Owning a house remains a dream to many Filipinos. This despite recent developments such as the availability of various financing schemes for home loans from banks and cooperatives.
For most families, poverty is the reason why they could not afford decent housing. For those few qualified buyers, on the other hand, cumbersome requirements such as collateral, documentation and prohibitive interest rates are the factors that hinder them from turning their housing dream into reality.
To date, government intervention in the housing market remains insignificant. Apart from substantial funding constraints, the government faces two major concerns in this area, namely imbalanced urbanization and an overall unfriendly investment climate.
Two major problems
Although urbanization signals growth and progress, it has also created new problems for the government. Workers and families from rural areas have moved to the cities to look for jobs and to avail of basic public services such as health and education.
Soon enough, public resources for housing and other services are not enough to address the needs of a growing number of migrants. Congestion has given birth to more problems such as fewer job opportunities, an overwhelmed and inefficient public-service sector and jobless informal settlers who could no longer afford to go back to their provinces.
To address these problems, the government opened relocation sites and in some extreme cases has given out transport money to allow the informal settlers to return to their provinces.
These programs are widely regarded to have had limited success, in part because some relocation areas provide inadequate access to livelihood programs or job opportunities. The issue ultimately boils down to the lack of opportunities and decent public services in the rural areas.
To date, low-income households have little resort but to tap the public housing programs despite the overwhelming bureaucratic processes and lack of funding. The private sector is afraid to invest in areas where most of the homeless people reside due to the lack of infrastructure such as roads and infrastructure.
In addition, high credit risks associated with low-income households and borrowers push banks and private real estate companies to cater more to the middle-segment and high-end income classes.
Institutional reforms and challenges
The Urban Development and Housing Act (UDHA) of 1992 and the Comprehensive Shelter Finance Act (CISFA) of 1994 are just two of the most important institutional reforms in housing.
These measures have allowed the national government and private companies to work together to build low-cost housing units and have bestowed local government units more power in implementing housing regulations in their respective jurisdictions.
Despite this development, banks and real estate companies continue to cater to the middle- and high-income groups, leaving the government unable to raise funds for public housing .
In addition, the devolution of housing regulations from the national government to local government units also has its hurdles to overcome. There is no clear delineation as to how the national government and LGUs divide the responsibilities. It appears the national government still does all the necessary work, while LGUs become dependent on national support and wait to be told what to do.
Moreover, funding for LGUs are often limited by what the Internal Revenue Allocation provides. Some provinces do not get enough funding or earn enough tax revenue. Another problem encountered by LGUs is the availability of relocation areas. Some may have idle lands to use, but redistribution and right-of-way issues, among others, impede them from utilizing the land for the homeless.
Possible directions for reform
The government faces a pressing need to provide housing, especially for those in the lower income classes of society. Private initiatives to support this objective, however, will remain anemic unless private players are given enough incentives to help.
A broad recommendation to encourage private investment — and, thus, reduce pressures on the government’s coffer — is to promote broad-based growth that ensures the development of rural areas. Such will entail, among many things, providing infrastructure and reducing the cost of investment and doing business, especially in the countryside.
In this regard, there may also be a need to empower LGUs to perform their roles without relying too much on the national government. For one, the government must ensure that there are clear-cut regulations on how idle lands can be used for resettlement or development of low-cost housing. This should then allow LGUs to take control of their land and resources and use them according to their housing plans. At any rate, the relationship between public and private sector must also be strengthened. The government must encourage the private sector to also target the low-income group by investing in low-cost housing.
Ovum is the ICT advisory brand of the Datamonitor Group, with a 25 year history of advising both enterprises and their suppliers on the business value of ICT.For inquiries on Ovum, please contact Tanisha Kuckreja at tanisha.kuckreja@ovum.com.–Maria Ana E. Espinosa, Junior Researcher, Businessworld
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