One of the primary factors contributing to the growing cost of living in urban areas is housing. For more than half of Phnom Penh residents, homeownership is financially out of reach, while renting is increasingly eating larger portions of monthly salaries.
In response, the government is taking a more proactive approach by solidifying a partnership with Habitat for Humanity, an NGO experienced in delivering affordable housing cost-effectively without sacrificing comfort, future upgradability, and durability.
However, my experience in architecture and urban design has taught me that design and construction can only do so much to alleviate cost constraints. Architecture alone cannot solve this issue; a multi-disciplinary approach is necessary. Affordable housing can only be viable and scalable if the issue of land acquisition can be resolved. Hence, Cambodia should establish a National Land Procurement Fund (NLPF) to resolve the issue of land prices.
The outcomes of projects in the last decades that involved public-private partnerships, for example, World Bridge Homes and Arakawa Residence, still exceeded the established affordability level, were often too far away from the city center, and offered too few units to satisfy demand. Even when private developers and home buyers received tax deductions, and the design and construction strove to provide decent-quality homes while still keeping prices affordable, it is now not enough to overcome the cost of land in urban areas such as Phnom Penh.
Nevertheless, the government is insistent on a public-private partnership framework, which does not tackle high land cost, while profit motives from real estate developers will undermine affordability and at-scale implementation of housing.
Alternatively, under the NLPF, the government will have a mandate to buy suitable land plots within urban areas to be later developed into affordable housing, therefore, providing it with a tool to side-step the main stumbling block hobbling affordable housing development.
Housing on Public Land: a Lesson from Vienna
The model whereby the government actively acquires and reserves land in a “land bank” for social housing has proven successful even in wealthy urban areas with strong market pressures, as evident in cities like Singapore and Zurich.
Although radical, its earliest proponent, Vienna, the capital of Austria, pioneered this approach a century ago and continues to build upon it. This has allowed Vienna to build social housing units on publicly-owned land, effectively shielding them from wider market pressures.
While other European cities experience high rents and a stagnating level of social housing, according to recent research by the accounting company Deloitte, tenants in Vienna typically pay around one-third as much as those in London, Paris, or Dublin.
Vienna achieved this outcome mainly through the “Fund for Housing Construction and Urban Renewal” that was established in 1984. The fund has a mandate to acquire land and provide plots for social housing construction. It offers the city government a systematic mechanism to acquire and stockpile land for future public use and currently holds 3.1 million square meters of land.
The strategic acquisition of land has allowed Vienna, through its municipal housing provider, Wiener Wohnen, to construct affordable residential complexes on selected plots and maintain direct operations and management of 220,000 dwellings.
By enabling affordable housing at scale, this housing model contributes to Vienna being consistently ranked among the world’s most livable cities in the Economist’s annual index.
Creating Cambodia’s National Land Procurement Fund
Learning from Vienna’s example, the Cambodian government should formulate its own affordable housing strategy centered on acquiring land across its urban centers.
The NLPF should be established as an entity that will enable the government to cost-effectively procure land in urban areas, which will then be developed into affordable housing units.
Similar to Vienna’s strategy, the NLPF should operate in a strategic manner, buying land that is fallow, farmland on the city outskirts, disused industrial sites, vacant buildings, and land that is already on sale to avoid high prices.
The NLPF must cooperate closely with the Ministry of Land Management, Urban Planning, and Construction by prioritizing reserving land for social housing in urban areas. The government should also contribute directly to the fund by redirecting underutilized public land and property to be converted into public housing.
All land purchases should be in accordance with a long-term urban development plan that forecasts the number of additional housing requirements and designates locations of new neighborhoods which are integrated with public transit and public services.
The NLPF should be directed by a board with strong public interest and technical expertise. Its members should represent the relevant ministries but also housing associations, residents’ groups, and independent experts. Members of the board should have a fixed term, with leadership positions elected annually to ensure that the board is refreshed with relevant experience and perspectives.
Selection of the board members should be carefully vetted to prevent conflicts of interest that could influence purchasing decisions for property in which serving members have an interest. Hence, serving board members are required to regularly disclose their personal assets and businesses, especially those relating to property.
All of this, along with other measures such as strictly adhering to laws on public accounting and public asset management, regular auditing, and annual parliamentary hearings, will ensure that the structure and governance of the NLPF are inherently accountable and that it will operate sustainably.
Funds for the NLPF should be annually allocated via the national budget. Even a modest annual budget of 10 million USD, or 0.001% out of Cambodia’s 10 billion USD annual expenditure, can make a difference.
Furthermore, the government should take extra steps to supplement the NLPF’s budgets, for example, by initiating a luxury real estate tax on high-end apartment buildings and luxury hotels. It directly finances the NLPF’s budget while also assisting in maintaining a check on property prices. Moreover, the NLPF should be exempt from the annual property and purchase tax.
Thus, despite the annual expenditure, the government will be gradually building land assets and passing on the benefits back to the public. Hence, in the long run, the model allows the government to secure land when it is still cheap and develop plots later when there is high demand, saving money in the long run.
The NLPF will be the cornerstone of a new affordable housing strategy and will function in conjunction with two other entities that I proposed previously: the National Housing Foundation (NHF), a trust that will manage affordable dwellings transparently and efficiently; and a National Housing Agency (NHA), an independent watchdog and regulator for social housing.
Realizing benefits beyond just housing
Apart from the obvious effect of enabling more affordable housing units, making such a policy decision will generate additional positive knock-on effects, with largely positive impacts for homeowners and renters.
Firstly, there will be competition for private developers, which will push them to improve the quality of their housing units, enhance public amenities, and ensure better quality control. Rather than a one-size-fits-all approach, Cambodians will have more diversity of home choices; from affordable to luxury homes; leasehold to freehold options; and inner-city to suburban living.
Moreover, public green space can be established on publicly-owned lots that are yet to be developed. Thus, benefiting the public even before they are transformed into affordable houses. And when lots are later developed, the NHF will have more leverage in ensuring that public benefits are enhanced along with the construction of new housing.
Most importantly, increasing availability of affordable housing will lower rents and the prices of privately-developed apartments and homes. It will serve to keep prices in check, avoiding an overheated real estate market that could lead to financial instability. Finally, keeping overall home rent and ownership prices affordable for citizens will aid Cambodia‘s long-term economic growth, ensuring that growth is inclusive and sustainable for all.
By adopting a strategy to systematically acquire land in urban areas, Cambodia can accelerate the cost-effective and scalable implementation of affordable housing in urban areas. Therefore, adequate housing—a basic necessity—will no longer be hampered by high property costs. Yet it goes beyond just having a home; it means giving all urban citizens an equal opportunity.
*Aronsakda Ses is a Research Fellow at Future Forum. This article was written as part of the Future Forum’s Inclusive Policy Fellowship, an endeavor supported by the Australian Government through The Asia Foundation’s Ponlok Chomnes II: Data and Dialogue for Development in Cambodia.
