Friday, March 25, 2011

The State and Housing

Ub Post
March 25, 2011

As a next parliamentary election approaches, the Government is increasing the size of its housing project and is reducing the interest rate of housing credit.

Last week, the Government passed a decision to implement a 100,000 Family Housing Project and thus keep yearly interest rate of housing credit below 8%.

It is the right time to judge if the decision is feasible or not, who will pay for real expenses and what should be taken into account in order to implement this challenging task, and express own views and positions from the point of civil society.

Ulaanbaatar City needs some 200,000 family apartments so far. If to look back at previous housing projects before implementing this ambitious project, we need to have completely new approach of governance, urban planning and investment etc. With respect to governance or state policy, it is obvious that Mongolian government possess no integrated long-term policy regarding the housing and that its actions are limited only by populist promises made between elections with intention to win them.

Actions taken by authorities are often ephemeral as they do not think before acting but act before thinking. For instance, three years ago the authorities proudly laid a foundation stone to build Power Plant #5, a new power source crucial for the city’s housing project, in Uliastai, eastern uptown sub-district of Ulaanbaatar City.

But they have changed their mind to build it on the base of existing Power Plant #3. Such a careless and irresponsible treatment to such an ambitious and important project makes us think that they never undertake proper surveys and studies or they work under someone’s pressure.

In both cases, it is visible that the authorities are not satisfactorily negligent and responsible and lack strong governance management. Moreover, our government in every stages measure its action results according to the amount of money spent but not to achievements made and outcomes reached and what Mongolian people did benefit from that.

For instance, when I tried to find out how many families managed to get modern apartments thanks to government’s 40,000 housing program, the only information I managed to get from the official website administered by Housing Financing Corporation, the government’s agency in charge of the program, was that a total of MNT31.4 billion was spent for housing projects in Ulaanbaatar City and rural provinces between 2007 and 2009 under the government housing program and current balance amounts to MNT1.3 billion”.

Would not it be more important for citizens to know not the amount of money spent but the number of families got apartments so far under the program?

It can be concluded that there is no urban planning for Ulaanbaatar.

If there is, it must be a special plan that is against the will of citizens and that is intended to make our lives more complicated and more uncomfortable.

If they even had a plan to implement, their plan must have been to build dwelling apartments inside high school yards, on kids’ playgrounds, blocking the roads, cutting the flood-control dams or filling the spaces between buildings.

In a civilized country with good governance, infrastructure system is provided prior to building apartments. But it is different in Mongolia.

First we build apartments and afterwards build infrastructure. As result, every family in ger districts dig own water well in own yards and transport sewage separately.

Even if we hired saboteurs to make planning and undertake it for us, the situation would not be such a catastrophic like today. There are few extraordinary abnormalities existing with respect to housing investment source and selling prices.

Existing infrastructure access and capacity of water, sewage and electricity in Ulaanbaatar City is no longer able to afford the city’s increasing demand because authorities allows to build apartments in every free spaces close to infrastructure system in a disorganized way.

Housing land licensing is still tricky and hidden for ordinary people like mineral licensing. Reselling these licenses at higher price is the biggest and most profitable tax-free corruption source. It is not a secret anymore that the size and scope of this licensing business is getting bigger and bigger, making it a certain political power already.

A reason that hikes up apartment price is the corruption money to get housing land license and other relevant permits. The decision to keep housing credit interest rate below 8.0% as stated in previous program and 6.0% as in new program is beyond reality.

Current yearly rate of commercial banks or money market is 14% means that the margin of 8.0% would be paid by budget or by taxpayers.

It is a government’s attempt to regulate market price of goods and service. In all cases where goods & service prices are not regulated by market’s rule of demand and supply, final victims of it are consumers on long-term basis.

Government’s interference never reduces market price of goods and services, meaning there no balance between demand and supply. The Government decides to “issue housing credits with interest rate of 6% to middle-class families without own apartment in possession”, which means all citizens without apartments.

The priority of the housing program should be to build one or two storey cheaper dwelling apartments with access to hot and cold water system affordable by low-income families.

In order to build such apartments, it would be faster if turn lands owned by citizens into investment.

It is efficient that the government issue bonds and get long-term credit in order to make infrastructure investment. Besides, distinguishing of population by their employment with public service not by income level in order to provide with apartment with preferential conditions, makes their interest to work with public service which would make the government more cumbersome.

The time has come to take into consideration the above problems concerning the governance, urban planning and capital source before launching successive program.

Translated by P.Shinebayar

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