The Iranian Housing System under the Islamic Republic Government (1990–2021)

Housing is one of the most important human needs. Governments often put policies on the agenda to provide housing. Housing policy-making and planning varies from country to country, with each country following a specific approach based on its social, economic, and political structure. The initial response of the government in England to the considerable shortage of housing after World War II was to establish a strong housing program using the public budget, and when Margaret Thatcher came to power, the role of the market in housing policy increased (Harloe 1981; Ungerson 1994; Priemus & Kemp 2004). Programs such as the Housing Benefit were proposed, which aimed at constructing affordable houses for low-income families; however, this program was later revised and the Local Housing Allowance was included in it (Hamnett 2009; Colburn 2019). In Italy, housing policy regarding renting or owning property has been discussed (Caruso 2017), and there has been a great change, with the national government delegating authority to local government (Iommi 2011). In France, the main elements of low-income housing policy have included the construction of public housing, the payment of direct rent subsidies to households, and help for low-income residents. The private sector has become responsible for providing the main part of housing construction (Laferrère & Le Blanc 2000; Blanc 2004). In Germany, low-income housing policies have included direct subsidies to low-income households and social housing (Egner 2011). The government of the Netherlands introduced the Housing Allowances scheme in 1970 and many low-income households were supported under this program (Priemus & Elsinga 2007). The rent subsidy, in 1984, and the Housing Allowances program, in 2006, were both rolled into the Rent Rebate Program (Colburn 2019).

In the US, the federal government first executed public housing policy to support low-income households; then, in 1970, they started Demand-Side Subsidies (Colburn 2019). However, it still supports housing production using Supply-Side Subsidy programs such as Low-Income Housing Tax Credit (LIHTC) (Eriksen & Lang 2018). In Australia, most low-income households (two-thirds) live in their own houses (Martin et al. 2016). In China, since 1979, consecutive modifications in housing and macroeconomic policies have caused the marketization of housing, plus market-oriented modifications in housing policy (Wang & Murie 1999; Zhao & Bourassa 2003; Fang 2006; Cao & Keivani 2013). Over recent decades, Financial and Fiscal Policy, the Land Supply Policy, and Structure of Housing Supply have been included in their program (Ye et al. 2010). In South Korea, the following policies are among the most important: Clearance (1950), Site-Service (1960), Re-Location and Demolition (1970), Building High-Density (1975), and the Housing Regeneration projects (1980). Since the 1980s up to the present time, the construction of public and social housing for the poor was included in the program (Ha 2007). In Japan, the development of house ownership has been one of the crucial elements of housing and low-income housing policy (Hirayama 2003; Arku 2006). In Singapore, the Home Ownership for the People scheme was proposed in 1964 in order to encourage the democratization of property-ownership and to support house ownership in the low-income and middle-income classes (Goh 1989; Arku 2006). While, in New Zealand, during the 1990s, a collection of fundamental housing modifications were carried out (Thorns 1986; Murphy 2004). Thus, using housing subsidies, under most democratic capitalist governments, is an indication of the commodification of housing policy.

Up to the early 1970s, housing programs in developing countries contained innovations that were supported by their governments to design, construct, and sell houses using loans with subsidized interest rates. These policies were generally carried out on a limited scale, and, according to families, they were not affordable or centralized, and in some cases were inefficient (Mayo 1999). Housing policies in developing countries have undergone considerable changes within the past three or four decades; so during the 1990s and 2000s, they emphasized the empowerment approach. Governments focused on five special market elements, i.e., land, financial affairs, infrastructure, industrial construction, and construction materials (Arku 2020). In Egypt, mass housing and service-location programs were proposed for low-income groups (Abdelkader 1989), while Nigeria proposed an empowerment approach in housing policy (Daniel & Hunt 2014). After 1994, the government of South Africa executed the Capital Subsidy Scheme (Pillay & Naudé 2006); however, after this housing scheme, the low-income class could not afford to possess any houses. In Ghana, due to a lack of public interest in the Rent-Free Compound Housing System, Family Compound Housing gradually became the predominant policy – currently, Rented Compound Housing is being proposed instead (Danso-Wiredu 2018). Taiwan's government initiated a collection of Pro-Ownership policies, such as the Mortgage Loan Subsidies policy, in the 1970s (Radzimski 2014). In Jordan, house ownership is a priority (Al-Homoud et al. 2009) while, in contrast, no particular housing policy exists in Yemen (Alaghbari et al. 2009). Up to the 1990s, in Bangladesh, service-location programs, displacement, infill development, and upgrading were included in low-income housing policies (Choguill 1988). India first started displacement (Mehta et al. 1989) and cooperatives programs. However, mass housing and low-cost housing emphasized the achievement of sustainable housing (Srivastava & Kumar 2018). Indonesia executed crucial national policy for self-help housing (World Bank 1975), and two policies for public housing development and balancing the housing market (Tunas & Peresthu 2010). In Brazil, programs under the low-income public housing policy were initiated in the 1930s. From 2009 to 2011, the Minha Casa Minha Vida (MCMV) program was introduced to improve the living quality of the poor, reduce the housing shortage, and strengthen the economy (Sampaio 2020). In 2015, in Argentina, the government took measures to improve private investment for the vulnerable classes through the Pro.Cre.Ar framework (Murray & Clapham 2020). In Chile, up to the 1990s, support was merely composed of programs for public supply, direct housing construction, or supporting supply. In 2014, the D.S.49 subsidy program was carried out to improve the possibility of house ownership for low-income households (Ross, & Pelletiere 2014; Pero 2016).

The Iranian constitution was first drafted after the victory of the Islamic Revolution, and in Article 31 refers to the provision of housing. In this regard, six development programs were prepared, which can be categorized as social, economic, and cultural programs. The first development program (1990–1994), was prepared after the Iran-Iraq war in 1990. Given the problems in the housing market during those years, the first development plan for the housing sector aimed to prevent the growth of large cities, supply urban land at preferential prices, create new cities, reduce land acquisition, provide facilities for rental housing, strengthen housing cooperatives, and increase the quality of housing construction (Derakhsh 2016; Abdi 2017). But the government's priority was to provide housing in war-torn areas (Ghanbari & Zaheri 2011). During the second program for housing provision (1995–2000), strategies such as providing bank facilities and land transfer, discounts on land prices, and tax exemptions for units less than 120 meters, were put back on the agenda (Hezarjaribi & Emamighafari, 2019). Therefore, mass production and downsizing was the predominant method used for housing provision (Zarghamfard et al. 2019). But the government could not solve the housing problem because urbanization was increasing, and migration to large cities such as Tehran, Isfahan, Mashhad, and Tabriz had intensified (Molaei Qelichi et al. 2017). Thus, in the third program (2001–2005), the government prioritized housing provision for low-income groups, and strategies such as liberalizing the housing market, reducing government intervention, and creating a secondary mortgage market were considered (Baradaran et al. 2019; Ghaedrahmati & Zarghamfard 2021). In this third development program, the following measures were taken to address Article 31 of the constitution (Hezarjaribi & Emamighafari 2019; Baradaran et al. 2019): the provision of banking facilities, the gradual payment of loan instalments, the complete liberalization of the land market, the establishment of housing funds for specific groups, the reform of housing construction and production regulations, an increase in housing construction in the form of government leased units (with the help of cooperatives and mass builders), and the creation of a building and housing database. In the fourth development program (2006–2010), the compilation of a comprehensive housing plan, the passing of a law on organizing and supporting the production and supply of housing, and the construction of Mehr housing, were the most important measures taken to balance the housing market (Abdi 2017). The fourth program pursued policies in the housing sector such as establishing social justice, reducing regional inequalities, curbing housing inflation, and producing housing commensurate with household finances (Mohammadi Dehcheshemh 2018). The fifth program (2012–2016), similar to the previous ones, paid attention to the provision of low-income housing, trying to achieve the outputs of the comprehensive housing plan. The program also addressed significant policies such as reducing regional inequality in accessing adequate housing, improving and renovating urban structures that were crumbling, and supporting low-income young couples (Zarghamfard et al. 2019). The sixth program (2018–2022) addressed the most crucial problem in the housing sector, worn-out buildings and urban regeneration. Other housing strategies reduced the vulnerability of rural settlements, providing housing for low-income urban populations, providing financial resources and low-cost facilities, and providing the land needed (Tavakolnia & Zarghami 2018). Despite the policies and strategies adopted by the government in the housing sector, housing affordability is still challenging, as middle-class households have increased since the mid-1990s. But low-income households continue to struggle, and are unable to afford adequate housing in the market (Alaedini 2021). Housing prices rose after the early 2000s, but policies such as Mehr Housing were able to halt these rising housing prices; however, since about 2008 house prices have again risen following international sanctions. With the election of Rouhani as president (2014), housing prices experienced an unprecedented rise. During this period, the market was abandoned, and there was no control over prices (Zarghamfard et al. 2019). On the other hand, land policy in Iran has always been imperfect, and integrated urban land management has never been achieved. Often the public sector did not sell its land on the open market (Meshkini et al. 2019); therefore, only the private sector managed the housing market. Since expectations of inflation prevail in the land sector, agents pursued a policy of increasing housing prices. The result of these processes was an increase in land and house hoarding. According to the Ministry of Housing and Urban Development, housing prices increased by 100% in 2020. Ebrahim Ra’isi was elected president of Iran in 2021 under the promise of building 4 million housing units per year. After six months, however, land and housing prices have continued to rise, and no new housing units have been built. In such a situation, housing affordability is an issue, so that middle-and low-income households cannot access adequate housing. Given the current situation, it is evident that having a house has become a dream. Overall, with the prevailing economic conditions, access to affordable housing seems unreachable, and the government needs to develop more research into this area.

The first development program was approved by the Islamic Consultative Assembly in 1990, and the most important goals of this program were as follows: reconstruction and strengthening of national defence capacities, reconstruction of production centres and population numbers damaged during the imposed war, creating economic growth with an emphasis on the self-sufficiency of agricultural products, controlling inflation, meeting the basic needs of the people, ensuring Islamic social justice, reform of consumption patterns, and reform of the executive and judicial management of the country (Pourdanesh & Mojahedzadeh 2020). The first development plan achieved an average annual economic growth of 52.7% per year (Mustafavi 2018). Due to the recession prevailing in the housing sector, a set of policies were adopted in this program to strengthen the supply side of the housing. However, because of problems with adjustment policies and economic stabilization, the recession in the housing sector did not settle (Ghanbari & Zaheri 2011). Increasing bank interest, the rapidly increasing prices of building materials, and severe inflation reduced the financial power of households and had a destructive impact on housing. In the early years of the program, capital inflows caused a rapid increase in land prices. Inconsistencies in policies related to credit and land preparation led to a failure to achieve program objectives and increased household density in residential units (Saremi 1999). In the first development program, the production of 2,285,000 residential units was at the top of the objectives. Due to a lack of capacity for building within the country and the weak participation of the private sector in funding, this objective was not achievable (Program and Budget Organization, 1994). However, the construction of durable buildings was one of the positive points in the first program. Reducing the average floor areas and aiming towards the construction of small buildings for the low-income class were other objectives of the development program. In general, the above purposes were not fulfilled (Khodabakhsh 2001). Broadly, the shortcomings and successes of the first program can be categorized in the following table.

The construction of housing units and changes in apartment sizes constituted the different aspects of the program (Noruzi 2003). In general, the above goals were not fulfilled. The low number of rental housing units, increasing the share of land in the cost of housing, and the low contribution of bank loans in the housing sector explain the crucial role of the first program.

In general, we can say that during the first development program, supply policies were put on the agenda. Reconstruction was the main policy because it came after the Iran-Iraq war. To address this issue, on the one hand, the government was forced to offer free materials (Taheribabersad 2004), while on the other, they needed to take into consideration suitable land for this. As a result, the government handed over land at different prices in each region. Housing policies and its results during the first development program are shown in the following figure.

Overall, during the first and second development programs, land supply in big cities such as Tehran, Tabriz, Isfahan, Mashhad, and Ahvaz increased and, consequently, building density went up. As a result, an excessive increase in land prices occurred in such cities.

The second development program was approved in 1995, one year after the end of the first program, and pursued the following major goals: 1) the realization of social justice and the promotion of the society's public culture; 2) increasing productivity; 3) economic growth centred on agriculture; 4) the development of a non-oil administration; 5) environmental protection and optimal use of the country's natural resources; and 6) law enforcement and the strengthening of public participation (Shirzadi 2011). The economic goal of this program was to achieve an annual growth of 5.1% over four years (Mustafavi 2018). An evaluation of the program indicates that 1,017,000 housing units with a total floor area of 145 million square meters had been constructed. During this period, the focus was on the free market, and supply-side policies were on the agenda (Javad 2000). The policy exacerbated low-income people's difficulty in accessing the housing market. The existing deficiencies of the first program were not considered in the second program. Hence, the second program failed to reduce the gap between housing supply and demand. Both the first and second programs reduced the size of apartments, and it was decided that the apartment's size should be reduced to 100m² (Lahutifar 2003). In general, the policies formulated during the second program could not stimulate the housing market's building industry. Individual and personal housing production was more appropriate for households (Mahmudiany & Hosseini 2015). In this program, low credit was an obstacle to achieving these goals. The following table indicates the shortcomings and successes of the program.

Figure 1

Social and protected housing were at the centre of the second program, and focused attention on low-income groups. Of course, low-income groups participated in this process and were involved in the process as labour. To reduce costs, the government used the low-income groups themselves in the construction process. The mass production of housing was prioritized in this program (Javadiashlak 1998) and facilities were granted to housing developers. This prevented low-income groups from accessing affordable housing.

Figure 2

It can be concluded that the policy governing the housing sector was ‘savings, downsizing and mass production’, and the target groups were identified based on the axes of this policy. Most of the plans in the housing sector had been relatively successful. For the first time, special objectives were developed in the housing sector.

The third development program was aimed at ‘structural reforms’. The main objective of which was to reduce government ownership, and to expand the private sector and public participation in economic activities, social justice, decentralization, public access to information, environmental protection, export development strategy, attention to community cultural developments, and providing free health services (Shirzadi 2011; Pourdanesh & Mojahedzadeh 2020). In this program, the annual economic growth was 6%, and the average investment growth was 7.18% (Mustafavi 2018). Also, the average size of residential units was reduced from 123m² in 2001 to 119m² in 2004. In 2001, 2002, and 2003, there was an increase in the construction of rental units by approximately 31%, 35%, and 37%, respectively (Economic Report 2004 and monitoring the performance of the first four years of the third development program 2005). This program proposed monetary policies and economic liberalization to resolve the housing problems, but it did not achieve the predefined goals. Generally, the share of housing has always been more than 10% of national production. In other years, except for 1998 and 1999, the housing sector's share has been a growing trend (Riazi 2003).

From 1992 to 1995, due to the implementation of economic adjustment policies, few investments were absorbed by the housing sector (Document of the third program in housing sector 2000). After 1996, the housing sector's share in total investments increased. But in 1998, thanks to a fall in oil revenues, the housing sector experienced a recession. Between 1999 and 2010, due to a rise in oil prices, there was an issue in the housing sector (Abdi et al. 2012). The problems with the implementation of housing plans rose dramatically, some of which were related to production, supply, and demand, while others were connected to regional and urban planning constraints (Table 5).

Some of the problems stated above were related to the requirements of the period. The third development program was successful in some cases, the most important of which were reinforcing the mass production policy and the construction of rent-ownership housing. Rental housing construction and supply is a relatively new strategy. Through this strategy, the government can provide low-income housing. Since 1992, this strategy has become common in Iran, the first example of which was implemented in Rasht (1999) (Heydarichapaneh & Rezatb 2011). However, due to a lack of rental institutions in Iran, this policy did not achieve its goal. Another reason for the failure of this project was the unwillingness of both government and investors to build rental housing.

In this program, there was no significant relationship between administrative goals and private goals. The shortcomings of the program included a lack of proper analysis of indicators, and the discontinuity of these indicators. Paying attention to low-income housing was the main point of the third development program. There were specific policies for the housing sector, the most important of which was the ‘regulation of the housing market’. As a result, housing lending and housing production credit increased, while mass production and downsizing were also encouraged and strengthened. When the housing market regulation policy was implemented, housing and land prices soared and because of this, low-income groups could not enter the housing market. There was virtually no effective demand from these groups.

During the third development program, the average annual housing production increased to 9%. Generally, during the first three programs (1990–2005), more than 95% of housing sector plans were privatized and the government only had a guidance and supervisory role (Abdi & Ghobadi 2006).

Iran's fourth program completed the third development plan, with some of the third plan's themes being repeated. The program pursued the following goals: interaction with the global economy; expanding privatization and economic competitiveness; equalizing educational opportunities; protecting the environment; achieving food security and public health; providing public access to health services; establishing justice and reducing social inequalities; promoting social capital, human rights, and citizenship; detente in international relations; improvement in women's affairs, increased national security, development of judicial affairs, and the modernization of government (Shirzadi 2011). The annual economic growth for this program was considered to be 8% (Mustafavi 2018). Under the fourth program, it was anticipated that a total of 3,108,000 housing units would be built in urban areas. Studies showed that 86% of these housing units were constructed, and 91% of housing units had building licenses (Fourth economic, social and cultural development program law of Iran 2005). In 2007, the construction of about 75,000 housing units was completed in rural areas, and their costs were funded by the facilities of rural housing improvement. In addition, also in 2007, roughly 350 million dollars were paid to banks as subsidies for rural housing improvement projects (Economic Report 2009). In small and medium-sized cities, some grants were considered for those who constructed affordable rental housing. During this period, the assignment of building permits had an ascending trend. Downsizing was not successfully achieved under this development program. A housing master plan was developed during this development program, which was a premier achievement in the housing sector. From another point of view, improvement, renovation, and revival of old textures were the landmark in the fourth development program. It can be said that worn-out fabrics, providing low-income housing, and meeting the housing concerns of young people were the key priorities of the fourth development program. The fourth development program is summarized in the following figure.

Figure 3

Figure 4

During this development program, the Mehr housing project (99 years) was proposed and carried out. The government sought to reduce fluctuations in the housing sector.

The fifth development program pursued goals such as social justice, the foundation of an Islamic-Iranian development model, increased production and social welfare, and the rehabilitation of the administrative system (Seifuri & Taqwa 2019). An economic growth of 8% was expected at the end of the program (Shaghaghi 2018). Studies (e.g. Souri 2014) suggest that the housing sector recession in 2009 continued until 2010. During this period, recession led to a fall in actual housing prices, and relative stability prevailed in the housing market. From late 2011, housing prices experienced a rising trend. Although housing construction is currently in recession, during the last two years the Department of Housing and Urban Development has still been reviewing the housing master plan approved in 2006 (Pourmohammadi & Asadi 2015). A revision of the housing master plan started in January 2014. Economic experts believed that a delay in closing the housing master plan would be detrimental to the housing market. Granting facilities to builders of affordable housing units in small and medium-sized cities and all villages included in this program was not predicted. Credit and technical assistance was not considered for improving and renovating rural housing. Supporting the establishment of factories that produced building materials and technical service providers, which was emphasized in the fourth development program, was removed. Ignoring and removing such factors can cause harmful effects for the disadvantaged groups (Analytical report about housing master plan criticism, 2015a). In the housing master plan, rental housing became the dominant tool for providing low-income housing. This approach was in stark contrast to the principles of the ‘resistance economy’¹ (Analytical report about housing master plan criticism 2015b). The pros and cons of the fifth development program for the housing sector is summarized in the following table.

In the economic plan, there were no specific targets concerning the housing market for the next five years. Problems such as a lack of residential units, rental properties, or land price increases were neglected., The Mehr housing project continued during this program. Over the previous seven years, the Mehr housing project had been implemented in suburban areas and transferred to applicants in the form of a 99-year ownership (Pourmohammadi et al. 2013), and was faced with financial crises and other problems such as a lack of urban planning and social amenities. This was owing to the financial issues that burdened the national economy. Table 8 presents the detailed number of planned units in each city and the project type.

Table 8 shows the division of Mehr housing units by the type of project and type of city. There exists three type of cities: cities with more than 25 thousand population, which were managed by the Ministry of Housing; cities with less than 25 thousand population, which were managed by National Land and Housing Organization; and new cities which were under control of the New Towns development CO. Three streams of Mehr construction projects were in practice. The owner-developer stream was for individuals who had their own land and had a small-scale construction. The other two streams were the ‘Tripartite Agreements’ and ‘cooperative projects’, which were concentrated projects in selected city localities.

By government decision, within the fifth development program the Mehr housing project was stopped, but unfinished units would be completed and delivered to the applicants. Housing officials have raised other programs such as social housing projects, but their details and conditions have not been disclosed. Although social housing in Iran started from the second development plan, it is still one of the most ambiguous concepts in Iran. In Iran, social housing is often referred to as housing that is built by the government for certain groups, namely, low-income groups and young couples. Social housing policy seeks to control the growing demand for housing, stabilize the market, mobilize the national economy, and reduce the unemployment rate. Under the social housing policy, the government pays the bulk of the cost, but applicants must also be involved.

The most important objectives of the sixth program include improving business, providing employment, financing, social justice and eliminating discrimination, empowering the deprived and the poor (with the priority being female-headed households), improving social insurance, and reducing social harm (Seifuri & Taqwa 2019). The program has targeted an average annual economic growth of 8%, and a Gini coefficient of 34% in the final year of the program (Mustafavi 2018). The Mehr housing policy has again been continued in the sixth development program, and by 2020, 1,578,000 Mehr housing units (82%) were scheduled to be delivered to applicants (Khora Sun News 2020). In addition, the construction of 400,000 housing units was on the agenda, and in some areas, supplying land has been the policy of the government. In addition, it was decided that 200,000 units would be built by developers in new cities, 100,000 units in cities with less than 50,000 people, and 100,000 units in dilapidated textures (Bazafarinishahri 2017). The focus has been on providing housing for low-income groups. So, the construction of 570,000 housing units is intended to support low-income groups (Eghtesad News 1975). Given that the sixth development program is not yet complete and no documentation concerning the results has been published, it is not possible to evaluate the performance of the housing sector.