Rethinking Institutional Reforms in the Philippine Housing Sector
Introduction:
Government strategies on housing sector have evolved into an extensive list of policy instruments that include direct production, pricing policies, security in land tenure, tax and credit incentives, financial subsidies and innovations, zoning and building regulations, and rent controls. In the last 25 years, government has also undertaken reforms to implement these strategies effectively.
A major reform is the shift from a highly centralized system of operation to a decentralized and participative approach to housing. Aside from these reforms, government has probably spent substantially more on housing subsidies than on any other welfare program in the country.
The Philippine Housing Market in Context:
The housing problem in the country is manifested in various forms—the proliferation of informal housing arrangements (e.g., squatting, ownership of structure with no lease on site); the poor quality of dwelling and infrastructure services; the growth in room letting, creating enormous congestion; unregulated housing and zoning; and land use conflicts.
Two major conditions contribute to this situation: one, overurbanization; and two, relatively inelastic supply, specifically at the lower end of the housing sector. Overurbanization has been defined as a stage where a higher degree of urbanization exists relative to the rates warranted by their degrees of industrialization.
Trends in Government Housing Strategies:
The National Shelter Program (NSP) represents the Philippine action agenda for housing. The program has three key areas that contain the various policy instruments in housing, namely, production, finance and regulation.
The production component entails the development of site or service home lots and the construction of residential buildings for low- to middle income households. The functions related to production are the following:
(1) ensuring a continuous supply of housing construction, which includes accreditation and franchising of private developers, constructors, fabricators, and suppliers who shall directly participate in the actual construction of identified housing projects.
(2) accreditation of housing technologies.
Performance of the Housing Sector:
The focus of the NSP is homeownership. Between 1993 and 2001, about 971,000 households obtained housing ownership from the program. Most households (51 percent) obtained housing from developments provided by private developers and financed through the different housing finance programs (e.g., UHLP, MWLS, GFIs, PAG-IBIG). About 13 percent of the households benefited from the NHA resettlement program.
Sustainability of the NSP:
The NSP accomplishments in housing have been obtained with great fiscal burden. Housing projects implemented by the national government have been problematic in terms of cost recovery. The recovery rate of programs under the NHA shows a collection efficiency rate of 40 percent for programs that provide only serviced plots, and 26 percent for programs that include both lot and housing.
Private sector participation in housing:
Government recognizes the importance of the private business community in housing development in the country. Thus, it has employed the “carrot and stick” approach to getting the business community (e.g., developers) to invest in low-income housing.
Proposed Directions of Institutional Reforms in the Housing Sector:
While many problems on housing are linked to institutional barriers in the land and financial markets, government has focused reforms on organizational and program-specific issues. Organizational and program reforms, while necessary, can only be effective if the basic institutional issues are first addressed.
Conclusion:
The Philippines is among the countries that have adopted a diversified portfolio in mortgage financing.66 In particular, the CMP has gained some international recognition as a noteworthy mechanism for housing the urban Notwithstanding the institutional reforms mentioned above, there is still a need to examine the incentive structure of the program that includes not only the beneficiaries but also other players such as developers, originators, and NHMFC.
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