Chapter 12

Past housing programs have enabled nonpoor households to have access to the formal housing markets. However, socialized housing is inaccessible to the poor, especially those in the urban areas. The bottom 40 percent of urban households had to resort to informal housing or informal settlements characterized by congestion and very poor living conditions (Table 12.1). While efforts are exerted to raise living standards, these are negated by the lack of affordable housing.

To address the housing problem, the government has to contend with several interrelated issues: land prices, housing finance and guarantees and high transaction and production costs in the housing market. This approach recognizes the government’s principal role to provide the enabling policy and regulatory framework for the development of efficient housing markets and to use an efficiently-targeted subsidy system to help the bottom 40 percent of households to have access to decent shelter. In this context, the National Urban Development and Housing Framework (NUDHF) has adopted the following objectives: "(i) ensure that land is available to housing; (ii) ensure that residential infrastructure is provided to recognized housing development areas; (iii) support housing finance systems; and (iv) provide mortgage guarantees."

The government, therefore, shall implement reforms in the housing market, focus efficiently on targeted housing assistance to the poor, create a sustainable housing finance system, involve local governments in addressing housing and urban development problems, and promote greater private sector, i.e., business, civil society and peoples’ organizations, participation in the housing market.

From 1998 to 2000, achievements in the provision of mass housing were modest. The housing subsector sought to provide shelter security units especially for the poor by promoting security of tenure in housing. (A shelter security unit is defined as a lot, house or house and lot package.) The housing demand-supply gap remains as critical as ever in view of rapid urbanization abetted by in-city migration, rapid population growth and formation of new households, and the current slowdown of the country’s economic growth.

Housing Assistance

For the Plan period 1999-2004, total housing need is estimated at 3.3 million housing units composed mainly of 1.1 million housing backlog and 2.2 million units for new households. The bulk of the housing need is concentrated in the National Capital Region (1.06 million households), followed by Regions IV (0.6 million) and III (0.3 million). Table 12.2  provides information on the target households and accomplishments from July 1998-2000.

Housing Finance

In the past years, allocation for housing was only one percent of the annual budget. In 2000, however, it increased to 1.4 percent. The bulk of credit funds is with the government financial institutions (GFIs) and the pension funds that have been tasked to provide liquidity to the housing credit market. In 1999, the government introduced the Multi-Window Lending System (MWLS) to replace the Unified Home Lending Program that had been saddled with a low loan repayment rate and huge arrears. There was also an attempt to lay down the groundwork for mortgage securitization and a secondary mortgage market.

The MWLS utilizes government financial institutions as separate lending windows for housing loans to specified target clientele. The GFIs committed and lent these at government-directed subsidized rates for socialized and economic housing, and at market rates for open housing (Table 12.3). As of December 2000, of the P37 billion commitment of five GFIs for housing, total utilization was only P5.6 billion for 26,011 shelter security units. There is a need to review the MWLS and identify a sustainable housing finance system that will provide low-income households access to affordable shelter.

Likewise, in 1999, Republic Act (RA) 8763 was passed to increase the capitalization of the Home Guaranty Corporation (HGC) from P2.5 billion to P50 billion in a span of 50 years. The same law provided for the prioritization of socialized and low-cost housing packages. The increased capitalization will strengthen the credit guaranty capacity of HGC.

To rationalize land use by local government units (LGUs), the government provided technical assistance to complete and update the Comprehensive Land Use Plans (CLUPs). There is a need to strengthen the capacity of local governments in land use planning as only 15.5 percent of the 1,524 municipalities and 84 cities have CLUPs. Moreover, the mechanisms for the participation of the civil society and the private sector in the implementation of programs related to housing and urban development need to be enhanced.

Targets

Following the policy framework, policy direction and strategies defined in the foregoing sections, the housing sector targets the provision of shelter security to 1,200,000 households for the plan period 2001-2004 that translates to a funding requirement of P215.16 billion. The target adopts a 73 percent to 27 percent ratio in favor of socialized housing, principally for the bottom 40 percent of households (see Table 12.4).

Policy Direction

The government’s housing efforts will be mainly directed at the bottom 40 percent of households because of their inability to access the formal housing markets. This will mean providing these households with affordable socialized housing through efficient production of housing units for ownership or rental and sustainable housing finance. Intervention in the housing markets shall aim to improve the efficiency of that market, with the private sector taking the lead in the production and financing of housing units. Where necessary and to the extent that the government’s fiscal position may warrant, efficiently targeted subsidies will be utilized to make those units affordable.

The pension funds’ housing programs shall continue to be strengthened in order to respond to the housing demand of the members. The pension funds provide their members access to affordable housing finance and help address the demand for housing of nonpoor households. They shall continue to provide liquidity to the primary mortgage market of socialized, economic and open housing and shall help the development of the secondary mortgage market.

Strategies

The government shall pursue policy, legal and regulatory reforms to reduce transaction costs and improve the efficiency of the housing market.

Housing agencies involved in providing housing loans and granting of housing permits shall endeavor to cut by at least half the number of days, processes and requirements for loan applications and housing permits. This shall be undertaken without compromising prudent lending practices and safety standards.

The government supports the enactment of the Land Title Insurance Bill that seeks to remove certain bottlenecks in the processing of housing permits. The Bill promotes a more reliable and fraud-proof system of securing land titles, and addresses the problem of forgery of land titles.

To address the issue of high prices of urban lands for housing, the National Land Use Code shall be enacted. It shall deal with gaps in land use planning and real estate management particularly in the areas of data generation, and development and application of methods/technology. The Code shall promulgate national and regional standards and guidelines, including local model zoning ordinances on land use classification, physical planning, estate development, and zoning. Through the Code, conflicts in land use planning, classification and allocation shall be resolved.

To encourage private sector participation in the housing market, the government shall improve the policy, legal and regulatory environment for both the primary mortgage market and the secondary mortgage market. Housing finance shall rest on market-based principles and the efficient use of subsidies and incentives to address specific market failures.

Financial and credit policy reforms including the review of MWLS shall be pursued to make the housing finance system sustainable. The interest rate structure shall be reviewed in light of Executive Order (EO) 138 laying down a market-oriented interest rate and credit policy. Credit enhancement measures of HGC will improve access to housing finance, encourage private sector participation and help the development of a secondary mortgage market.

Innovative financial schemes shall seek to generate long-term funds for the housing sector. This will include, among others, a securitization program and the development of a private secondary mortgage institution. Reforms in pension funds and contractual savings shall aim to provide long-term liabilities to match the long-term funding needs of the housing sector.

The policy and institutional framework for a secondary mortgage market institution shall be formulated. Among others, this involves clarifying the roles of the Home Guaranty Corporation (HGC), National Home Mortgage Finance Corporation (NHMFC), Home Development Mutual Fund (HDMF), other government financial institutions, and the private sector. The Securitization Bill, which creates the necessary infrastructure to establish a market environment for a wide range of asset-backed securities in the country, shall be prioritized. This bill also expands available long-term credit for housing, infrastructure, and other development priorities. Likewise, to increase revenues for housing, the HDMF Charter will be amended to enable the HDMF to plow back its earnings to housing finance.

The government will provide priority assistance to those who are in danger areas (river banks, esteros and other flood prone areas), those in the right-of-way (ROW) of government infrastructure projects, and those in threat of demolition. Government will also pursue the regularization of tenure of informal settler families occupying public lands. Greater resources of the national government will be allocated to address the needs of the informal sector. Community-led self-help approaches to housing as well as nontraditional building and management technology in housing production will be encouraged.

Major programs to implement this strategy shall include: (a) improvement of sites and services; (b) Community Mortgage Program (CMP); (c) Land Tenure Assistance Program (LTAP); (d) Group Land Acquisition Program (GLAD); and (e) declaration of parcels of public lands with informal settlers as "alienable and disposable" so that these can be acquired by families residing therein.

Targeting will be sharpened to effect a more equitable distribution of housing assistance to the informal sector. For this purpose, priority measures will be undertaken to complete the listing of beneficiaries of housing projects and to facilitate consultation with affected informal settlers on appropriate action plans for relocation, housing and resettlement.

Whenever possible, in-city relocation will be promoted. The government will also ensure that basic social services and ancillary facilities are available in resettlement sites. This is part of a rational resettlement policy that considers appropriate design, standards, financing, legal and institutional frameworks for resettlement and relocation projects.

To provide rental housing options for the poor, the government shall promote efficient rental markets through incentives for the private sector participation and the provision of on-site and off-site services to housing projects located outside the major metropolitan centers. This will be an alternative to rent controls that tend to discourage new investments in rental housing.

The government will make housing loans accessible at affordable rates for the formal sector or those who are employed and are members of the pension funds. Developmental financing will be made available for developers who require financial assistance. Thus, sectoral and institutional housing projects, such as PNP/AFP Housing Program, Teachers’ Housing Program, OFW and Workers’ Housing Program, Cooperatives’ Housing Program, LGU Housing Program, Corporate Housing Program, and National Government/Local Government Employees Housing Program shall be pursued.

Institutional strengthening for housing and urban development will be pursued through the creation of the Department of Housing and Urban Development (DHUD). This aims to strengthen the coordination and supervision of policy on shelter delivery, finance and regulate housing and urban development services. Considering the tight fiscal constraints and the government-wide streamlining of the bureaucracy, the creation of the DHUD will be subject to the "scrap-and-build policy" of the government. This means that existing units or agencies in the housing sector may have to be merged or even eliminated to give way to the creation of DHUD.

Stronger cooperation among housing institutions will be facilitated through a consultative council composed of representatives from the national and local governments. Geographical tie-ups with infrastructure agencies will also be pursued to cater to the needs of industrial/commercial centers.

Inasmuch as the operationalization of the NUDHF greatly depends on local governments, capacity building initiatives for the LGUs will be conducted. Technical assistance will be provided to LGUs in preparing and updating their CLUPs. Moreover, local housing boards will be created in cities and municipalities where necessary. The local housing boards will formulate, develop, implement, and monitor policies on the provision of housing, resettlement areas, and will seek to uphold the right of the underprivileged and homeless to a just and humane resettlement process, among others.

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