Reforming housing for the poor in the Philippines

Author: Marife Ballesteros, PIDS

The enactment in the nineties of the Urban Development and Housing Act (UDHA) of 1992 and the Comprehensive Shelter Finance Act (CISFA) of 1994, two pro-poor housing legislations, greatly changed the Philippines’ policy on housing the poor. From a highly centralised and heavily subsidised policy, the government moved to a market-oriented and participatory approach to housing. Despite these reforms, the problems with UDHA and CISFA have not delivered housing on the scale or of the quality that is required.

The National Shelter Program (NSP), which regulates housing production, regulation and financing, is the Philippines’ banner program for low-income housing provision. The NSP divides housing into ‘socialized’ (valued at less than USD 6,000, targeted at households up to the 30th income percentile) and ‘economic’ housing units (valued at up to USD 40,000, targeted at households up to the 50th income percentile).

Current housing efforts remain inadequate, with figures showing an acute housing shortage estimated at over one million units – still probably a gross underestimate. On average, the NSP has only delivered 26 per cent of its target, or less than 10 per cent of total housing need. Moreover, the housing backlog is likely to worsen,, due to worsening poverty and increasing urbanisation.

Several factors have contributed to hindering the outreach and sustainability of the NSP programs.

First, following the Philippines’ general decentralisation trend, the UDHA makes local government units (LGUs) responsible for being the UDHA’s main implementer. But most LGUs lack the capacity and resources for shelter and urban management. Moreover, LGUs are not often keen to accept low-income migrants for relocation, due to limited social services and economic opportunities, and housing maintenance costs.

Second, resettlement costs are increasing, increasing LGUs’ dependence on national subsidies. Lack of coordination between the lead national agency on resettlement – the National Housing Authority (NHA), LGUs and other national agencies further hinders the success of resettlement projects. Another problem is beneficiaries abandoning or transferring the home-lots they are awarded, due to a lack of opportunities and services.

Third, identifying suitable beneficiaries of government housing programs is difficult. LGUs lack incentives to develop databases for beneficiary registration, so the awarding of home-lots is often ad hoc and politically dependent. Tracking down the awardees of housing units has also proven difficult, due to lack of a monitoring system.

Fourth, under the UDHA, both the government and the community must eradicate professional squatters and squatting syndicates. But actual enforcement – arrests and prosecutions, has been sloppy, partly because of weak coordination between authorities and communities.

Fifth, the awarding of home-lots is often delayed by bureaucratic legalism and valuation issues. The establishment of eviction guidelines for urban poor settlements has been one of the highlights of the UDHA, providing informal settlers with some legal rights to the land they occupy. But these rights are sometimes disregarded, specifically in private lands, and monitoring has been weak, because no central agency or quasi-judicial body exists to ensure compliance.

Sixth, housing finance programs have limited outreach. For example, the Social Housing Finance Corporation‘s ‘Community Mortgage Program’ has been helpful, but lacks sufficient funding to expand operations. On the other hand, the Home Development Mutual Fund’s ‘Socialized Loan Program’, geared towards salaried workers, has not greatly benefited the poor

Not only does the Philippines have one of the lowest mortgage penetration ratios, but public expenditure on housing is one of the lowest in Asia, at less than 0.1 per cent of GDP on average,  The aim of CISFA was to strengthen the NSP through regular and higher annual budget appropriations between 1995-2002, but only 52 per cent of this  allotted increase in NSP funding was actually released. The entry of housing microfinance has been limited

Moreover, private sector funds remain considerably untapped. The UDHA intends to entice private investment in socialised housing through tax exemptions and regulation, but the incentives’s benefits are not clear. The UDHA also requires developers without socialised housing projects to set aside 20 per cent for low-income housing programs, but compliance has not been adequately monitored.

For the housing sector to be more responsive to the needs of the poor, several key reforms are required.

First, a reliable and sustainable poverty database system is needed at the local level. with clear and measurable parameters to identify suitable beneficiaries. The Department Of Interior and Local Government is currently working on a monitoring system to generate baseline information on poverty; this system could also be adopted for shelter programs.

Related to this, establishing a national resettlement policy will ensure a common framework for resettlement approaches, housing packages, and entitlement. NHA’s role as lead agency should be strengthened, with funds from the various resettlement agencies integrated into a common fund.

Second, a system of incentives should encourage and capacitate LGUs to perform their roles in shelter as identified in the UDHA. LGUs and the national police should also be empowered to more effectively curtail squatting syndicates.

Third, the Philippine government should develop a public-private partnership as a key strategy to resettlement projects. The tax incentive scheme for shelter needs to rationalised and made more responsive. At the same time, the government must increase public expenditure on housing, ensuring that the subsidy scheme is transparent and well-targeted.

Finally, NSP success requires a favourable environment for housing finance. Thus, the government must ensure the financial health of state-owned housing finance institutions, and encourage the entry of housing microfinance institutions, including foreign-based microfinance. Scale and sustainability will only come through through developed capital markets, not continuously using government funds. On the demand side, government should try to improve the bankability of the poor through community and livelihood development programs.

This article is summarised from a Phillipines Insitute for Development Studies (PIDS) Policy Note published here.