Leading Economic Expert Appraises Housing Challenges

EghtesadOnline: Hossein Abdoh-Tabrizi, a prominent figure in Iran’s housing and finance sectors, has appraised the main challenges facing Iran's housing sector.

News ID: ۷۴۸۸۷۰

04 November 2019

In his opinion, the toughest challenges facing Iran’s housing sector include unreasonably high prices of residential lands, speculative activities, lackluster mortgage market, weakness of laws and high volume of poor housing in slum settlements, the Persian economic newspaper Donya-e-Eqtesad reported.

He believes that to tackle these four issues, decision-makers need to adopt key policies, including improving the access to home financing, supporting private sector in supplying homes and improving the management of residential land market.

“Presently, in addition to indexes and variables of the housing market per se, the distribution of population in large cities is reflective of the adverse outcomes of policies carried out in the past,” he told a gathering at the Institute for Management and Planning Studies, according to Financial Tribune.

“The population of urbanized areas now accounts for 73% of Iran’s total population. Despite the balance achieved in urbanization, infrastructures are still concentrated in downtown areas of Iranian cities, resulting in a disturbing image of housing sector. Iranian cities are crippled by traffic holdups, pollution and social ills.”

The economic expert finds the current system of mortgaging in Iran dysfunctional and inefficient, as evidenced by the fact that mortgage loans hardly account for 15% of Iran’s gross domestic product, “whereas in Britain, for example, the share of mortgage loans stands at 80% of the country’s GDP.”

On top of that, Iranian households won’t be able to service their home loans even if they increase. High inflation rates won’t allow a strong mortgage market take shape in the country.

Abdoh-Tabrizi believes that laws concerning housing sector are weak.

The veteran economist referred to the findings of a longitudinal study in which Mohammad Tabibian and Ahmad Shafa’at, the researchers, suggested that rules and regulations regarding housing sector of the past 100 years were designed with utopian ideals and with no regard for available resources.

“These laws give the government an executive, rather than a policymaking, role. Take the example of a law ratified in 1947, based on which the government was tasked with building 400 residential units. The majority of laws passed since then has been much of a muchness, such as the Mehr Housing Project of the previous administration. In fact, governments that are not capable of producing public goods happen to produce inefficient private goods,” he said.

On the fourth main challenge facing Iran’s housing sector i.e. the large level of indecent housing, Abdoh-Tabrizi said one-third of overall housing in the country is located in undeveloped areas.

“These decrepit housing units lack legal property deeds. They have been constructed on someone else’s land and are not compatible with rules and regulations of land ownerships, land use and zoning [the process of dividing land in a municipality into zones in which certain land uses are permitted or prohibited],” he said.

“There is no way but to recognize these residential units as legal in order to exert more control over their construction, gain access to tax revenues and give better services to their residents who are mostly very poor.”

The economist noted that the government needs to act as a facilitator in the housing market rather than a main player.

“It needs to allow markets to function as normal, take the helm of policymaking, particularly in the framework of public programs for improving social welfare and tackling poverty,” he said.