Under the socialized housing segment (Php 450,000 and below), the actual production of units during the period 2012 to 2015 did not meet the volume targets needed to reduce the deficit.  In 2012, the deficit was 57,472 units; in 2013, 62, 890; in 2014, 70,632; and in 2015, 67,361. Given the slow pace of growth in the production of socialized housing units, it is highly probable that the backlog in this segment will not be wiped out by 2030.  The deficit is mostly likely to be higher.  In contrast, the conditions in the economic housing segment (above Php 450 to Php 1.25 million) appear more favorable. For 2012, there was overproduction of 40,716 units; 2013, 28,250 units; 2014; 15,587 units and only in 2015 was there less actual production than planned, a difference of 3,541 units.  Given this performance, the backlog in the economic housing segment can be reduced and the deficit will likely be wiped out before 2030.  Low cost housing (Php 1.25 million to Php 3 million) enjoyed even a higher surplus of production.  For 2012, overproduction was 49,543; for 2013, 28,735; for 2014, 23,155; and for 2015, 16,647.  Given this record, the backlog in this segment can be eradicated by 2030.

         These data show that except for the segment that cannot afford to pay for housing units in the free market (mostly the so-called informal settlers) and some of those who belong to the socialized housing segment, the private sector is sufficiently empowered to meet the demand of the housing market, with some help from government agencies like the Pag-Ibig Fund and other housing agencies.  The major targets of socialized and low cost housing are the households with overseas workers earning incomes abroad or with workers in the BPO/KPO sector. I have been told by housing developers that OFWs can account for as much as 60 per cent of their total market.  The active participation of NGOs like GK and Habitat also helps facilitate the increase in the supply of units in the socialized housing segment.  Many corporations also are channeling through their Corporate Social  Responsibility (CSR) programs housing subsidy assistance to their employees who are part of the low-cost housing segment.

         The big challenge for inclusive growth is to make decent housing affordable to those earning less than Php 200,000 annually.  To address the growing deficit in households that cannot afford housing in the free market, the Roadmap proposed government-subsidized projects.  Socialized-urban in-city medium rise buildings or MRBs constructed at cost and conveyed to beneficiaries at  Php720,000 per unit and horizontal structures sold for Php400,000 per unit with construction cost of Php360,000 per unit would be constructed for households that are under the category “cannot afford.”  Socialized urban (in-city) public housing units (MRBs) provided to these specific segment would be fully subsidized by the Government.  Made up mostly of informal settlers residing within or around the urban centers, these households should be encouraged to rent rather than to own the units.

         Local Government Units (LGUs) should seriously consider partnering with private real estate developers under the Local Government Code that allows Public Private Partnership in certain projects that involve infrastructure, which can include housing.  Under this PPP for the People (P4) concept, public land can be made available for private real estate developer to put up MRBs in the center of urban areas for socialized housing.  Funding from Pag-Ibig is available for these projects.  A leading example is the Bistikville Housing for informal settlers in Quezon City, a partnership between the Quezon City Government (which provided the land) and PHINMA Properties Holdings which constructed the housing units with the help of Pag-Ibig funding.  This successful project has been replicated in Cavite under the name of Strikeville and may be replicated in other LGUs in Bataan and Batangas.  It is important to emphasize that informal settlers should not be relocated far away from urban centers because they have to be close to where the work opportunities are.

         The Socialized Housing Finance Corporation can be tapped to finance loans of in-city MRBs classified as socialized urban housing targeting households who are not able to afford to amortize a Php400,000 loan.  Meanwhile, support for developers producing units for the economic and low cost housing segments should continue by extending the fiscal incentives such as exemption from value added taxes as well as other forms of income tax holidays.  If the tax reforms being proposed under the Duterte Administration are really meant to favor the middle-income households, it would be counterproductive to remove the VAT exemptions because the ones who would be prejudiced are not the poor (those who cannot afford housing) but those belonging to the economic and low cost housing categories, i.e.  those earning annual incomes of Php 200,000 to Php 3 million.

         A final argument for the Government going out of its way to subsidize the lower segments of the housing industry is its large output multiplier of 3.44, meaning that a one-peso increase in demand for housing creates 3.44 pesos additional output in the entire economy. This multiplier can be divided into the initial output multiplayer effect, production-induced output multiplier effect and the consumption-induced output multiplier effect.  The initial multiplier effect pertains to the initial increase in final demand for housing units. The production-induced multiplier effect is the additional output in the economy that is induced by the production of housing units to meet the final demand.  Finally, the consumption-induced output multiplier effect is the additional output in the economy that is induced by the consumption spending of those employed in the housing industry.  These increases in incomes can partially compensate for the VAT forgone by the Government as an incentive to the housing industry.  For comments, my email address is bernardo.villegas@uap.asia.