(Part 1)

Next to food security, the most serious challenge to the present Administration in the economic realm is to provide decent housing to the lowest income groups among our more than 22 million households.

I am proud of the fact that the private research group, the Center for Research and Communication (CRC), to which I have belonged since 1967, has been one of the most active in helping the Philippine government and the private business sector to formulate housing roadmaps. Led by one of the leading experts on the economics of housing in the Philippines, Dr. Winston Padojinog, the Philippine Housing Roadmap for 2025 to 2040 was recently completed, in partnership with the four housing and real estate associations, i.e., the Subdivision and Housing Developers Association (SHDA), the Organization of Socialized and Economic Housing Developers of the Philippines (OSHDP), the National Real Estate Association (NREA), and the Chamber of Real Estate and Builders’ Association (CREBA).

I am presenting in this series of articles a summary of the results of the study for the guidance of all sectors of Philippine society committed to providing decent housing, especially to the low-income households which can constitute as much as 60% of the entire population of some 120 million Filipinos.

Since the last housing roadmaps formulated in 2012 and 2016, the housing sector has achieved significant milestones, including the establishment of the Department of Human Settlements and Urban Development (DHSUD) and the provision of incentives for socialized housing. Despites these achievements, however, the Philippines still suffers from serious shortages in housing for low-income households as housing production continues to fall short of the goals. Of the one million units targeted by DHSUD to produce annually over the six-year period under the present Administration of Ferdinand Marcos, Jr., less than 100,000 units have been constructed annually. The increasing gap between housing demand and supply, compounded by increasing construction costs and the growing number of marginalized households, underscores the urgent need to adopt a more coordinated approach between the public and private sectors. The availability of housing, whether owned or rented, for the masses is one of the most stabilizing factors any society.

While recent adjustments to socialized housing price ceilings, VAT exemptions, and housing subsidies and incentives offer some relief, fiscal support, and collaboration among the key stakeholders, such as government agencies, developers, housing associations and financing associations continue to be grossly insufficient. The Roadmap prepared by the team of Dr. Padojinog for the period 2025 to 2040 aims to coordinate the efforts of all housing sector stakeholders to address the serious backlogs effectively, which by 2023 was already estimated at 12.4 million and projected to balloon to 16.6 million by 2040 if present trends are not reversed.

The vision that guided the four participating real estate and housing associations is as follows:

“Every family has the right to equal access to a decent, affordable, safe, resilient and sustainable home and community regardless of economic status. The housing industry stakeholders, both public and private sectors, envision to collaborate in providing housing solutions to eliminate the backlog by the year 2040.”

To realize this vision, the four associations — in close cooperation with the Government — aim to achieve the following goals: 1.) Increase the production of decent, safe, affordable and sustainable housing according to targeted needs and market segment beneficiaries in each region; 2.) Mobilize funding for public and socialized housing and encourage investments in affordable housing; 3.) Bridge end-user financing and affordability gaps; 4.) Improve housing’s regulatory environment; 5.) Encourage the establishment of decent, safe, resilient, sustainable, and affordable housing units and housing communities.

Given these mission and vision statements for the entire Philippine housing industry, the Roadmap focused on addressing the current weaknesses of and threats to the industry. These include: 1.) Unclear respective roles of the government and private sector in the provision of public and socialized housing that often result in overlaps and confusion; 2.) Price ceiling adjustments that often are not responsive to the ever-changing conditions of the housing sector; 3.) Lack of diversity and flexibility in the development approach to socialized housing; 4.) Lack of assurance on the provision of income tax holidays to providers of economic and low-cost housing units, which lack often inhibits long-term investment decisions related to housing; 5.) Absence of a regulatory framework and standards to promote “green” or sustainable housing, including the provision of tax breaks and incentives to developers that adopt them; 6.) Affordability gaps that limit the capacity of the marginalized and socialized housing segments to afford renting or owning a housing unit; 7.) Overdependence on domestic capital and traditional bank financing, exacerbated by the limited amount of available guaranty funds for housing development and the absence of asset securitization for affordable housing segments; 8.) Limited government budgetary allocations to the housing agency and to key shelter agencies targeting marginalized and low-wage earners; and, 9.) Bureaucratic delays in the approval process that increase costs and discourage the production of housing units.

In response to these industry gaps and limitations, certain strategic initiatives were recommended to reduce the backlog and to improve affordability. First on the list is to have a clear delineation of roles between the government and private developers. It is recommended that the government prioritize public and socialized housing for lower-income households and informal settlers, while private developers focus on mid- to upper-income market segments and explore alternative development approaches such as horizontal housing. It is crucial to emphasize the need to allocate funds for socialized housing and to address affordability gaps. Additionally, expanding incentives for economic and low-cost housing developers, including tax holidays and aligning thresholds with updated regulations, can stimulate production.

To bridge affordability and access gaps, the government should enhance public housing options through long-term leases and interest expense subsidies. There is need to improve access to developmental funding for both socialized and economic housing by liberalizing interest rates, attracting foreign direct investments, and exploring housing and real estate investment trusts (REITS). Affordable end-user financing should likewise be supported through subsidized rates and extended payment terms. On the other hand, regular and increased budget allocations for public and socialized housing, including real estate management, alongside regulatory improvements and sustainability measures, will be critical. Lastly, establishing a supportive regulatory environment and encouraging green building practices will further enhance housing development efforts.

Some more specific programs which can achieve the goals and implement the strategies were also recommended. For example, to increase housing production, a co-production model is being suggested in which the government focuses on public housing for informal settlers and the lower 30% of the socialized housing market, while the private sector focuses on the upper income socialized housing, economic housing, and low-cost housing segments. Like in the 4PH model, the government can provide the land while the private sector constructs the housing units. Other housing development approaches besides vertical structures could also be adopted while focusing on areas with the largest housing needs and backlogs. Lastly, other modes of balanced housing compliances could be considered, and the housing escrow fund should be tapped for socialized housing production.

Finally, there is need to improve the regulatory environment, making it as investment friendly as possible for the private sector. Efforts to streamline the permitting and licensing process including the improvement of the housing one-stop processing centers; rationalizing professional accreditation of real estate practitioners; and reviewing land conversion processing initiatives will go a long way in lowering costs and accelerating housing production.

Lastly, to encourage sustainable housing, there should be an emphasis on developing a regulatory framework for green, resilient, and affordable housing, supported by incentives and partnerships for skill training and domestic industry growth. The roadmap to achieve the strategic vision by 2040, the year when the Philippine economy can reasonably aspire to be a First World Economy, concludes with a reinforcement of production targets, an estimate of public funding as well as private capital requirements, and the project economic impact of the housing sector on the national economy.

(To be continued.)

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia