Rouhani’s Social Housing Scheme faces Bumpy Start

By Alireza Ramezani, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

Why Rouhani’s social housing scheme faces more than bumpy start

After a two-year delay, Iranian President Hassan Rouhani’s administration is preparing to implement its social housing program.

The scheme aims to provide 570,000 residential units to households on low incomes or with special needs by the end of Iranian year 1400 (March 20, 2022). The proposal was approved Dec. 11 by the Infrastructure Commission, and it is now waiting for final approval from the Cabinet.

Government officials say the program will be a substitute for the controversial Mehr housing scheme, which has been mired in controversy. Initiated by former populist President Mahmoud Ahmadinejad, the Mehr scheme has failed to hit its targets due to what housing experts have called bad financing, poor building quality and inappropriate construction locations.

The Mehr scheme has remained on Rouhani’s shoulders due to commitments the previous administration made, but it is in its final steps now. Indeed, Deputy Minister of Roads and Urban Development Ahmad Asghari Mehrabadi told the official IRNA news agency in August that the massive project will be completed by the end of the current Iranian year (ending March 20, 2017).

The new social housing scheme is to be financed through a variety of sources, including savings from reforms in fuel subsidies and renovation loans offered by banks. The aim of this is to avoid the biggest mistake of the Mehr scheme: borrowing from the Central Bank. The latter policy notably resulted in a surge in inflation in 2012 and 2013.

The first draft of Rouhani’s plan for social housing in 2014 outlined the provision of 125,000 residential units each year for the first four income deciles of Iranian society. However, the government’s inability to secure lines of credit forced it to postpone the program and reduce its initial target to 100,000 units per year, with the exception of the current year, in which 70,000 housing units must be completed.

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