The inability to afford housing has become one of the most significant challenges for Iranian households in recent years. Here’s a brief look at the root causes of this issue.
Some housing policymakers believe that the housing market imbalance is physical in nature. They argue that a shortage of 5 million housing units is the main cause of this imbalance. However, the real issue is the lack of purchasing power among households.
Since 2011, investment growth in construction has been negative 4%. Additionally, from 2019 to the final quarter of 2024, capital formation in buildings has recorded a negative growth rate of 5%.
Severe Housing Price Increases: Home Ownership, a Distant Dream for Many Iranians
Disruptions in housing supply and demand have been caused by imbalances in key macroeconomic variables. These imbalances have pushed the housing market into an abnormal state.
Since 2014, the housing production slump has continued, and construction volume has remained below the minimum required for market balance. Estimates indicate a housing unit shortage of approximately 2.6 million units nationwide.
However, three key factors indicate that physical imbalance is not the root cause of the housing crisis.
Those advocating for the mass construction of housing cite the household density index as evidence.
They argue that urban housing shortages amount to approximately 1.5 million units. However, in Iran, high inflation and economic risks have led to many housing units remaining vacant.
In 2016, while there were 18.1 million urban households, only 17.4 million residential units were occupied. The household density index indicated a shortage of one million units.
However, in the same year, nearly 5 million vacant or second-home properties existed.
The Issue Is Not Supply Shortage; The Real Problem Is Poverty
This indicates that when considering both occupied and vacant housing units, the market in 2016 faced an oversupply, not a shortage.
In recent years, a portion of existing housing has remained out of the consumer market. If these units were made available, a significant part of the housing imbalance would be resolved.
Physical imbalance can be addressed if economic imbalance is resolved. However, as long as economic issues persist, solving the physical imbalance alone will not yield results.
The experience of constructing 2.3 million “Mehr Housing” units in 2007 demonstrates that even after seven years, 15% of all housing units in the country remained unused.
Additionally, the experience of the state-backed Maskan Melli (National Housing) project in the past three years has shown that many eligible households cannot afford the initial payment.
Out of over 5 million registered households, only 1 million have been able to provide the required upfront payment.
The dominance of speculative and real estate investment profits is another obstacle preventing new housing units from entering the consumer market.
Between 2011 and 2023, approximately 5.5 million new housing units were constructed. However, at the same time, over 1 million new households joined the ranks of renters.
These figures indicate that a portion of new housing units was acquired by existing property owners rather than increasing supply for new buyers.
During this period, the number of urban households grew by 6 million, while 5.5 million new housing units were built.
However, the number of renters increased from 4.5 million to nearly 6 million, and the number of homeowners rose from 9.4 million to 13.6 million households. These statistics confirm that the real issue is the economic imbalance in the housing sector—household poverty.
Housing: A Necessity or a Tool for Speculation by Government Entities?
Currently, 1.5 million urban renters live in absolute poverty, a figure that has increased 1.5 times since 2011.
Additionally, over 4 million households in cities and rural areas lack adequate housing.
Half of Iranian households spend more than the acceptable limit on housing costs. This economic reality indicates that the housing crisis is driven more by economic imbalance than by a physical shortage of homes.
For developers to increase housing production, they need to sell or rent out their constructed units.
However, as long as household financial difficulties persist, the housing market will not experience growth. High inflation and low economic growth have driven up living costs.
In this situation, households struggle to afford basic necessities such as food, medicine, and clothing, leaving them unable to pay for housing.
As a result, demand for purchasing or renting housing has declined, pushing the market into a deeper recession.
Improving the housing market requires sustainable economic solutions
Unless inflation is controlled and household incomes increase, neither construction will thrive nor will the housing market imbalance be resolved.
In short, Iran’s housing crisis stems from the lack of purchasing power and economic deprivation of citizens, not from a shortage of housing units.
Many powerful and wealthy entities have exploited the housing market for speculation, reaping enormous profits.
It was previously revealed that over 2 million vacant homes in Tehran are owned by state-affiliated banks, and no taxes are paid on them.
