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Inventing Better Thai Housing Solutions
than Baan Eua-Arthorn & Baan Mankong

This paper presented at The International Conference The Royal Institute of Thailand
19 June 2012, Dusit Thani Hotel
  • Sopon Pornchokchai, PhD D.FIABCI CRS RICS
    President, Thai Appraisal Foundation

Better housing solutions will help people obtain better housing with cost efficiency and effectiveness. This study provides hard facts to review current and conventional housing solutions which may not fit the context of Thailand and should be adjusted in order to provide better housing for Thai people consistent with prevailing resource constraints. The two major housing schemes under review were Baan Eua-Arthorn and Baan Mankong. They exhibit many weakness that should be overcome and were not at all good prototypes for housing solution.

Major areas of the critiques centre on “Baan Eua-Arthorn” and “Baan Mankong”. “Baan Eua-Arthorn” (literally home with care) is a housing scheme to build and finance 600,000 units of formal housing for the poor. Meanwhile, “Baan Man Kong” (literally secured housing) is a slum improvement program via financing the poor to upgrade their own home.

Baan Eua-Arthorn: A Waste

Baan Eua-Arthorn is a recent housing and housing finance scheme introduced in 2003 (NHA, 2006-1). A number of criticisms can be explored. This scheme was an imitation without scrutiny. The Prime Minister went to Russia in late October 2002 and found that some four million sq.metres of apartments were built for lower income groups (Thairath, 2002). Subsequently, the government requested the National Housing Authority to conduct this scheme and let the people book their homes in early 2003. In normal practice, ample time for scrutiny is required for proper planning.

Actually, in Russia, social housing was no longer popular.  Most housing developments were conducted by the private sector, i.e., 20% private housing, 80% multi-flat blocks (50% privatized and 50% rental units owned by municipalities) (UNECE, 2006). A brief visit to Moscow might not be adequate to construct a good scheme for housing development and housing finance in Thailand.

In Thailand, the government had in the past rarely needed to subsidize housing for the poor.  From 1990 to 1998, developers in the private sector built low-priced townhouses (priced at no more than Baht 600,000) and condominiums (priced at no more than Baht 400,000) amounting to over 226,810 units with a total building area of over 6-7 million sq. metres in the Bangkok Metropolitan Region (AREA, 1998: 39). Because of their success in private housing provision, Thailand was classified as a model for low-income housing (finance) provision in the world (Pornchokchai, 2002-1: 9). In addition, rental housing in the formal sector is very cheap. The rent is approximately Baht 500 – 2,000 per month. Please see the following photographs.

Considering the negative effects of this scheme, this investment in Baan Eua-Arthorn might not be a cost effective project. This is reflected in the number of un-occupied housing units, once estimated to be 340,000 units (AREA, 1998). This scheme would destroy the existing housing provision through the private sector which entailed no cost of subsidy. In addition, it would be a substandard development because for typical detached houses, a plot size of 200 sq. metres is needed. But in the case of this scheme, a detached house can be on a land area of as small as 100 sq. metres.

One major criticism is the subsidy of Baht 80,000 per unit. Actually, in an open market, there is no need for a subsidy. The private sector can provide housing for the lower-income groups themselves.  In the market, there are a large number of private housing units offered for sale at prices cheaper or equivalent to this Eua-Arthorn scheme. Therefore, there is no proper reason why the government needs to sanction a market that is already good for consumers except that it would be a good opportunity for construction contractors, particularly the large foreign ones who would find more jobs in Thailand.

That the NHA built a few hundred detached housing units in the BMR is an exception that cannot be made the norm.  First, the cost of construction is far beyond control. That is why the government could build only a few hundred units, which are considered showcases. Most of the units built were condominiums. Secondly, in comparison, prices per sq. metre of townhouses built by the private sector nearby are considered cheaper. Therefore, people who bought these Baan Eua-Arthorn units did not get a good deal.

The reasons given to support this scheme were dubious. According to the newspaper ((Krungthep Turakij, 2003: 10), it was reported that there were some 5,000 squatter settlements throughout Thailand with total households of 1.6 million.  This was really misleading. According to a field survey, there were only 1,589 slums in Thailand with a total population of only 1.8 million or 3% of the total population (Pornchokchai, 2003: 5). Most of these slums were land rental slums. Very few were squatter settlements. In addition, most of the slum population consisted of non-poor or people not below the poverty line (CIA, 2006). It was believed that this misleading information was prepared to support this unreasonable scheme of Baan Eua-Arthorn.

In addition, the government had used this similar approach during the past 30 years by building walk-up apartments for people in slums. However, this was proved to be an unsuccessful approach. Many slum dwellers who were allocated an apartment unit sold their right to stay or leased it out to others and moved back to the slums. The lower income groups who were encouraged to buy a unit in this Baan Eua-Arthorn scheme might not have enough income for repayment so they will simply sell or lease it out as well.

According to the invitation of the NHA, quite a few large local and foreign developers were interested in this mass construction of Baan Eua-Arthorn (NHA, 2006-2).  Therefore, another big question is whether the real benefit of the 600,000 units under this scheme would be to big foreign contractors or the lower-income households that need housing.

Last but not least, if the 600,000 units could be materialized, the number of unoccupied housing units might be increased substantially. These productions would be a waste. The number of people who would actually move in should be fewer than the units built. Those who actually stayed might not be the proper target group. They might have incomes higher than Baht 15,000 per month as stipulated. Therefore, this scheme might miss the original target groups of lower-income households but would accommodate higher income groups.

Consequently, the housing finance for these units of Baan Eua-Arthorn might not be a success story. The lower-income groups might not be able to repay the money, whereas higher income groups can already afford a house.  Moreover, the aim of this scheme would not be reached because they are not the target groups.

Baan Mankong: Only A Dream

The Baan Mankong Scheme (CODI, 2006) is meant to serve a slum community requiring replotting or development. Subsidies of Baht 25,000 per family are available for communities upgrading their infrastructure; Baht 45,000 is allocated for reblocking and Baht 65,000 is allocated for relocating a housing unit in the physical adjustment scheme of the community plan. Families can draw on low-interest loans from CODI or banks for housing and there is a grant equal to 5 percent of the total infrastructure subsidy to help fund the management costs for the local organization or network. This type of housing finance would simply be an immediate face-lifting and would be unrealistic in the long-run.

Most slums are on rental land.  Normally, when land owners want their land back, they just tell the slum dwellers and pay them some compensation.  The dwellers simply leave.  In the past 50 years land might not have had much commercial value.  However, at present, the owners have alternative land uses with better return.  Therefore, there should be few land owners who really want to allow dwellers to rent land at a very cheap rent or sell land a great deal below market value for this Baan Mankong Scheme. 

There might be some land owners who are very generous in terms of assisting with this project, or some of them might be forced to accept the ideas of selling land at one-fourth the market value to materialize this scheme.  However, this action is an exception which cannot be made the norm. As discussed earlier, not all slum dwellers are poor. If we give privileges to slums dwellers over other urban residents, some disparity will exist. This is thus only a strategy used by politicians to win their vote by bribing the dwellers.

The really poor groups are those house renters in slums. This sort of Baan Mankong Scheme might not really affect them positively. And even for house renters there are alternative formal types of housing for them to rent outside slums. Therefore, this scheme will not help them much.

According to the invitation of the NHA, quite a few large local and foreign developers were interested in this mass construction of Baan Eua-Arthorn (NHA, 2006-2).  Therefore, another big question is whether the 600,000 units under this scheme would be beneficial to big foreign contractors or the lower-income households who may need to buy a house.

In principle, slum dwellers should not be considered static in with regard to housing. Their houses will be relative to their economic status. If they are better off, they will have a better house and vice versa. In a slum, wealth or poverty is personal matter. After some decades, some may be better off. Some may become poorer. To give slum dwellers security of tenureship for the whole community is thus unrealistic.

In the past there had been a similar concept of promoting land tenureship to slum dwellers in the form of numerous land-sharing projects; however, most of them failed (Pornchokchai, 1992: 93).  If anyone were to visit the land sharing projects today, only a few original slum dwellers could be found.  Many of them have moved out and house renters later simply moved in.

A Case Study of Baan Mankong

There is one Baan Mankong slum which has received many awards and seems to have become the prototype for dealing with this type of problem. However, there is some doubt as to whether it is a genuine success or simply a case where positive propaganda has been accepted without question.

This slum is located along the banks of an old irrigation canal on land over which the dwellers are granted a very generous and secure land lease. The influx of substantial amounts of public funds has emerged to support numerous development projects. Its history has been documented and the resulting story has become well known, apparently demonstrating a successful solution to a significant slum problem.

However, this so-called success might not be as significant as it first appears, and there are a number of reasons that support this view. The slum does not really demonstrate a general solution to slum problems; it can be seen to make neither efficient nor effective use of public funds.

The development which has occurred has resulted only through heavy investment of public funds.  These public funds have been spent only on certain community groups and this has resulted in disparity between peoples.   Under these circumstances the case study represented by this slum should be regarded as an exception and not a general model capable of being used in dealing with many other slum problems. In fact, if the procedure followed in the case of this particular slum were adopted blindly, it is quite likely that we would lose our way in attempting to solve the problem of slums in developing countries.

One issue which is not usually considered seriously in the evaluation of this particular development is the extent to which the development represents efficient use of the land in question. This land, located within the city proper, comprises approximately 16,000 sq. metres of land and contains around 250 housing units. For a site of this size and location it would normally be expected to have been developed at residential densities which would allow the provision of around 1,600 apartment units. This form of development would have provided substantial benefits in housing low income groups in the community. However the land is exclusively occupied by a group of squatters who have illegally occupied public land for over 50 years without ever providing any payment or compensation in return for their occupation.

It would be fair to ask how could 1,600 apartment units have been built on the site? Under normal circumstances 80% of the total 16,000 sq. metres of land would be built upon while 20% would be used for open space and infrastructure. This 80% amounts to 12,800 sq.  metres. If typical 5-storey apartments were built, the gross building area would be 64,000 sq. metres. Then only 80% of the total building area would be the net usable area, amounting to 51,200 sq. metres. The remainder would comprise common areas, facilities and the like. Further, if a typical apartment unit comprised approximately 32 sq. metres, then the total number of units which could be built would be 1,600.

This is 6.4 times the existing density and could provide housing for an additional 1,350 households. Even if these squatters were to be allocated two units each as some sort of privilege, approximately 1,100 less-privileged households could still be housed on the site. It can be seen that the utilization of the land is at a much lower level than should be accepted in cities such as Bangkok.

Considering returns to the public, if the potential 1,350 apartment units were built in order to rent them to other low-income groups at 2,000 baht per month (US$ 66 per unit), the revenue produced would be 32.4 million baht or US$ 1 million per annum. Because of the continuation of the status quo in the slum the public has not been able to realize this return. Instead, the public budget has been used for many development projects for this privileged group of 250 households.

In addition, each household is also subsidized at 80,000 baht or US$ 2,400 per year from public funds. Altogether, this represents a budget allocation of some 20 million baht or US$ 600,000. Yet, each household is eligible to get a loan of some 100,000 baht or US$ 3,000 for housing construction at a very generous rate of interest.

It results in very cheap land rent.  It is important to look at the value of the assets which are involved in this case. The land occupied by the existing slum may be worth about 4,000 baht or US$ 120 per sq. metre. If the government had provided generous compensation for the existing slum dwellers to leave the site, and given the fact that they have enjoyed free occupation for some 60 years, the site could have contributed 60 million baht or US$ 1.8 million or 240,000 baht or US$ 7,300 per unit to the public budget. Looking at the situation in this way, we could say that payment of compensation to the squatters in order to recover the land would probably be cost effective because the public should not be expected to continue to maintain this community forever.

On the other hand, if this piece of land could be developed for some alternative use, the value could be 12,500 baht or US$ 380 per sq. metre. The total value of the land could have been 200 million baht or US$ 6 million. If it could be leased at a return of 4% per annum, the annual income would be 8 million baht. The government could then spend this amount of money for the benefit of the public at large instead of supporting the living conditions of a relatively small group of slum dwellers by using the official budget supported from the taxes of fellow countrymen.

In this model slum the total value of assets being used by each slum is significant; each household occupies a site with a potential land cost of 240,000 baht, builds a new house at 200,000 baht, and roughly receives development funds of some 60,000 baht. This represents a total of 500,000 baht per household, which amounts to 125 million baht or US$ 3.8 million for all of the 250 privileged slum households.

For these squatters who have stayed on this land for free for some 50 years, if their monthly cost of living in terms of accommodation were as low as 2,000 baht or US$ 60, the effective value of their free of cost squatting would total 1.2 million baht or US$ 36,300 per household. These figures should be given very careful consideration in order to ensure that the slum problem is, in fact, being dealt with in an effective and economically responsible way.

Yet, there are unreal savings.  It has been mentioned that one success factor demonstrated by this project is the development of a savings program in the form of a saving cooperative in the community. This seems to be promoting the idea that success has not come from the injection of mainly public funded resources from outside the community.

In looking at this issue in detail, it is noted that the savings is 5 baht per day or 1,825 baht per annum (US$ 55).  At this rate of savings, 22 years would be needed in order to save enough to be able to purchase economical home furnishings at a cost of 40,000 baht. However, in fact, the squatters save for only a very short period of time prior to achieving eligibility to borrow the money. This reinforces the view that the emergence and development of this project has depended largely upon a huge injection of resources from outside the community, not from the savings of the residents.

In addition, inappropriate low-rise residence can be observed. The fact that 250 new row houses were built on this land represents an inappropriate use of the site and this has resulted from an unrealistic concept from the beginning. Almost 50 years ago, when Thailand first adopted walk-up apartments for city living, many scholars doubted that apartments were suitable for the Thai lifestyle. The view at that time was that housing units needed to be on the ground level. However, the later emergence of more than half a million owner-occupied apartments or condominiums, which were mostly low-priced residences for low-income groups, has demonstrated the appropriateness of these types of multi-storey apartments.

In turn, any development of low-rise residences with a low density of land use should be regarded as inappropriate, particularly in the sense of the ineffective and wasteful use of valuable inner-city land. In an open market, assuming the land had been available on the market, it is highly likely that those who would buy a townhouse in that particular location would have been middle-income groups. Condominium development as a viable alternative would provide more units suitable for low-income groups.

It is actually the repeat of mistakes. There is a conventional belief that poor people have poor land tenure; therefore, there is a view that they should be provided land without considering whether or not they can afford the true cost. In the case of non-slum households, when they want to buy a house, their budget constraints require them to purchase a small condominium unit or a small low-rise townhouse far away from the city centre, and that results in their having to sacrifice a lot of time to commute to work. The security of property tenure available for the poor should be reexamined in view of the likelihood of producing disparity among people.

In a particular slum in 1996, only 16% of the households were earning below the poverty line. Some 23% of them would have been able to afford to purchase a house in the open market. It is very likely that this situation has improved up to the present. Therefore, there are some well-to-do households that do not even like the minimum standard housing provided because they can afford something better. There are also some exceptionally poor households that cannot afford even a very highly subsidized housing unit. These households are likely to sell their right of stay and squat somewhere else. The provision of prototype tenure for all households without considering these differences in economic standing is thus inappropriate.

For over 20 years, there have been a number of land sharing projects which have been showcases of success. However, they are rarely mentioned today. Many of the households did not want to pay their housing loans. Arrears accumulated to such an extent that the authorities decided to write off their debts, simply giving them the land. In another community where the land lease was only one US dollar per month, many occupants are still in arrears. They believed that the government should give the land to them for free.

Are these people ‘untouchable’?  Sometimes, when authorities deal with the so-called poor, they seem to regard them as being untouchable. Realistically, slums in the city should all be rebuilt in order to pave the way for rejuvenated and intensified land use. If land is efficiently and effectively used in the city, sporadic or haphazard growth would be minimized. Infrastructure would not need to be expanded endlessly at a very high cost to the public. Pragmatically it would be a sound policy for most low-rise inner city slums to be demolished and redeveloped into high-rise dwelling units. In this way the land could be used to accommodate more people or could be reallocated for commercial premises for planned urban development.

However, in an anarchist environment, it seems that any action which might disturb the poor is anathema. In Thailand, it is very difficult to relocate slums, in contrast to Singapore, Malaysia, Vietnam and other neighbouring countries; however, people should understand that things have to change over time. A more sensible treatment of slum redevelopment should be accepted because no planner can foresee or plan city development without some rearrangement of the use of the land in the city.

There is a good example which demonstrates more effective use of land. The present location of the Ministry of Foreign Affairs, Mahidol University, and Rama Hospital in the Phyathai District of Bangkok was formerly the site of a large slum of around 1,500 households. It was the largest slum in Bangkok at that time. The government relocated the people and paved the way for better land use for the public good. If that slum had not been removed and the squatters were still living there, would it have been better for anyone? This case shows that substantial benefits can be derived from the redevelopment of slums.

In sum, any success cases of Baan Mankong scheme is an exception rather than the norm. To build up a success case might create disparity among the poor and other poor outside slums become de facto less-privileged poor. Providing security of land tenureship for slums where land is scarce even for non-slum groups to afford, should be reconsidered. Actually, slums can be relocated to provide better uses of land for slum dwellers themselves, for other poor and for all other stakeholders in the city without creating disparity nor face-lifting.

Concluding Remarks

The lessons from Thailand are that policies and plans for low-income housing finance need scrutiny. Otherwise, they might not respond to the needs of low-income groups. In turn, Thailand also has a lot of good examples and innovation in housing the lower-income groups which could be studied, learned from and adapted by other countries.

The government did not give priority to the establishment of housing policies in Thailand. Actually, Thailand did not even have a ministry of housing or human settlements. There was only a National Housing Policy Sub-committee, which was established in 1982 under the National Economic and Social Development Board. The Sub-committee did not have any authority but rather had a consultative role to the government. Afterwards, it disappeared. Housing policies tend to be imitated from other developed countries. Without proper scrutiny, the policies did not help solve the problem of housing but also generated side-effect problems.

Another observation is that housing policy in Thailand went beyond slums. Actually, slums represented only a small portion of the total housing stock in Bangkok. They have decreased over time. Therefore, slums were not the major concern for Thailand. In other words, housing development in Thailand went beyond slums. Thailand is a good example of the success of enabling policies. After the successful efforts to house the general public, the problems that remain include over-production and speculation, which requires study to analyze the causes and effects in detail as well as to deliver appropriate recommendations for planning and further studies.

Remarks:
Dr.Pornchokchai conducted a comprehensive survey of slums in Bangkok in 1984 and conducted another comprehensive survey of slums nationwide in 1996. He has been a consultant to different organizations of the United Nations in this field. He earned a PhD in land and housing from the Asian Institute of Technology, a certificate in housing development from Katholieke Universiet Leuven as well as a certificate in valuation from LRTI-Lincoln Institute of Land Policy.

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