Woes of low-income public workers –  Affordable housing

Woes of low-income public workers – Affordable housing

  • By Dulguun   -   Sep 16,2020
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COVID-19 is not all bad news for Mongolians as they develop efficient ways to work from home, increase online shopping services, and improve personal hygiene practices. Most importantly, the government has decided to give out apartments to public workers working on the frontline against COVID-19.

Cabinet approved a resolution on May 20 to provide housing to state special employees under rent-to-own arrangement. A task force led by then-Deputy Prime Minister U.Enkhtuvshin carried out the work and enabled 1,500 state workers to get new homes. Many employees working at the National Center for Communicable Diseases, Ministry of Health, National Emergency Management Agency, General Authority for Border Protection, General Police Department, Military Hospital, General Staff of the Mongolian Armed Forces, General Customs Authority, and veterinaries received entitlement to housing in shifts at the time.

On June 30, the minister of health personally handed over entitlement to housing to 400 doctors and health care staff who contributed to preventing local transmission of COVID-19. The minister and other officials told them that all they needed to get keys to their new apartment was sign an agreement with the Ulaanbaatar Housing Corporation (UHC). However, who would have known that this “simple” task would take so long?

A public worker, who wished to remain anonymous, said that he went to UHC the day after receiving his entitlement. Though he worked for the government for over 10 years, his salary was sufficient to buy housing worth 45 million MNT, which is hardly enough to buy a one-room apartment. As it happens, the public worker had outstanding consumer loan. Another option he could take was to find a co-lender. With his mother as a co-lender, he could now afford an apartment worth around 75 million MNT and was able to find it through a real estate agent. However, UHC told him to pay down payment and deposit.

“After paying off my consumer loan and paying back the money I owed to friends and relatives, I went to UHC. But they wanted me to pay over 2 million MNT (for down payment and deposit),” he said. “This might be a small amount of money for some people but when you’re pressed for time, it’s difficult to scrape up even 20,000 MNT.”

Like the Mongolian saying “A living man has a way”, the public worker managed to gather sufficient funds and moved into his new apartment just recently. There are many more state employees facing similar challenges and even more who have given up hope. 

Those with multiple children would naturally want to live in a larger home but due to their low income, they’re left with no choice but to choose smaller apartments. Based on the apartment listing posted outside UHC, the average price of a square meter is around 1.8 million MNT, with the highest being 2.56 million MNT and the lowest 1.47 million MNT. The cheapest apartments are reportedly selling out the fastest. Several construction companies contracted with UHC said that they’re sold out on cheap, small apartments located far from the city center – even those that have relatively poor quality. For example, Orchlon Construction has commercialized two of its properties but their prices are different as night and day. The one located in 4th khoroo of Songinokhairkhan District, offered at 1.47 million MNT per square meter, is already sold out. But quite a few apartments are still available at the other property located in Bayanzurkh District, which is closer to the city center. It’s most likely due to its high price – 3.56 million MNT per square meter.

Contracted with UHC, Nandin Misheel LLC is offering apartments in Khan-Uul District for 2.6 million MNT per square meter. When asked about their sales, a representative said, “No state worker has bought our apartment yet. Two were interested but haven’t signed a contract yet. They’re trying to acquire more money for the apartment from what I heard. In general, it seems that state employees aren’t able to afford apartments worth 100 million MNT or more because of their income. They seem to be choosing cheaper ones instead.”

If a state employee wants to buy an apartment costing more than 100 million MNT, he or she is required to pay the difference in cash as the government is allowing them to buy housing worth less than 100 million MNT through discounted loan. Not just paying the difference but even providing a two-month rent as deposit is hard for most public workers, especially those working in service and cleaning sectors. A janitor working at a state hospital said that she stopped looking for an apartment as she can’t pay the deposit.

Unlike in May or June, fewer people seem to be hovering around UHC. One of them was an elderly man. He said, “Only my son has a job. He works for the police department. Based on his income, he’ll be buying a one-room apartment. It’s a cumbersome work with complicated process.”

Three months after receiving entitlement to housing, more than 300 state employees still haven’t found an apartment. These people were nominated by their organization and the selection process was held publicly. The majority of selected employees for the housing serve in the health sector. They can only buy apartments from companies contracted with UHC. As most of the affordable homes have been bought by previous state employees, the remaining 300 or so people are left with only a few options. Some people apparently gave up their entitlement in consideration of their children’s commute to kindergarten or school, as well as financial reasons. They complained that the rent-to-own program is as “cumbersome” as the mortgage with 8 percent interest rate.

500 state employees have been housed

Acting Executive Director of UHC S.Dorjderem detailed on the rent-to-own program in the following interview.

How is the rent-to-own program for state employees progressing?

In relation to the global pandemic, lifestyles and working schedules of many people have changed. State administrative and service employees are working hands-on to prevent and fight against the spread of this virus. Therefore, Parliament and Cabinet decided to create a rent-to-own housing fund for state employees working in high-risk conditions. The Ministry of Construction and Urban Development and city administration have been put in charge of this program in cooperation with the Ministry of Finance, Mongol Bank, Financial Regulatory Commission, General Authority for State Registration, UHC and the private sector.

For starters, a list of 1,000 eligible state employees were sent to the State Emergency Commission. UHC was tasked to find appropriate housing and sign rent-to-own agreements with them. So far, about 600 state employees have selected their housing and signed the agreement. Around 70 organizations and individuals submitted housing supply proposals to us and we selected those that met the criteria. In particular, properties must have been handed over to the State Commission, satisfy construction standards, and have parking space. We tried to support as many companies as possible. This is the government’s way of supporting the public and construction companies amid emerging economic challenges caused by the pandemic.

Is it true that selected state workers had to find their home before September 5?

The registration of eligible state employees and properties began in early July. It is resuming to date. Those who signed their agreement in early-August are waiting to move into their new home right now. However, some of the selected people haven’t come to UHC. Over 300 people are unable to come due to the quarantine, inability to find affordable housing, and financial difficulty. Therefore, we’ve decided to send materials of 500 people to the Financial Regulatory Commission and Mongol Bank first. Since both individuals and construction companies are waiting for people to move into their homes, we’re trying to speed up the process.

Some people say that the rent-to-own arrangement is no different from a mortgage. Can you talk about this?

Banks are providing mortgage with 8 percent interest but the criteria is very high. For instance, you need to provide 30 percent down payment and proof of income among other documents. Its financing is also very small. Not everyone is able to get it. However, this loan for state employees has many advantages. Firstly, we’re offering housing that match their income so they don’t need to provide down payment. We received 100 billion MNT financing to house 1,000 people. If they can prove their income, each person can get an apartment worth up to 100 million MNT. If they choose housing that exceed this amount, they can pay the difference themselves. Secondly, they are given 15 years to repay this loan with interest of 6 percent. State employees can apply for it even if they have an apartment and loan, and live outside Ulaanbaatar.

State employees said they are paying 700,000 to 1 million MNT per month under this arrangement. Exactly how much are they paying?

It depends on who is getting the loan, the price of their apartment and their income. Most state employees are choosing an apartment that cost more than 80 million MNT. Some are also paying down payment.

Is it true that some state employees are choosing not to get this deal because they are unable to pay the down payment?

As there is risk that some people might not be able to make their payment on time, we’re demanding deposit equal to two months’ rent. For example, a person who took out an 80 million MNT loan will pay 1.6 million MNT.

What kinds of challenges are you facing with this program?

As the implementation period is short, the number of available properties are limited. The demand for affordable small-sized apartments is high among state employees. This type of housing was sold out first.

Dulguun Bayarsaikhan