Closing the gaps in Philippine housing

The persistent housing backlog in the Philippines might expand in the following years, if left unaddressed, calling for both government and the private sector to ramp up their efforts in closing the gap.

According to the Department of Human Settlements and Urban Development (DHSUD), the housing backlog is estimated at 6.5 million homes. This number is actually what was reflected in 2030 projections shared by the Board of Investments, assuming that production of housing units would average 200,000 units every year from 2012 to 2030.

From 2021 to June 2022, the DHSUD reportedly produced 294,142 housing units.

In a previous finance committee hearing at the Senate, DHSUD Assistant Secretary Avelino Tolentino III said that if housing production continues “business as usual,” the backlog might end up rising to 10.9 million by the end of the current administration.

Recognizing such alarming occurrences, a new housing production target has been set for the next six years.

Under the “Pambansang Pabahay Para sa Pilipino” program, DHSUD is given a directive to work towards clearing up the backlog by building one million houses, particularly affordable and accessible ones in selected areas every year, until the President completes his term.

As BusinessWorld reported about the announcement of this program last October, the housing program will require P1 trillion to realize at a cost of P1 million per home, which will need to be subsidized.

An annual subsidy budget of P36 billion is proposed to cover the difference between commercial mortgage rates and the expected preferential interest for home buyers of one percent.

“The intention is to bring interest rates to 1%, so that’s where the interest subsidy will come in. The market rate that we’re looking at for this marginalized sector is 6%,” Human Settlements Undersecretary Roberto Juanchito T. Dispo was quoted as saying.

Moreover, Human Settlements Undersecretary Henry L. Yap said the DHSUD wants to tap the private sector, particularly banks, to participate in the program.

“We’ve been going around talking to the developers. They have expressed their support for this project. The SHDA (Subdivision and Housing Developers Association) is one of the housing organizations that we’ve been meeting with and many of them have expressed support,” Mr. Yap was also quoted as saying.

The department added that the “Pambansang Pabahay” program can trigger economic activities in 80 allied industries of the housing sector once it goes full blast in the construction.

“Among the top 10 out of 80 industries that could benefit from the housing program once fully implemented include steel and metal manufacturing, cement, veneer and plywood, refine petroleum producers, sawmills and wood and wholesale/retail businesses,” the DHSUD said in a statement.

The program is also seen as a means for the Philippine real estate sector to further recover from the coronavirus pandemic, when community quarantines and other restrictions slowed down construction and other development projects.

“This program will be a big market for private developers as we will be building one million housing units a year in the next six years… this will trigger much-needed economic activities in the sector and propel its recovery from the adverse effects of the pandemic,” DHSUD Secretary Jose Rizalino L. Acuzar said in a separate statement.

Meanwhile, for the private sector, the need to make getting permits easier is seen as key to developers’ participation in an intensified drive to clear the backlog.

In another BusinessWorld report, 8990 Holdings Chairman and Co-founder Mariano D. Martinez said that the government has to support the private sector as well, especially by cutting the length of permitting processes — which he finds as “one of the hardest hurdles or longest hurdles” in housing production — from 24 months to six months.

“[I]f they want to achieve a million houses that should really [be a] number one [priority],” Mr. Martinez as quoted as saying.

As part of the housing program, DHSUD recently broke ground for housing projects in the cities of Iloilo, Bacolod, and Roxas in Western Visayas. The units are said to be used for the relocation of informal settlers and offered to low-income families in the said cities. — Adrian Paul B. Conoza