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Housing mess

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A total of 190,000 households are living in ger districts currently. Providing ger district households with apartments is not only a matter of housing but also a big challenge for Mongolia’s development. It also goes without saying that housing will be instrumental in getting rid of air pollution in Ulaanbaatar. Furthermore, it is hard to use the term “urban households” when referring to households that have no running water.

During the last two years, since the management of our capital city was transferred to a different political party for the first time in history, we had an increased number of housing projects progressing simultaneously. Senior management of the capital city visited the United States, the Republic of South Africa, Singapore, and Korea to learn their experience in public housing. However, Ulaanbaatar residents are more interested in the outcome of housing projects than how many projects there are and how they will be implemented. We, the residents of Ulaanbaatar, need to have our own apartments as soon as possible which offers basic living conditions.

Ger District Redevelopment Project

Fifteen months ago, the Ulaanbaatar Citizens’ Representatives Council, commonly referred to as the “City Council,” approved a project to redevelop seven ger district locations into modern apartment areas. The Ger District Redevelopment (GDR) project’s pipe construction alone costs 35 billion MNT. The project is expected to be completed by 2019 and provide 92,500 households with apartments. A total of 15 companies will implement this project and are expected to deliver 5,800 apartments this year and another 9,500 next year. The project is managed by D.Battulga, Chairman of the Ulaanbaatar Citizens’ Representatives Council.

Government Housing Corporation Project

Eight months ago, the government made a decision to provide a funding of 100 million USD to establish a Government Housing Corporation (GHC) on the foundation of the Housing Finance Corporation. The corporation is aimed at building affordable housings for people opting for the eight percent interest mortgage program. The mortgage is being provided to people who have a full-time job and have paid a down payment of 30 percent. Furthermore, renting options are available for public servants, young families, people with disabilities, and elders. Loans that existed with the Housing Financing Corporations were fully transferred to the State Bank. This project is directly managed by the Prime Minister.

Ulaanbaatar Housing Corporation Project

Several days ago, a new project that targets people who are not able to make a down payment was announced by the Mayor of Ulaanbaatar. This project will allow people to put 25-30 percent of their salary in a housing accumulation fund every month to receive an apartment three to five years later. Afterwards, they will be eligible to gain ownership of the apartments by making the required monthly payments. It is expected that the Ulaanbaatar Housing Corporation (UHC) will receive 20,000 apartment orders in the first year and accumulate 50 billion MNT, which will allow them to commence the work to build two housing districts. They will build apartments in six locations that are owned by the city. This project is expected to run much faster as there will be no need to relocate ger districts from those locations. It looks like that the mayor will be in charge of this project.

Using the same approach, every province can establish an Aimag Housing Corporation (AHC). When many projects are implemented simultaneously, there could be overlapping management and organization. Such problems could lead to conflicting management, fights over authority, and ineffective spending. It means that we have to starting thinking about it now.

The policy on public housing has to be simple, clear, and highly efficient. The main reason for government involvement in housing is to provide mass housings at an affordable price in a shorter amount of time. The government has started to build studio apartments for elders and people in home care, rental apartments for low-income families, and apartments for middle-income families and above. It will also be efficient for the private sector, not the government, to build houses with spacey backyards for those with higher incomes.

HOUSING AND DEVELOPMENT BOARD

A project to build 200,000 apartments in the capital city is not only a construction project but also a matter of development. Therefore, we have to be wise in project management and organization. Although Korean models are similar to ours in terms of formatting, it seems that the Housing and Development Board of Singapore is more suitable to our case. Integrating different managements of the corporations mentioned above will better meet the needs of a country with a small population like us.

Since the Housing and Development Board of Mongolia (HDBM) will belong to and be governed by the government only, its highest authority should be the Ministry of Economic Development. Branch offices of the HDBM could be established in the capital city as well as province centers and be managed by local governments. It will be more efficient to have the Ministry of Economic Development provide high-level management, methodology, research, and evaluations to local governments, which will be working under integrated budget and funding.

The HDMB should be a limited liability company and eventually become a shareholding company. In terms of structure, the HDMB can have two main departments, one in charge of construction and another managing lands and corporations. The construction department should be responsible for planning and construction of infrastructure and buildings, research and development, building quality, and tenders. The other department could have a simple structure where they have two divisions; one in charge of real estate management, housing management, public involvement, and production, and the other managing the relations between corporations, financial and information services, laws, and internal audit. Apart from the two main departments, a third department needs to be established for research and studies.

The 400,000 hectares of land owned by Ulaanbaatar is quite a huge capital itself, therefore, it should have the same level of management, by the corporation that is in charge of its funding. The corporation should be able to issue bonds and raise capital to fund construction and purchase lands from people at market rates, which is the fastest method for land acquisition. Also, another way of raising capital would be by selling lands owned by the capital city for higher prices.

In terms of funding, the Housing and Development Council should establish a fund besides the public budget and raise capital by issuing local bonds, setting up a lottery in apartment sales, and land auctions. Singapore has a Central Provident Fund that collects all compulsory taxes from both employers and employees into retirement, healthcare, and housing (ordinary) accounts under the name of employees. It is allowed to make housing payments from an ordinary account.

Besides the proposal from the mayor to collect 30 percent of salary for an accumulation fund, every housing project needs a mechanism that will ensure a timely completion of the project and guarantee that people will move into their apartments in time. The Mayor’s reassurance that the government will not go bankrupt is just not going to be good enough. South Korea solved this problem by establishing a Construction Guarantee that is owned by the government (55 percent), commercial banks (18 percent), and construction companies (14 percent). This organization provides all remainder funds needed for a successful project completion in case a construction company fails to complete its project within the deadline.

In terms of organization, international tenders should be announced only after finalizing the policy and mechanism. Otherwise, we will repeat our experience where a newly formed government denies the previous processes started by the former government and freezes large projects, stopping their progress.

Furthermore, it would be great if our mayor resolves the issue of heating and power sources by immediately starting the construction of Power Plant No.5.

If the housing projects in our capital city are successful, it will produce many positive changes including the recovery of our economy, shrinking of ger districts, and reduction of air pollution.

SOURCE: UB Post




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