The Evolution of Philippine

Housing Policy and

Institutions

Group Members

Bobis, Arvin
Drilon, James Peter
Mago, Mharciane Maxine
Naculanga, Glenn Pete

Subject/Time/Day

Housing (ARC 511)/6:00-9:00P/Saturday

Professor

Ar. Efren M. Berme Jr., UAP

INTRODUCTION
• In 2007, there was a backlog of 1.3 million, of which two-thirds was ‘unacceptable
housing” including dilapidated or condemned housing and marginal housing, including
informal settlers.

• In 2010, informal settlers in Metro Manila, the country’s economic and political center,
numbered about 580,000.

• Housing conditions are a reflection of the level of economic development

• Poor Housing is likely to be as much the result of housing policy – the combination of
policies and regulations that determine the efficiency and responsiveness of housing
supply

• Housing programs in the Philippines have focused on maximizing the output of new
houses and sites for sale at below market prices via under-priced mortgages,
development loans and guaranties, and other implicit and explicit government subsidies.

HOUSING AND THE STATE

• A functioning housing market is one where households can translate their notional
demand for quality housing into effective demand at market prices, and where the
supply of housing is responsive to that demand.

• On the supply side, investments are relatively risky due to the ‘irreversible’ nature of
housing, inherent uncertainties, and the long gestation periods involved in production.

• The slow adjustment in the housing system makes housing markets “suppliers’
markets”, characterized by excess demand or excessively high market prices.

• On the demand side, households typically require financing to make housing

investments. Without proper credit and property market information however, lenders
are not able to serve all segments of the housing market profitably, particularly at the
lower end.

• The strongest political case for intervention and social provision in housing has been in
terms of a direct and effective means of ensuring minimum housing standards and
redistribution rather than efficiency

• The existence of “market failures” and inequities provide a-priori economic reasons for
government intervention.
• The practical case for intervention should depend on whether the market failure is
large enough to matter and the chances of government to actually overcome it.

• Regulations, taxes and subsidies, and the direct provision of goods and services are
among the policy options of the state.

ACHIEVEMENTS AND COSTS OF HOUSING POLICY TO DATE

1st Quarter of 1900s

• Housing policy was embodied in an effort to “clean-up” Manila which was beset by
sanitation problems and overcrowding.

The past decades saw various attempts to address the problems of the country’s
growing localities, particularly primate cities. Among these were measures to remedy
overcrowding and improve building sanitation, establishment of public housing
corporations with different mandates, such as shelter production, financing, provision of
guaranties, and regulation. In 1978 an urban land reform program was enacted (through
Presidential Decree 1517) with the aim of regulating “the existing pattern of land use
and ownership in urban and urbanizable areas.”

Current Housing Policy: Dealing with Symptoms Rather than Causes of Housing
System Failures

The principal intention of state-sponsored housing programs in the Philippines has

always been to ensure better housing for low-income households. This was implicit in
housing interventions during the early 1900s, which included slum clearing programs,
relocation, and the enforcement of new sanitation and building codes to “clean-up”
Manila, as well as later in the 1940s when housing and subdivision development for
low-income/worker households was undertaken. In 1941, the first national housing law
(Commonwealth Act 648) created an agency with distinct pro-poor objectives to
undertake urban housing, subdivision, and slum clearance programs. In 1947, the
Philippine Homesite and Housing Corporation (PHHC) were established with the explicit
corporate objective to establish public housing for low-income families.

• Initial interventions included slum clearing programs and new sanitation and building
codes, and later the acquisition, development and resale of landed estates and housing
on behalf of labor.

1960s and 1970s

Housing was recognized as a strategic economic activity and a more elaborate housing
program was articulated which included:

1. Social is any rental housing which may be owned and managed by the state, by non-
profit organizations, or by a combination of the two, usually with the aim of
providing affordable housing. Social housing can also be seen as a potential remedy
to housing inequality. (e.g. slum clearance, rental tenement construction and
resettlement projects) built and funded by government
2. Economic housing, built and financed by government,
3. Government financing of privately-owned housing. A number of public housing
corporations were established to implement this program.

1987 to 2011

• Around 2.4 million households received housing units that were built, financed or
insured with public support, representing about 49 percent of the official target and 30
percent of the estimated backlog per year.

• Of the 2.4 million households, about 21 percent were assisted thru direct production;
22 percent thru urban asset reform programs; and 57 percent thru housing finance,
specifically individual mortgage loans and retail guaranties.

Housing finance has been the dominant component of the housing program. To
maximize output, government housing finance programs have typically featured under-
priced housing loans and guaranty products, tenor mismatches (e.g. long-term, below-
market fixed rate mortgages financed with higher-priced, short-term debt), and policies
for funding and underwriting undisciplined by the market. This has resulted at least
three financial crises for NHMFC - in 1985, 1992 and 1996 - involving large fiscal and
quasi fiscal costs - the last one involving about Php 42 billion borrowed from the Pag-
IBIG, SSS and GSIS - and one liquidity squeeze for HGC in 1998 from which HGC has
yet to recover. Subsidies, apart from being implicit, have also been highly regressive:
during the time of the NHMFC and HGC crises, higher-income borrowers captured
nearly 75% of interest subsidy flows, 90% of subsidies associated with arrears under
the major lending programs, and 80% of cash and bond guaranties. These distributional
inefficiencies have continued under the Pag-IBIG Fund which bailed out NHMFC in
1988 and 1997 and now anchors government’s housing finance program. Subsidies
embedded in Pag-IBIG below-market rate mortgages are effectively borne by Pag-
IBIG’s lower-income, self-employed member-savers who do not qualify for housing
loans but who receive lower returns on their mandatory contributions because of
interest subsidies and default leakages . This raises the question of whether end-user
financing represents the optimal way for Pag-IBIG to comply with its mandate and, more
critically, whether Pag-IBIG has crowded-out rather than crowded-in private lenders.
Pag-IBIG enjoys significant legal and regulatory privileges, including mandatory
contributions and a general government guarantee - preferential conditions which
private lenders can hardly compete with.

Today

• Housing policy is embodied in a national shelter program that features a “total systems
approach to housing finance, production and regulation” and an interacting network of
implementing housing agencies, led by Housing and Urban Development Coordinating
Council (HUDCC).

• Agencies are the National Housing Authority (NHA), which produces shelter for the
bottom 30 percent in the income distribution; the National Home Mortgage Finance
Corporation (NHMFC), envisioned as a US style secondary mortgage market institution;
the Home Guaranty Corporation (HGC), which provides guaranties and other
incentives; the Housing and Land Use Regulatory Board (HLURB), which regulates land
use planning and housing development; and the Social Housing Finance Corporation
(SHFC), a subsidiary of the NHMFC which undertakes social housing programs for low-
income households, such as the Community Mortgage Program (CMP).

• Three contractual savings institutions:

- The Home Development Mutual Fund, also known as the Pag-IBIG Fund;
- The Social Security System (SSS), and the;
- Government Service Insurance System (GSIS) – serve as support agencies tasked “to
ensure that the funds required for long-term housing loans are available on a
continuous and self-sustaining basis”.

Over the years, the overall goal of the national shelter program has been to increase the
access of target households to decent, affordable and secure shelter, where target
households are typically those in the bottom 3 income deciles living in urban areas, and
“secure shelter” is a house, a lot, or both. Housing is largely positioned as a poverty
alleviation program in other words, although its so-called multiplier effects have been
cited to justify larger agency budgets and lower mortgage rates.

References:
Rethinking Urban Housing Policy in the Philippines. Retrieved from
http://www.gdn.int/sites/default/files/Paper_Toby%20Mansod_4_2%20%28Rev
%29.pdf?fbclid=IwAR04oa6Hb4N7dq4n3mRXGVqE88YJv0898To1QUr5ne-
0O1soSG5sZrIh2Cc

Housing in the Philippines. Retrieved from

https://www.slideshare.net/joems_angel2000/housing-in-the-philippines?
fbclid=IwAR04zq4l7_gAaghme7lyCJkl2W7ViC_VnyadeZrtCmHLv-xRUGe9J7j-SPQ

Closing the Gap in Affordable Housing in the Philippines; Policy Paper for the National
Summit on Housing and Urban Development. Retrieved from
http://documents.worldbank.org/curated/en/547171468059364837/pdf/AUS13470-
REVISED-PUBLIC-WBNationalHousingSummitFinalReport.pdf?
fbclid=IwAR2bmnxq6cvt0t4To8G_RR1Imu9EPM8I3uS2my_gdGC7988yHmVBxVj5S2A