Worker Housing Opportunities

Viet Nam Overview

Worker housing is affordable accommodation specifically built for workers, often those employed in nearby factories or industrial parks (IP). Worker housing provides safe and comfortable living conditions while addressing housing shortages in certain areas.

Worker housing has certain differences from social housing, primarily in location and legal standing. Social housing can be developed anywhere, while worker housing responds to the demand from mostly within industrial parks or surrounding areas. Social housing buyers can receive land use right certificates (LURCs) for freehold or 50-leasehold, and have the right to resell to eligible buyers after at least 5 years from the date of purchasing or lease-purchasing. Most worker housing is operated in the form of rental accommodation. Development can be public or private. IP developers, IP manufacturers, and real estate developers are the main suppliers of worker housing. 70% of worker housing in the Northern provinces is provided by IP manufacturers.

Worker housing is a low-rise residential building maximum of 5 floors without an elevator. The parking area is designated on the ground level. Some supporting amenities include a community area, canteen, minimart, green space, and playground. There are single and family unit types. The average room size for a single type is around 30m²-35m² for a maximum of 6 people sharing. A family type has an average size of 25m² for one household of 4 people. As regulated, the minimum standard unit area for worker housing in industrial parks is 5 m²/person with a maximum of eight people. Each room is equipped with basic complete including 1 bedroom, 1 restroom, with/without a kitchen.

Worker housing is still in shortage in Viet Nam. It is recorded that Vietnam has around 4.5 million laborers in IP, half of which requires accommodation equaling 12.5 million m² GFA housing demand. Currently, there are a total of 122 completed worker housing projects with 2.7 million GFA m²; sufficient for only 20% of the demand. Given the shortfall, individuals are building lodgings close to industrial parks. However, many of these houses are dated and overcrowded, with health and safety risks. 

Figure 1: Worker housing in Trang Due Industrial Park, Hai Phong City

What Policies and Incentives Apply to Worker Housing?

Previously there was no clear legal framework or definition for worker housing. Resolution 33 was passed in early 2023 and has made significant commitments to worker and social housing. The development and commitment to social and worker housing are now embedded in national and local government planning.

There are policies to encourage investment and development, and support packages for workers to access housing products. By law, for some specified industrial zones, a minimum of 2% of the total land area of an industrial park must be used for worker housing. Land use fees (LUFs) are proposed for exemption for development land for worker housing. Other proposed financial mechanisms for developers include the exemption or reduction of VAT and CIT, and construction costs can also be deducted when calculating CIT rates. Developers can also access preferential loans from the Bank for Social Policies and other credit institutions operating in Viet Nam.

Workers can access loans from the Government’s credit support package of VND 15 trillion. According to Resolution 33, workers looking to buy or rent affordable properties can access a loan interest rate subsidy of 2% per year for two years from 2022 to 2023.

Worker Housing in Hai Phong

Hai Phong is a leading industrial port city in Northern Viet Nam, its strategic location close to major roads and seaports makes it an important economic hub. As of 2022, its population reached 2.4 million, GRDP growth of 12.3% ranked eighth in the country and second in the Red River Delta. It is also a leading FDI destination and attracted registered capital of US$385 million in Q1/2023. Given strong fundamentals, it is home to leading manufacturers from diverse sectors from textile (Regina Miracle occupying up to 70-ha factory land in VSIP Hai Phong), and automobile (VinFast with 335-ha land area in Dinh Vu - Cat Hai EZ), to electronics (LG - Hai Phong technology complex in Trang Due IP with a total area of ​​52.5 ha).

The city has 14 operational industrial parks, 26 industrial clusters, and over 200,000 industrial laborers. Approximately 50,000 are migrant workers. It plans to develop 15 additional industrial parks across 6,000 hectares, which will necessitate a workforce of up to 300,000 and up to 1.5 million GFA of worker housing.

There are two large-scale operational worker housing projects in Hai Phong, including a 278-unit campus developed by LG Display and a 330-unit project in Duong Kinh District developed by Dinh Vang Company.

Worker housing in Hai Phong comprises predominantly rental properties. Worker housing from individual owners in Thuy Nguyen District home to VSIP Hai Phong and Nam Cau Kien IP, achieves gross rent averaged US$3.2 to US$4.2/m²/month. Occupancy for these worker housing in this location was high at 95%. 

Table 1: Worker housing rents in Thuy Nguyen District, Hai Phong City

Source: Savills Vietnam Valuation & Advisory

By 2030, 15 worker housing projects are expected. Priority areas include Dinh Vu - Cat Hai economic zone with 48 ha allocated for social and worker housing, which will deliver accommodation for 38,000 workers over the next five years; VSIP Hai Phong will also deliver worker housing across 5 ha. 

Table 2: Future worker housing projects in Hai Phong City by 2030

Source: Hai Phong City Web Portal

Conclusion

Despite the impending new supply, current worker housing is insufficient. According to Savills Q1/2023 SPPI, manufacturing added 482,000 workers YoY, reflecting the greatest labor demand in the first quarter. From this, private developers can benefit from high demand. Given Viet Nam’s continued industrial development, healthy FDI inflows, significant manufacturing workforce, and strong investment policies, worker housing will be an attractive niche sector.

If you are interested in learning more about worker housing development in Viet Nam and the potential the market holds, please contact Ms. Nguyen Thi Hong Van, Associate Director, Valuation & Advisory Services, Savills Vietnam. 

Read more:

Commercial and Residential Real Estate in Hai Phong