Hanoi / The formalization of the informality

In the previous post, I mentioned the state boundary was expanding to involve the informal sector into the formal system. Doi moi is not the starting point of market economy in Vietnam, but the formalization of the market economy and the ongoing economic changes in many aspects of the country. This will be interpreted in detail by examining the transformation of housing policy.

In Vietnam’s closed socialist period before doi moi, private ownership of housing and land did not exist. Housing was seen as a social service that should be fairly distributed rather than left to market dynamics. Living space was divided and distributed equally by the state. One tube house used to be owned by one family was shared by many families, each family having one room. The socialist housing estates and the French villas were sub-divided similarly.

In an economic system where the state tried to be in control yet lacks capital and power, the role of market didn’t disappear, but went underground. The state power was diluted in urban management and the high rate illegal construction broke down the state boundary. Between the late 1970s to the early 1980s, many housing transactions in Hanoi were carried out in the informal market. Even though following the market logic, the informal housing market was much more volatile compared to those in a conventional market economy, and the housing prices were very low. Without legally recognized ownership, the assets could not be used to obtain surplus value through multiple transactions due to their unfixed nature and uncertainty. The housing property, as a type of capital, could hardly be accumulated under the Vietnamese socialist command economy.

In the late 1980s, the occupation of the private sector in urban housing was estimated for over 80 percent. The housing policy tried to take advantage the private capital since the state power was in weak. Housing as a social service was gradually replaced by elements of market. Since 1989, the state motivated people to renovate and build new houses for their own use under the policy of ‘the state and people working together’. In this mode of housing provision, people contributed capital and labor, and the state land and building materials.

In Vietnam, the privatization of the housing stock started officially with the ‘Ordinance on Housing’ in 1991, which gave people the right to own a house. The official land market, which gave individuals the right to own a land-use was established with the “Land Law” in 1993. These liberalizing laws actually legalized an ongoing process of an already existing unofficial land market operative among small-scale families.

 

The legislating for property ownership formalized part of the informality in housing regime. Therefore, the state boundary was expanding to formalize the informality by legalizing the illegality. Controversially, the legalization of the market system in land and housing sector didn’t bring an end to the informal market, but triggered its development. As the ownership of the assets was admitted, the exchange value could be easier described or organized. The increase in transactions was accompanied by the increase in illegal transactions. More transactions continued to take place outside the state administration, largely due to the complicated, time-consuming and unclear policies in land rules. In the built environment of Hanoi, the consequence of the privatization of housing property is the booming popular housing (private-owned self-built housing) since 1990s.

1991 1993

Left: PHÁP LỆNH NHÀ Ở 1991 (Ordinance on Housing 1991). Right: LUẬT ĐẤTĐAI 1993 (Land Law 1993).

Source: http://moj.gov.vn/vbpq.

Reference

Gillespie, John. The emerging role of property rights in land and housing disputes in Hanoi. In State, society and the market in contemporary Vietnam: property, power and values, edited by Hue-Tam Ho Tai and Mark Sidel, 103-122. London: New York : Routledge, 2013.

Harvey, David. Social justice and the city. Oxford: Basil Blackwell, 1988.

“LUẬT ĐẤTĐAI.” http://moj.gov.vn/vbpq/Lists/Vn%20bn%20php%20lut/View_Detail.aspx?ItemID=10810

“PHÁP LỆNH NHÀ Ở.” http://www.moj.gov.vn/vbpq/Lists/Vn%20bn%20php%20lut/View_Detail.aspx?ItemID=11609

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