Bernardo M. Villegas
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Private Sector Led Housing Boom

           Construction will be a major pillar of the more rapid growth of Philippine GDP for at least the next two decades. Although there is room for a great deal of private participation in infrastructure development through the Public Private Partnership (PPP), the government will have to take the lead in the building of roads, bridges, airports, seaports, etc.  Public infrastructure is the primary responsibility of government, especially as it affects the lives of the lower-income groups.  It is in the provision of decent and comfortable housing that the private sector must take the lead.  Such agencies as the National Housing Authority can only play a very limited role even in socialized housing.  Private business and civil society must cooperate very closely to provide housing for the millions of Philippine households that still lack the kind of housing that fits the dignity of human beings.

          A recent study of the Center for Research and Communication concluded that the government's housing program is unsustainable and limited in scope and scale.  Its resources and capabilities are insufficient.  The government cannot take the sole burden of providing shelter to those in need.  The private sector must be actively involved.  Some of the reasons behind the lack of scale and sustainability in the housing program of the government in the past are the following:

1.    Government subsidy did not serve the intended beneficiaries.  Evidence has shown that the housing subsidy programs benefited the higher-income groups rather than the lower-income households.  For some reason or another, the subsidies did not trickle down to the really needy Filipinos.

2.    Private capital has largely been excluded from the housing program.  The Government has taken the sole burden of shouldering the cost of funding a housing program aimed at filling the housing gap.  This exclusive role taken by the public sector has led the government to introduce all types of interest rate subsidies and other credit concessions into the credit market.  Such market distortions have discouraged the private sector from participating in the provision of socialized housing.

3.    There was a monolithic approach to address the need for decent housing through homeownership.  Other forms of providing decent shelter short of homeownership were not considered.  Rights and long-term leases of housing units are not only more affordable to low-income households but also provide flexibility to unit dwellers to eventually move on and upgrade their dwelling places without being saddled by debts.

4.    Poor or non-existent estate management programs have made the mortgaged housing units worthless.  Many repossessed units were neglected and abandoned, resulting in the diminution or even obliteration of the re-sale and mortgage values.

5.   Relocation programs, especially site selection, have not taken into full consideration the adverse impact on the beneficiaries' livelihood and purchasing power.  Other schemes have to be explored without necessarily uprooting the beneficiaries from their old locations.

6.    Lack of structure and capability of some government housing finance institutions to evaluate, assess and collect from borrowers.  Agencies need to upgrade their capabilities to manage, collect and monitor resources allocated to them

7.   Risk has been unbalanced as government agencies assumed the full responsibility of providing housing and assuming most of the credit risks in the housing programs, using guarantee schemes, mortgage take-outs, non-risk based guarantee premiums, etc.

          A private led housing boom is possible if the State will apply the principles of efficiency in housing programs.  This would require the following actions:

·    Respect the market mechanism in the pricing of capital.

·    Deal with the beneficiaries as a community but give them the choice to also exit from it.

·    Preserve the value of the assets and its transferability by  institution estate management as

part of the housing program.

·    Enhance the capacity of specific government agencies to identify and monitor targeted

beneficiaries, evaluate capacity to pay, enforce contracts and collect amortizations.

·    Promote the equitable assignment of risks and reasonable returns to participating agents (i.e., developers, guarantors, lenders, government, etc.) in the housing market; and

·    Provide choice to beneficiaries to upgrade by exploring other forms of meeting the need for decent shelter besides ownership (e.g, rights, long-term leases, etc.)

          With interest rates at historically low level and many more business-minded young entrepreneurs introducing the concept of social enterprise into the housing market, I see no reason why a housing boom cannot be sustained for decades on end, considering the accumulated back logs of millions of units at the level of socialized housing, economic housing and low-cost housing.  Additionally, there is still growth in the number of Philippine households since our population will continue to be at the demographic dividend stage for at least the next twenty years till about the 2030s.  For comments, my email address is