Low income housing:

achievement, costs,
challenges
Toby C. Monsod
UP School of Economics
3 February 2010

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Preliminaries
A functioning housing market: HH 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.

Housing is a private good but subject to significant market

failures, especially at the bottom end, which is an
economic rationale for both intervention and social
provision. Also: equity, minimum housing standards

Range of options: regulations, taxes/subsidies, direct

provision. But government failure could be worse than
market failures.

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State policy thru the years
1st quarter 1900s: punitive, “clean up” Manila (slum
clearance, sanitation and building codes)

’30s – ‘50s : public housing investments in behalf of

labor (e.g. Vitas, Diliman)

‘60s – ‘70s: housing as strategic economic activity;

subsidized and non-subsidized sector; public housing
corporations (e.g. Tenement Act, Sapang
Palay/Carmona, Quezon City housing projects)

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1975/1986 onwards: National shelter
program
Goal: increase access to decent, affordable and secure
shelter
Who: bottom 30%, 40% or 50%; living in urban, or
both urban and rural areas
What: house, lot, or both
Featuring: interacting network of housing agencies
(HUDCC, NHA, HLURB, HGC, NHMFC, SHFC) +
Pagibig, SSS and GSIS

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Achievements: 2 million HH assisted
from 1987-2007

= 29% of backlog; 49% of target

~ 20% (403, 215 HH): direct production, e.g.

resettlement, slum upgrading, sites and services
and other projects
~ 26% (543, 976 HH): tenurial assistance or
community-based mortgage finance
~ 54% (1,106,492 HH): individual mortgage
finance

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 Table 1: Estimated Backlog, Targets and
Households served 1987 to 2007(In ‘000s)
1 9 8 7 - 9129 9 3 - 9189 9 9 - 0200 0 1 - 0240 0 5 - 0 T7 O T A L
E st i m at e d N e3e,d3 7 6 3 ,7 2 4 3 , 3 6 2 3 , 6 0 0 1 ,8 2 5 1 5 ,8 8 7
B ac k l o g ( y e ar1 ,01)8 2 2 ,2 2 5 1 , 1 3 9 2 , 0 6 9 5 8 5 7 ,2 0 0
P h y si c al t ar g e6 t2 7 1 ,2 0 0 4 7 8 1 , 2 0 0 6 6 4 4 ,1 6 9
H H Ser v ed 278 669 229 483 395 2054
% T ar g e t 4 4 . 3 5 5 .8 4 7 .9 4 0 .3 5 9 .5 4 9 .3
% E st i m at e d B ac
2 3k. l5o g 3 0 .1 2 0 .1 2 3 .3 6 7 .5 2 8 .5
Backlog: units with double occupancy (urban & rural); units for tenure, infra
or structural upgrading; units for replacement due to danger area/infra
area/for eviction or demolition; homeless.
 
Estimated Need: Backlog + projected new HH from population growth
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Costs: Fiscal and quasi-fiscal costs,
leakages, stunted markets
Housing finance: Record not good. Collapsed in 1985, again
in 1996
 Llanto, et. al [1997]: from 1995-97, 25 B in subsidies of

which 90% were off-budget

 WB [1997]: recap of NHMFC + provisioning for Funds =

P 55 B

Housing Production: Record not good. high attrition rates in

resettlement sites (as experienced in the 1950s), large
inventory of unoccupied housing units

Crowding out of private sector on both finance and real

side

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Good news: recent attempts at reform
Development of Poor Urban Communities Sector Project
(DBP and HUDCC), to pilot:
 Market-based shelter financing (MFI on lending DBP

loans at market rates) + up front capital subsidies

 Rights-based tenurial instruments

 LGU as borrower or guarantor

Railway Resettlement Projects (NHA)

 Innovation: in city/in-town policy; Local Inter-Agency

Committee
 NHA as catalyst rather than direct provider

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However, blind spot remains
While the focus has been on maximizing the output of
new houses and selling these at below-market prices, the
fundamental causes of unaffordability on the supply side
have remained largely unaddressed. Particularly
dysfunctions in land markets.

“The housing dilemma is primarily a land problem” [Roxas

1969]

“If (land) prices were as low in comparable developing

countries… as much as 50% more shelter could have been
built and fewer than 28 % of households would probably
live under irregular tenure arrangements.” [Strassman and
Blunt 1993]
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Evidence from international experience: the
establishment and strengthening of land and
property market institutions is a prerequisite

“The establishment and strengthening of land and

property market institutions—including secure property
rights, flexible land use regulations, and ease of land
conversion, — is not easy. But without the commitment
to such institutions, and without investment in connective
infrastructure, targeted interventions to integrate slums
are unlikely to work.” [WDR 2009, Chapter 7,emphasis
added]

More generally: spatially blind institutions and spatially

connective infrastructure are prerequisites for successful
interventions

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Prioritizing and sequencing of policies
is critical

Sequence: “… spatially blind measures to create

conditions suitable for economic concentration,
followed by connective policies to deal with
congestion” (WDR)

Other spatially blind institutions:

 Basic social services to all

 Regulations for housing finance.

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On “spatially connective
infrastructure”

In-country evidence on spatially connective

infrastructure: Infrastructure, particularly transport,
exerts both an indirect and direct effect on poverty
reduction (Balisacan, et. al [2008])

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Transport, exerts both an indirect and direct effect on poverty
reduction (Balisacan, et. al. [2008])
Explanatory variable Mean income Rate of poverty
growth reduction
Mean income growth     –   
Initial conditions      
Log (Per capita income 1988) –
Mortality rate – –
Inequality   –  
Inequality squared   –  
Ethnic fragmentation    
Dynasty
Time-varying policy variables
Change in literacy +
Change in electricity +
Change in road density + –
Change in CARP +
Change in ag. TOT +
0.628 0.649
 Adj. R-squared

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On “spatially connective
infrastructure”…

However, status:
 Level of investment: below par

 “Missing link”: provincial roads

 Bias for international connections versus domestic

transport networks and corridors ⇒ enclaves

As a stimulus, building domestic connective network is

likely to generate more productive jobs and reduce
poverty than direct government production of public
housing

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Proposition 1
The integration of informal settlements a key component of urban
and development policy. Low-income housing a key component
of social policy.

However, without the pre-requisite fluid land markets and domestic

connective infrastructure, direct state interventions to address
low income housing problems – for post-ondoy or otherwise –
are likely to be ineffective and wasteful as they have in the past

More precisely, to be successful, state strategy relating to low

income housing needs to be embedded in a coherent and explicit
urbanization framework. The prerequisites for inclusive
urbanization are the same for successful low-income housing
policy.

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Proposition 2: once costs are
contained on the supply side…

Housing social assistance, when warranted, needs to be

i. on-budget (transparent),
ii. de-linked from market-based transactions, and
iii. Evaluated vis education, health, and other
components of social policy.

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Design for subsidy policy: household-based,
tenure neutral, allowing for self-selection.
Type 1: Moderate to low-income HH who are at fringe of formal housing
finance market. Options:
 lump-sum down-payment support

 mortgage buy-downs

 mortgage default insurance

Type 2: HH for whom income, employment, collateral or other constraints

make access to formal finance and housing infeasible. Options:
 upfront capital grant or rental subsidies

 serviced lot with core house as upfront subsidy, with assistance

tied to savings mechanisms

But if costs are not contained on supply side, demand side subsidies will
simply be paying for inefficiencies.

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Implications
1. Move discussion of urban-rural linkages and
management of urbanization strategy to provincial and
sub-region level. Managing a portfolio of ‘places’, including
chartered cities.
 Metro arrangements?

1. Re-focus central agencies/NG away from direct housing

assistance/production targets to –
Explicit urban policy (framing MTPDP)
Resolving bottlenecks in land markets (administration
bottlenecks, articulate land/land use policy, inventory of
public land) and credit markets
Connecting the domestic economy; addressing “missing
links” in domestic infra and building density
Ensuring policy predictability and guarantees, tenure neutral
policies
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3. City/municipalities to focus on:
 local planning, embedded in larger “area” planning

 local land use regulations and removing admin bottlenecks

in land administration (which will enable private sector)

 Property taxes

 Basic health and education services to all

 Local transportation and connective infrastructure

And, when a certain level of urbanization is reached, targeted

social assistance (not direct or subsidized housing finance!), e.g.
 Servicing of land for settlements
 Local rental housing policies, subsidies?

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“Post-ondoy” rehab issues provides opportunity
to reframe low-income housing debate

From the “cart before the horse” ⇒ embed

housing in explicit urbanization policy.

From a focus on “in-situ vs relocation?”, “in-city

vs. off-city?” “single house or MRB?” ⇒
discussion of transport, land market
interventions, the efficiency and inclusiveness of
processes that will reconfigure the greater MM
area.

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