08 low income housing -- achievement, costs, challenges - dr. toby c. monsod

8/9/2019 08 Low Income Housing -- Achievement, Costs, Challenges - Dr. Toby C. Monsod

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for posting 020810 1

Low income housing:achievement, costs,challenges

Toby C. Monsod

UP School of Economics

3 February 2010


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Preliminaries

A functioning housing market: HH can translate theirnotional demand for quality housing into effective demandat market prices, and where the supply of housing isresponsive to that demand.

Housing is a private good but subject to significant marketfailures, especially at the bottom end, which is aneconomic rationale for both intervention and socialprovision. Also: equity, minimum housing standards

Range of options: regulations, taxes/subsidies, directprovision. But government failure could be worse thanmarket failures.


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State policy thru the years

1st quarter 1900s: punitive, clean up Manila (slumclearance, sanitation and building codes)

30s 50s : public housing investments in behalf oflabor (e.g. Vitas, Diliman)

60s 70s: housing as strategic economic activity;

subsidized and non-subsidized sector; public housingcorporations (e.g. Tenement Act, SapangPalay/Carmona, Quezon City housing projects)


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1975/1986 onwards: National shelterprogram

Goal: increase access to decent, affordable and secureshelter

Who: bottom 30%, 40% or 50%; living in urban, or

both urban and rural areas

What: house, lot, or both

Featuring: interacting network of housing agencies(HUDCC, NHA, HLURB, HGC, NHMFC, SHFC) +

Pagibig, SSS and GSIS


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Achievements: 2 million HH assistedfrom 1987-2007

= 29% of backlog; 49% of target

~ 20% (403, 215 HH): direct production, e.g.resettlement, slum upgrading, sites and servicesand other projects

~ 26% (543, 976 HH): tenurial assistance or

community-based mortgage finance~ 54% (1,106,492 HH): individual mortgage

finance


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Table 1: Estimated Backlog, Targets andHouseholds served 1987 to 2007(In 000s)

Backlog: units with double occupancy (urban & rural); units for tenure, infraor structural upgrading; units for replacement due to danger area/infraarea/for eviction or demolition; homeless.

Estimated Need: Backlog + projected new HH from population growth

1 9 8 7 - 9 21 9 9 3 - 9 81 9 9 9 - 0 02 0 0 1 - 0 42 0 0 5 - 0 7T O T A

E st i m at e d N e e d3 , 3 7 6 3 ,7 2 4 3 ,3 6 2 3 , 6 0 0 1 ,8 2 5 1 5 ,8 8

B ac k l o g ( y e ar 0 )1 ,1 8 2 2 ,2 2 5 1 , 1 3 9 2 , 0 6 9 5 8 5 7 ,2 0 0

P h y sic al t ar g e t6 2 7 1 ,2 0 0 4 7 8 1 , 2 0 0 6 6 4 4 ,1 6 9

H H S e r v e d 2 7 8 6 6 9 2 2 9 4 8 3 3 9 5 2 0 5 4

% T ar g e t 4 4 .3 5 5 .8 4 7 .9 4 0 . 3 5 9 .5 4 9 .3

% E st i m at e d 2 3 .5 3 0 .1 2 0 .1 2 3 . 3 6 7 .5 2 8 .5


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Costs: Fiscal and quasi-fiscal costs,leakages, stunted markets

Housing finance: Record not good. Collapsed in 1985, againin 1996 Llanto, et. al [1997]: from 1995-97, 25 B in subsidies of

which 90% were off-budget

WB [1997]: recap of NHMFC + provisioning for Funds =P 55 B

Housing Production: Record not good. high attrition rates inresettlement sites (as experienced in the 1950s), large

inventory of unoccupied housing units

Crowding out of private sector on both finance and realside


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Good news: recent attempts at reform

Development of Poor Urban Communities Sector Project(DBP and HUDCC), to pilot:

Market-based shelter financing (MFI on lending DBPloans at market rates) + up front capital subsidies

Rights-based tenurial instruments LGU as borrower or guarantor

Railway Resettlement Projects (NHA)

Innovation: in city/in-town policy; Local Inter-AgencyCommittee

NHA as catalyst rather than direct provider


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However, blind spot remains

While the focus has been on maximizing the output ofnew houses and selling these at below-market prices, thefundamental causes of unaffordability on the supply sidehave remained largely unaddressed. Particularly

dysfunctions in land markets.

The housing dilemma is primarily a land problem [Roxas1969]

If (land) prices were as low in comparable developingcountries as much as 50% more shelter could have beenbuilt and fewer than 28 % of households would probablylive under irregular tenure arrangements. [Strassman andBlunt 1993]


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Evidence from international experience: theestablishment and strengthening of land andproperty market institutions is a prerequisite

The establishment and strengthening of land andproperty market institutionsincluding secure propertyrights, flexible land use regulations, and ease of land

conversion, is not easy. But without the commitmentto such institutions, and without investment in connectiveinfrastructure, targeted interventions to integrate slumsare unlikely to work. [WDR 2009, Chapter 7,emphasisadded]

More generally: spatially blind institutions and spatiallyconnective infrastructure are prerequisites for successfulinterventions


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Prioritizing and sequencing of policiesis critical

Sequence: spatially blind measures to createconditions suitable for economic concentration,followed by connective policies to deal with

congestion (WDR)

Other spatially blind institutions:

Basic social services to all Regulations for housing finance.


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On spatially connectiveinfrastructure

In-country evidence on spatially connectiveinfrastructure: Infrastructure, particularly transport,exerts both an indirect and direct effect on povertyreduction (Balisacan, et. al [2008])


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Transport, exerts both an indirect and direct effect on povertyreduction (Balisacan, et. al. [2008])

Time-varying policy variables

Explanatory variable

Mean income growth

Log (Per capita income 1988)

Mortality rate

Inequality

Inequality squared

Ethnic fragmentation

Dynasty

Change in electricityChange in road densityChange in CARP

Change in ag. TOT

Adj. R-squared

Change in literacy

0.628

+

+

+

+

+

Mean incomegrowth

Rate of povertyreduction

0.649

Initial conditions


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On spatially connectiveinfrastructure

However, status:

Level of investment: below par

Missing link: provincial roads

Bias for international connections versus domestictransport networks and corridors enclaves

As a stimulus, building domestic connective network islikely to generate more productive jobsand reducepovertythan direct government production of publichousing


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Proposition 1

The integration of informal settlements a key component of urbanand development policy. Low-income housing a key componentof social policy.

However, without the pre-requisite fluid land markets and domesticconnective infrastructure, direct state interventions to addresslow income housing problems for post-ondoy or otherwise are likely to be ineffective and wasteful as they have in the past

More precisely, to be successful, state strategy relating to low

income housing needs to be embedded in a coherent and expliciturbanization framework. The prerequisites for inclusiveurbanization are the same for successful low-income housingpolicy.


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Proposition 2: once costs arecontained on the supply side

Housing social assistance, when warranted, needs to be

i. on-budget (transparent),

ii. de-linkedfrom market-based transactions, and

iii. Evaluated vis education, health, and othercomponents of social policy.


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Design for subsidy policy: household-based,tenure neutral, allowing for self-selection.

Type 1: Moderate to low-income HH who are at fringe of formal housingfinance market. Options:

lump-sum down-payment support

mortgage buy-downs

mortgage default insurance

Type 2: HH for whom income, employment, collateral or other constraintsmake access to formal finance and housing infeasible. Options:

upfront capital grant or rental subsidies

serviced lot with core house as upfront subsidy, with assistance

tied to savings mechanisms

But if costs are not contained on supply side, demand side subsidies willsimply be paying for inefficiencies.


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Implications1. Move discussion of urban-rural linkages and

management of urbanization strategy to provincial andsub-region level. Managing a portfolio of places, includingchartered cities. Metro arrangements?

1. Re-focus central agencies/NG away from direct housing

assistance/production targets to

Explicit urban policy (framing MTPDP)

Resolving bottlenecks in land markets (administration

bottlenecks, articulate land/land use policy, inventory ofpublic land) and credit markets

Connecting the domestic economy; addressing missinglinks in domestic infra and building density

Ensuring policy predictability and guarantees, tenure neutralpolicies


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3. City/municipalities to focus on:

local planning, embedded in larger area planning

local land use regulations and removing admin bottlenecksin land administration (which will enable private sector)

Property taxes Basic health and education services to all

Local transportation and connective infrastructure

And, when a certain level of urbanization is reached, targetedsocial assistance (not direct or subsidized housing finance!), e.g.

Servicing of land for settlements

Local rental housing policies, subsidies?


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Post-ondoy rehab issues provides opportunityto reframe low-income housing debate

From the cart before the horse embedhousing in explicit urbanization policy.

From a focus on in-situ vs relocation?, in-cityvs. off-city? single house or MRB?discussion of transport, land market

interventions, the efficiency and inclusiveness ofprocesses that will reconfigure the greater MMarea.

08 low income housing -- achievement, costs, challenges - dr. toby c. monsod

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