Housing Policy, Strategy and Recent Developments in Market-based Housing Finance

In the paper, the authors acknowledge that there seems to be considerable unmet demand for additional and improved low cost housing. They believe that it is financially unsustainable for the government to provide ownership of housing to all. The paper cites the example of the various institutions created by the Philippine government and the recent available data to show that despite elaborate intervention, government fell short of the target because:

• Cross subsidies did not always benefit the target group: People who benefited most from cross subsidization were the high and middle income groups and the developers;
• Limited participation: Due to the nature of the program and its implementation strategy, there was limited participation, especially from private banks, leading to increased dependence on pension funds and government funding;
• Creditworthiness was not a criterion: While allocating loans, creditworthiness was not taken into account. This led to increased defaults in loan repayment.

The authors recommend:

• Promoting market based housing finance system to provide low cost housing;
• Rationalizing government housing programs and institutions;
• Targeting subsidies to well identified low-income household;
• Stimulating private rental housing by lifting rent control;
• Fixing targets to mobilize savings as equity in low cost housing programs;
• Reviewing and amending legislation for efficient functioning of primary and secondary mortgage market;
• Maintaining a stable macroeconomic condition characterized by low inflation and low interest rates.