

Hamed Mazaherian said construction regulation in the country was “severely flawed” and marred by a conflict of interests which made Iran the 170th country in terms of construction regulations.

“Unfortunately all responsible bodies blame each other for the condition, including the municipality which has recused itself from the task, leaving the regulations in a chaotic state,” he said.

He said lawmakers had stopped short of dismantling Iran Construction Engineering Council–the body overseeing construction, but his ministry would intervene to reform the system by launching a threefold initiative.

“First and foremost, we are planning to reform construction laws and then we will move on to change the hierarchy of the council followed by revising the process of issuing building permits,” he said.

Mazaherian said soon two building permits will be issued: one for the owner and another for the professional who takes responsibility for technical matters and safety regulations.