The Thai government’s plan to boost the economy and provide low-income housing is illogical, unsound and, according to Dr. Sophon Pornchokchai, President of Thailand’s Agency for Real Estate Affairs (AREA) will cause problems for the government.
During the past few months, the new economic team of the Thai government led by Dr. Somkid Jatusripitak has tried to push the low-income housing schemes with two aspects of anticipation, according to a statement from AREA.
First, it is expected to help boost the economy and second, is the aim that this endevour would become a masterpiece of the government.
However, according to Dr. Sophon, the aims might not be accomplished and, on the contrary, this scheme could be a crux for the government, or even help the opposition.
This so-called ‘kid’ scheme of Dr. Somkid has many weaknesses, according to Dr. Sophon.
The Ministry of Finance, he said, received the wrong data indicating there will be a demand of 2.5 million housing units during the next two years.
AREA said that actually, the average housing supplies are more than 600,000 units each year provided by the private sector. There is no housing shortage in Thailand. House prices and rents have never been a complaint in terms of affordability.
The Ministry of Social Development said there are some 2.7 million of the poor in Bangkok, something that AREA also disputes. It said that nowadays only some 10 percent of the population are considered poor.
It said most of them are in upcountry and most have their own homes. There are only a few hundred thousand in Bangkok, AREA said, which is a lot smaller than the number of slum dwellers. Hence, most slum dwellers are not poor.
AREA said the government would resettle those squatters along the canals in Bangkok however, most of them have already resettled elsewhere.
Dr. Sophon said that sarcastically, a pilot project will be built on a piece of land costing THB 800,000 per sq wah, or US$ 5,600 per sqm. There would be 1,000 units available and expected to sell to ‘the poor’ at THB 600,000 per unit. Only some privileged poor may luckily win these units. He said the government could not finish hundreds of thousands of units because they will run out of money however, at least the few units would be some tangible ‘face-lifted’ efforts to help the poor.
He added that financially, this project would not work. Construction costs alone would be around THB 1 million. A really poor family may not be able to afford THB 1,000 per month for the maintenance.
Dr. Sopon also pointed out four major hidden beneficiaries of this scheme.
First are the slum landlords who normally have to be compensated a lot for slum resettlement. If this scheme was successful in providing housing for slum dwellers the landlords will earn a lot. It is estimated that slums are situated on some 9,400 rai (1,600 sqm) of land. Slum land has limited uses therefore the value might be THB 5 million per rai, and would become THB 10 million when slums were resettled. This will help slum landlords earn THB 56.4 billion, he calculated.
The second beneficiaries will be those contractors, expected to be large or international enterprises who have the capacity to build a large numbers of units. Compensation for this construction will not be for the labourers nor for the economy at large, he said.
The third are those building material enterprises, particularly those giant cement and steel companies. During the past year steel prices have dropped 16 percent. The low-income housing scheme would help boost the ‘economy’ of these companies, instead of that of the country, according to Dr. Sophon.
As a lesson, the previous ‘Baan Ur-Arthorn’ low-income housing scheme where Dr. Sopon also pinpointed the problems during 2003 was also a failure. Originally 1 million units were planned, then 600,000 units were confirmed to be built however only 300,000 units were actually built. Tens of thousands were still unoccupied and a lot of those staying there were renters, he said.
In many projects around half of the original buyers moved away after five years.
Dr. Sopon suggested that the government allocate some THB 3,000 per month for the really poor families to rent a house or room on the open market. This will help fill existing empty units without any need to build new ones.
He also suggested a number of publications on the topic of low-income housing that can be of assistance for the Thai government to reach its aims.
He concluded by saying that in his opinion, worldwide experience confirms that the enabling policy by private initiatives is the must. Government housing production is obsolete and unrealistic.
