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The Philippine Housing Demand


wooden house with blueprints

We have heard since time immemorial of a housing demand backlog in the country, and while past administrations (from Marcos’ admin to Marcos Jr. admin) have vowed and made it one of their priorities, the backlog persists. Not that no efforts were made in the past.

During the Marcos-era of the 70s and the 80s, various agencies were created of different mandates but coherent in the sense that it laid down the policies and infrastructure to accelerate the production of housing starts to address the supply and demand of homes and home ownership.


On top of mind are the following – The Housing and Land Use Regulatory Board (HLURB) that was mandated to create the relevant development standards related to housing production, performs regulatory oversight, and ensures that what is promised to buyers are actually delivered by developers, and consequently prescribes penalties and fines for failure to do so. HLURB was also tasked to oversee the operations of homeowners' associations (HOAs) and condominium corporations (Condo Corp), and provided quasi-judicial roles to address disputes between buyers and developers, and intra issues within the HOAs and Condo Corp.


There is the Home Development Mutual Fund (or more popularly called Pag-IBIG) that provided the long-term funding for home buyers thru a provident fund system where employees and workers contribute, and the contribution is top-off by their employers and the government. The fund raised then becomes the “pool” by which home buyers are able to finance the acquisition of their house and lot or condominium units by way of a long-term repayment scheme, by as much as 25 to 30 years.


The Home Guaranty Corporation (HGC) was another entity created by law with the mandate to provide a system of guarantees to encourage private lending institutions and property developers to invest their funds to projects related to housing start generation. The guaranty is attached to loans, whether development loans provided to developers or mortgage loans to homebuyers by lending institutions. The guaranty is to encourage lending to house production and home buying (loans with HGC guaranty are considered non-risk asset by the lending bank) and the tax incentive make the corresponding cost of money lower (or interest) more affordable to home buyers. HGC has since then been consolidated with the Philippine Guarantee Corporation (or PhilGuarantee).


Another entity with financial intermediary function was the National Home Mortgage Finance Corporation (or NHMFC) which was organized to develop the secondary market for housing mortgages held by private and government lending institutions (Private Banks, SSS, GSIS, Pag-IBIG) which are otherwise locked in long-term tenor debt, i.e., 5, 10, 15 to 25 years. The objective was to liquify these mortgages through securitization and offering these via the secondary market, thereby increasing the funding pool available for relending.

The National Housing Authority was into direct production of housing starts geared for the low-income segment, those that are outside the scope of the formal financial system and therefore unable to borrow funds to address their housing needs. These are the informal settlers with no regular source of income and contractual workers who are paid even below the minimum wage rate (the unserved and under-served market).


And there were the Social Security System (SSS) and the Government Security and Insurance System (GSIS) that provided their own housing programs to their members, and who also contributed funds at one time to the National Shelter Program launched by the government in 1986.


So, what happened? Why is the backlog still persisting (and in fact have even increased in the last 10 year).


Over these years, these government institutions initiated various programs and campaigns and together with the private sector raised the supply and demand for houses and home buyers, but catching up with the backlog was never achieved. There were good and effective programs launched that had the potential of making a dent on the backlog, but due to various reasons, some self-inflicted, others external factors pushed back the outcome of these efforts below their avowed targets. Self-inflicted reasons include corruption, local politics, lack of budget and even mismanagement within the government-controlled entities, while the recession of 1983, the power crisis towards late 1980 to early 1990’s, the Asian financial crisis of 1997 and the 2008 global financial crisis set back the momentum of the government programs (resulting into high default incidents among borrowers and soured loans to developers). On the NHA-side, which deals with the direct production of housing starts for the unserved and under-served segments, there was no sufficient budget allocated for its use. Over-all, the government has allocated less than 1% of its annual budget from 1983 to 2019 for direct funding or subsidy to housing. (Habitat for Humanity)


The housing backlog persists. Between the period 2001 to 2018, the shortage was estimated at close to 6 million units and by then, the demand for homeownership was estimated at Php15 million already to this year (2022). The deficit is mostly evident in the socialized (Php480K-Php750K), economic (Php750K to Php 1.75 M) and low-cost (Php1.75M to Php3M) segments, while there appear to be a surplus in the mid-cost (Php3M to Php6M) and high-end segments (Php6 M and above). This does not even include the un-served and under-served segment (called the owner driven construction or self-help). The average production between the years 2014 to 2018 was around 230K to 240K and at this rate, it will take 24 years to cover the 2018 estimated backlog excluding the unserved market. (Habitat for Humanity).


If we are to overcome this challenge, obviously, the production of housing starts should more than triple and even more. More obviously, the government should focus on encouraging production of housing starts for the lower segment of the market, namely socialized, economic and low-cost where the deficit is, and greater budgetary allocation to NHA for the unserved market. Government incentives, funding and subsidies should be targeted where the deficit is significant. The use of modern technology is also a critical element so we can accelerate the timeline of construction and development, and improve quality to ensure safety of residents against the danger of the environment, while the enactment of the National Land Use Plan will lend a more scientific, pinpointing of zones appropriate and suitable for housing development.


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