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| Iran's economy struggles to support Ahmadinejad's ill-conceived housing vision | Iran's economy struggles to support Ahmadinejad's ill-conceived housing vision |
| (7 months later) | |
| The road to Pardis is full of dead ends. At least one wrong exit results in an abrupt U-turn at the gates of heavily guarded defence ministry territory, and several others end up at the foot of lonely, towering steel skeletons abandoned by developers years ago. The highway exits leading to this government-funded housing community east of Tehran are marked with dystopian signs indicating the "phase" number of each project. Some, like Pardis City: Phase 11, are nothing more than dredged-up holes in the moonlike landscape. They are the ghosts of a sprawling construction scheme once touted as a crowning achievement of Mahmoud Ahmadinejad's presidency, but now blamed for some of the Iranian economy's most pressing structural problems. | The road to Pardis is full of dead ends. At least one wrong exit results in an abrupt U-turn at the gates of heavily guarded defence ministry territory, and several others end up at the foot of lonely, towering steel skeletons abandoned by developers years ago. The highway exits leading to this government-funded housing community east of Tehran are marked with dystopian signs indicating the "phase" number of each project. Some, like Pardis City: Phase 11, are nothing more than dredged-up holes in the moonlike landscape. They are the ghosts of a sprawling construction scheme once touted as a crowning achievement of Mahmoud Ahmadinejad's presidency, but now blamed for some of the Iranian economy's most pressing structural problems. |
| Traces of life can be found closer to the town centre at Pardis City: Phase 1-3, where a modest bazaar and shopping centre cater to the needs of those who inhabit the town's 74,000 government-sponsored housing units. The community was built around the original village of Pardis in rows of public and private development projects planted into the treeless foothills of Mount Damavand like lego blocks. They include clusters of chic duplexes as well as plain panel high-rises, all in various stages of completion. The residents are a mix of poor Afghan workers, conservative families from low-income parts of Tehran as well as nearby villages. Overwhelmingly, they are middle-class commuters from the capital who moved to Pardis for the clean air and the prospect of owning a home, both of which have become rare in Tehran. | Traces of life can be found closer to the town centre at Pardis City: Phase 1-3, where a modest bazaar and shopping centre cater to the needs of those who inhabit the town's 74,000 government-sponsored housing units. The community was built around the original village of Pardis in rows of public and private development projects planted into the treeless foothills of Mount Damavand like lego blocks. They include clusters of chic duplexes as well as plain panel high-rises, all in various stages of completion. The residents are a mix of poor Afghan workers, conservative families from low-income parts of Tehran as well as nearby villages. Overwhelmingly, they are middle-class commuters from the capital who moved to Pardis for the clean air and the prospect of owning a home, both of which have become rare in Tehran. |
| These commuters, who by the estimates of one local bazaari make up approximately 90% of Pardis' population, are the strongest indication of the colossal failure known as the Mehr housing scheme. Driven by Ahmadinejad's vision of an egalitarian and just society, the project sought to enable homeownership for the economically "oppressed". Instead, it caused prices to soar, enabled corruption and profiteering, and made affordable housing out of reach not only for the poor, but also for the relatively well-off. | These commuters, who by the estimates of one local bazaari make up approximately 90% of Pardis' population, are the strongest indication of the colossal failure known as the Mehr housing scheme. Driven by Ahmadinejad's vision of an egalitarian and just society, the project sought to enable homeownership for the economically "oppressed". Instead, it caused prices to soar, enabled corruption and profiteering, and made affordable housing out of reach not only for the poor, but also for the relatively well-off. |
| The new administration has described the Mehr housing scheme as one of the largest hurdles to Iran's economic recovery. In a televised address marking his first 100 days in office, President Hassan Rouhani singled out the project as being the main culprit behind the country's still-rampant inflation, estimating it was responsible for 40% of current liquidity. | The new administration has described the Mehr housing scheme as one of the largest hurdles to Iran's economic recovery. In a televised address marking his first 100 days in office, President Hassan Rouhani singled out the project as being the main culprit behind the country's still-rampant inflation, estimating it was responsible for 40% of current liquidity. |
| The Mehr system offered developers free government land to build affordable housing units for first-time owners. Since most citizens have difficulty getting small bank loans, homeowners who signed up for Mehr housing were given 99-year mortgages guaranteed by the state. Banks acted as intermediaries between developers and the government, and the central bank was instructed to print more money to pay for the scheme. | The Mehr system offered developers free government land to build affordable housing units for first-time owners. Since most citizens have difficulty getting small bank loans, homeowners who signed up for Mehr housing were given 99-year mortgages guaranteed by the state. Banks acted as intermediaries between developers and the government, and the central bank was instructed to print more money to pay for the scheme. |
| As a self-proclaimed champion of the poor, Ahmadinejad dedicated vast resources to this feat of social engineering. In the past six years, communities like Pardis rose up all over the country. Billions were pumped into the economy to erect 17 new cities and some 1.5 million housing units. As of January 2011, the banking sector, particularly Bank-e Maskan had doled out loans totalling more than $10.2 billion to applicants. | |
| Readymade communities were erected in barren deserts, often with little regard for the on-the-ground ecological conditions. The plan was to equip each community with a range of amenities: public transportation, parks, hospitals, schools, mosques. But the actual implementation of these plans soon proved haphazard. The skyrocketing inflation rate - a product of Ahmadinejad's economic policies as well as tightening international sanctions - made these ventures unprofitable for developers, leading them to jettison projects mid-construction. After taking over the housing portfolio this fall, transport and urban development minister Abbas Ahmad Akhoundi said that some 200,000 units lacked access to water, heating and sewage systems. He said the undertaking failed to achieve its goal of providing housing to the underprivileged, since most of those who could afford it under the worsening economic conditions were middle class. | Readymade communities were erected in barren deserts, often with little regard for the on-the-ground ecological conditions. The plan was to equip each community with a range of amenities: public transportation, parks, hospitals, schools, mosques. But the actual implementation of these plans soon proved haphazard. The skyrocketing inflation rate - a product of Ahmadinejad's economic policies as well as tightening international sanctions - made these ventures unprofitable for developers, leading them to jettison projects mid-construction. After taking over the housing portfolio this fall, transport and urban development minister Abbas Ahmad Akhoundi said that some 200,000 units lacked access to water, heating and sewage systems. He said the undertaking failed to achieve its goal of providing housing to the underprivileged, since most of those who could afford it under the worsening economic conditions were middle class. |
| Before handing over the keys to the presidential palace this summer, Ahmadinejad ceremoniously announced that his administration created more than 1.18 million low-cost residences under the Mehr program. The cash-strapped government of Hassan Rouhani must now find a way to finance the remainder without further straining state coffers. In November, the Rouhani administration announced it had allocated $4oo million to pay for the units still under construction, thus putting an end to an endeavour Ahmadinejad once called "the finest undertaking since Adam." | Before handing over the keys to the presidential palace this summer, Ahmadinejad ceremoniously announced that his administration created more than 1.18 million low-cost residences under the Mehr program. The cash-strapped government of Hassan Rouhani must now find a way to finance the remainder without further straining state coffers. In November, the Rouhani administration announced it had allocated $4oo million to pay for the units still under construction, thus putting an end to an endeavour Ahmadinejad once called "the finest undertaking since Adam." |
| But the government still remains saddled with bad debt as homeowners struggle to pay off their mortgages. The decision to axe the project and refinance existing loans has increased speculation, leading to further price hikes. Under the current plan, Mehr applicants are entitled to a $7,500-10,000 loan from the government, which usually fails to cover even half the total cost. While some policymakers have suggested raising the mortgage ceiling, the Central Bank has so far refused to support the plan, instead suggesting the creation of "special accounts" backed by collateral such as personal assets and the value of the land. Without additional assistance, homeownership will remain out of reach for 70% of society, officials noted. | But the government still remains saddled with bad debt as homeowners struggle to pay off their mortgages. The decision to axe the project and refinance existing loans has increased speculation, leading to further price hikes. Under the current plan, Mehr applicants are entitled to a $7,500-10,000 loan from the government, which usually fails to cover even half the total cost. While some policymakers have suggested raising the mortgage ceiling, the Central Bank has so far refused to support the plan, instead suggesting the creation of "special accounts" backed by collateral such as personal assets and the value of the land. Without additional assistance, homeownership will remain out of reach for 70% of society, officials noted. |
| Meanwhile, urban populations continue to grow, as does joblessness. One of the main goals of building the insular Mehr communities was reversing migration to the larger cities, where living standards are deteriorating due to traffic, pollution and high rents. The spectre of Mehr will likely continue to haunt Rouhani's ministers, who operate under much worse economic circumstances than the oil-rich Ahmadinejad cabinet. An average family must now spend six times more than it did three years ago. Participation in the labor force has fallen to 37.3%, according to official statistics from 2012, and only around 68,000 jobs were created between 2005-2012. | Meanwhile, urban populations continue to grow, as does joblessness. One of the main goals of building the insular Mehr communities was reversing migration to the larger cities, where living standards are deteriorating due to traffic, pollution and high rents. The spectre of Mehr will likely continue to haunt Rouhani's ministers, who operate under much worse economic circumstances than the oil-rich Ahmadinejad cabinet. An average family must now spend six times more than it did three years ago. Participation in the labor force has fallen to 37.3%, according to official statistics from 2012, and only around 68,000 jobs were created between 2005-2012. |
| Perhaps the biggest obstacle to housing reform is corruption. Inflation in the real estate market proved profitable for racketeers who bought off units using complicit applicants as intermediaries, then sold them at much higher prices. Land grabbing turned into a rampant and uncontrolled practice. The new cabinet plans to impose transaction taxes and other restrictions to prevent further abuse, but the suspicious profligacy of imported luxury vehicles in ostensibly "poor" communities like Pardis suggests that it may be too late. While the majority of the residents here moved to one of Pardis' desolate cul-de-sacs to avoid downward social mobility, there are those who have made their fortune by navigating the inner workings of Mehr's opaque bureaucracy. In the words of the local fishmonger, "You'll find all kinds of people" in Pardis. | Perhaps the biggest obstacle to housing reform is corruption. Inflation in the real estate market proved profitable for racketeers who bought off units using complicit applicants as intermediaries, then sold them at much higher prices. Land grabbing turned into a rampant and uncontrolled practice. The new cabinet plans to impose transaction taxes and other restrictions to prevent further abuse, but the suspicious profligacy of imported luxury vehicles in ostensibly "poor" communities like Pardis suggests that it may be too late. While the majority of the residents here moved to one of Pardis' desolate cul-de-sacs to avoid downward social mobility, there are those who have made their fortune by navigating the inner workings of Mehr's opaque bureaucracy. In the words of the local fishmonger, "You'll find all kinds of people" in Pardis. |