Housing units in T/Phu in surplus but highly unaffordable

The availability of housing unit stock in Thimphu appears to be in surplus when compared to the estimated households residing inside the municipality area, according to the performance audit report on urban planning and development in Thimphu Throm, 2019.

However, the majority of the house unit stock belongs to the private sector and weak acceptance of the Tenancy Act in the private market with high rents creates huge mismatch in terms of demand and supply.

With a majority of the housing unit stock belonging to the private sector, the rents in Thimphu city has been ever rising.

The Royal Audit Authority (RAA) report found out that more than 80% of the housing unit stock belongs to the private sector with rent fixation being at the discretion of the house owners.

Moreover, house owners owe high housing loan interest and lack acceptance of the Tenancy Act provisions of disallowing rent increase every two years.

There is no fixed rental standard, and the widely accepted benchmark is that house rent expenses should not exceed 30% to 40% of the household income.

The national human settlement policies of Bhutan also require rental cost to be below 35% of average household income.

 “Majority of the population require low cost housing units while majority of the housing unit stock available are high cost housing units,” states the report. As majority of buildings are built on loans, it has direct implication on the rental charges.

According to Bhutan Living Standard survey, 2017, in urban areas, private individuals own more than 80% of the housing unit stock, 20% own their own dwellings, 17.5% live in rent-free dwellings and 63% live in rented houses. The monthly mean house rent in urban area was Nu 5,297. With limited households that can actually afford the units at the current market rate, the market is seen susceptible to future risk of rentals crashing due to un-affordability, which would reduce the income of the house owner, who would potentially default on the loan repayments, it states.

Moreover, lack of affordable housing gives rise to the informal settlements in and around municipality mostly inhabited by municipal workers and laborers engaged in the informal sector, the report states. In 2018, a RAA report found 138 households in 10 different locations with around 600 people living in these informal settlements.

Additionally, there is conversion of residential units to commercial units thereby further reducing the residential unit stock.

As of 2017, the housing infrastructure in Thimphu provided around 24,000 units of which around 1,700 units were provided by various institutions as affordable housing and the rest belonged to the private sector.

The Thimphu Structural Plan’s (TSP) projected capacity for housing units was around 77,000 units by 2027 and the projected figure would increase by the time the TSP is fully implemented, according to the report.

The RAA recommends the work and human settlement ministry and Thromde to ensure the Tenancy Act is implemented and followed, since building owners depend on Thromde for all their utility services.

Moreover, effective monitoring and enforcement of regulations is suggested to stop residential units being converted into commercial units and review and update the National Housing Policy 2002.

Thukten Zangpo from Thimphu