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Low Income Housing Scheme Will Bring Down Prayuth's Government.
AREA Press Release No. 400/2015: December 29, 2015

Dr.Sopon Pornchokchai, Ph.D. Dip.FIABCI, MRICS
President, Agency for Real Estate Affairs (AREA)

The new econmic team of Prayuth's Government expected that the newly planned low income housing scheme will help boost the economy. Dr.Sopon said this will help bring down the government because of its illogical and unsound rationale.

During the past few months, the new economic team of the government led by Dr.Somkid Jatusripitak tried to push the low income housing scheme with two aspects of anticipation. First the expected to help boost the economy. Second, this would become a masterpiece of The government. However, the aims might not be able to be accomplished. On the contrary, this scheme could be a crux for the government or even help the opposition destroy the government.

This so-called 'kid' scheme of Dr.Somkid has a lot of weakness.

  1. The ministry of finance received a wrong data that there would be a demand of 2.5 million housing units in the next two years (2017). Actually the average housing supplies are over 600,000 units each year provided by the private sector. There is no housing shortage in Thailand. House prices and rent have never been complaint for the affordability at all.
  2. The ministry of social development also had a false statement that there were some 2.7 million of the poor in the city. Nowadays, only some 10% of the population are considered poor.  Most of them are in upcountry where most of them have their own homes. There are only a few hundred thousands of them in Bangkok which was a lot smaller than the number of slum dwellers. Hence, most slum dwellers are not poor.  They said they would resettle those squatters along the canals in Bangkok. However, most of them were already resettled elsewhere.
  3. Sarcastically, a pilot project will be built on a piece of land of Baht 800,000 per sq. wah or USD 5,600 per sq.metre (USD 352 per sq.foot). There would be 1,000 units available expected to sell for 'the poor' at 600,000 per units. Only some privileged poor may luckily win these units. The government could not finish hundred of thousands units because they will run out of money. However, at least the few units would be some tangible 'face-lifted' efforts of the government to help the poor out.  Financially, this would be infeasible. The construction cost alone would be around Baht 1,000,000 per unit. The really poor family may not be able to afford Baht 1,000 per month for the maintenance.

Dr.Sopon pointed out four major groups of hidden beneficiaries of this scheme. First, they were slum landlords who normally have to compensated a lot for slum resettlement. If this scheme were successful to provide housing for slum dwellers. The landlord would earn a lot.  It is estimated that slums are situated on some 9,400 rai (1,600 sq.metre) of land. Slum land has limited uses. Therefore, the value might be Baht 5,000,000 per rai and would Become 10,000,000 when slums were resettled. This will help slum landlords earn Baht 56.4 billion (USD 1.6 billion).

The second beneficiaries were those contractors expectedly being the large or international enterprises who had capacity to build a large number of them. Earning of this construction would not be for the labourers nor the economy at large.

The third were those building material enterprises particularly those gigantic cement and steel companies. During the past one year, steel prices were dropped for 16%. This low income housing scheme would help boost the 'economy' of these companies instead of that of the country.

As a lesson, the previous 'Baan Ur-Arthorn' low income housing scheme where Dr.Sopon also pinpointed the crux in 2003 was also a failure. Originally, 1,000,000 units were planned. Then, 600,000 units were confirmed to built. However only, 300,000 units were actually built. Ten of thousands were still unoccupied. A lot of those really staying there were house renters. In many projects, around half of the original buyers moved away after five years.

Dr.Sopon suggested the government to allocate some Baht 3,000 (USD85) per month for the really poor family (if any) to rent a house/room in an open market. This will help boost the petty commodities as well as those SMEs who build cheap living quarters for the poor without any need to build the new ones.

Dr.Sopon also helped offer a few publications fir the government officers to read and comprehend in order to design constructive housing policies as follows:

  1. Timely Land Acquisition for Infrastructure Development: International Practices for Indonesia. May 8, 2010. A World Bank Project. Dr.Sopon is a co-author. Free download is available here http://goo.gl/RzSJMA
  2. Real Estate Valuation in Global Markets, 2nd Edition. Chicago: the Appraisal Institute, 2010, 617 pp (Edited by Howard C. Gelbtuch and Eunice H. Park.  Dr.Sopon wrote a chapter on Thailand.
  3. Housing Finance Mechanisms in Thailand. Nairobi. UN-HABITAT (2008). ISBN: 978-92-1-132038-1, 100 pp.: Dr.Sopon wrote this publication for the UN. It is also of free download: http://goo.gl/bFEcBw
  4. The Future of Slums and Their Employment Implications: the Case of Bangkok in Akimoto, Tatsuru. Shrinkage of Urban Slums in Asia and Their Employment Aspect. 1998. pp.415-459. This book belongs to the International Lobour Organization. It showed the shrinkage of slums in Bangkok and other world's cities. The case study of Bangkok was written by Dr.Sopon.
  5. 2015 Housing & Urbanization, 200 Cities: NYU Stern Urbanization Project. Stern School of Business, New York University. This is an ongoing project where Dr.Sopon contributed to the case of Bangkok.

Worldwide experience confirms that the enabling policy by private initiatives is the must. Government housing production is obsolete and unrealistic.