THINK TANK Center for Housing and Independent Research Synergies (CHAIRS) flagged the proposed removal of incentives for developers of socialized housing under the second package of the tax reform bill, saying this could worsen the housing backlog in the country.
In a statement issued over the weekend, CHAIRS President Christopher Ryan T. Tan said mass housing developers are protesting the planned repeal of compensatory incentives should the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill be enacted.
Republic Act No. 7279, otherwise known as the Urban Development and Housing Act, states that socialized housing projects will be exempted from paying project-related income taxes, capital gains tax on raw lands used for the project, value-added tax for the project contractor, transfer tax for both raw completed projects, and donor’s tax for lands donated for socialized housing projects.
The law further provides that developers must “develop an area for socialized housing equivalent to at least 15% of the total subdivision area or subdivision project cost and at least 5% of condominium area of project cost, at the option of the developer.”
“Removing this incentive will effectively paralyze private sector participation housing production,” Mr. Tan said in a statement.
He added that the current incentives granted to developers are only “compensatory” for doing a “missionary activity,” and should therefore be distinguished from investment incentives to be lumped under the Strategic Investments Priorities Plan.
Mr. Tan also noted provisions under the 1987 Constitution, which mandates the state to “undertake with the private sector a continuing program of urban land reform and housing which shall make available at affordable cost decent housing to the underprivileged and homeless.”
“Removing such compensatory incentives to socialized housing, will not only be unconstitutional, but will also reduce the balanced housing requirements to an “unjust, oppressive, and confiscatory exercise of police power,” Mr. Tan said.
With this, developers would be discouraged from developing projects for the socialized market, causing the housing problem in the country to swell.
The CHAIRS executive cited a 2016 study by the University of Asia and the Pacific stating that the Philippines would need 12.3-million housing units by 2030, from an estimated backlog of 6.7 million from 2001 to 2015 plus a projected housing demand of 5.6 million from 2016 to 2030.
CHAIRS Executive Director Santiago F. Ducay further criticized the removal of exemptions for the Home Development Mutual Fund (PAG-IBIG) from taxes, fees, and charges, which could potentially affect the affordability of housing projects for lower income groups.
“Current savings from Pag-IBIG’s tax exemption are channeled to providing interest subsidy to enable the lending for housing acquisition at a low of three percent for socialized housing,” Mr. Ducay said. — Arra B. Francia