Project 8. Reforming Housing Finance

Intended Outcomes

Outcome No. 2: Access to Quality and Affordable Housing and Basic Services

Key Result Areas

KRA NO. 2: Institutions Development
KRA NO. 3: Capacity Building
KRA NO. 4: Resource Generation and Management

Executing Agency

Housing and Urban Development Coordinating Council (HUDCC)

Rationale

The shortage of affordable housing remains a key issue that still awaits a more effective solution. Prior studies have pointed to several strengths and weaknesses in housing finance policies and institutional framework. Housing finance in market – based and policies have encouraged the participation of many banks. Government’s role should focus on the secondary mortgage market and NHMF and HGC should not go into retail activities. CMP has been considered as model financing scheme, however, it needs to accommodate more participants rather than be considered as the monopoly of the NHMFC. There are other players; the PAG-IBIG Fund, local government resources, and developers in compliance with requirements to provide socialized housing units within housing projects. Housing policies are formulated by basically the HUDCC and the LGUs often in isolation of one another. Studies point to the need to achieve better integration of policies at local and national levels to achieve complementation, and efficiencies of scale, among others. Further, government needs to address housing finance issues involving the poor and informal sector.

Objectives

1. To review and improve the housing finance policy framework towards more affordable and sustainable housing finance system.
2. To reengineer the institutional framework for housing finance and define the proper role of the government.
3. To provide the institutional mechanisms for socialized housing finance towards improving access to housing by the poor and informal sectors.
4. To create new approaches, document best practices on socialized housing provision and finance, including self-help approaches for the informal sector.

Project Components/Scope of Work

1. Review and Reform of Housing Finance Policies
2. Review and Reengineering of the Housing Finance Institutional Framework
3. Design of the Socialized Housing Finance Corporation
4. Preparation of Proposed Legislation

A. Review and Reform of Housing Finance Policies

This component involves an inventory and review of policies on housing finance, including housing finance policies of key cities, which will be done through a survey instrument. This will involve an assessment of the impact of housing finance policies on the role of the private sector in providing housing, on the dominance of government in housing finance and its inability to deliver its promises due to inadequate resources and management capability, the role of self-help approaches particularly in addressing the housing needs of the informal sectors, the inadequate role of local governments in housing finance and absence of local shelter plans in most cities, and in the regional/geographical dispersal of housing finance resources.

The review should provide useful inputs and directions in the reengineering of the housing finance policies at the national level, and housing policy models for local governments. ↑

B. Review and reengineering of the housing finance institutional framework

Consistent with the reforms in housing finance, the institutional framework for housing finance and production will be reviewed and reengineered. This component involves an assessment of the roles, functions of the government and its institutions in housing finance, and a deeper review and assessment of the operations of the existing public housing finance corporations.

Reforms in the institutional framework will involve defining the proper role of the government in housing finance, and its delineation with the private sector.

Particular consideration will be made towards government withdrawing from providing guarantees and directly getting involved in retail financing.

The reengineering of the existing housing finance corporations, their corporate structure and operations, services, investments, and other operational areas will be undertaken and the appropriate amendments in the legislation will be drafted. ↑

C. Design of the Socialized Housing Finance Corporation

The DHUD bill provides for the creation of a Socialized Housing Finance Administration within the DHUD to administer national government subsidy to socialized housing. But this is an interim arrangement. The eventual goal is to establish a socialized housing finance corporation that is able to generate, mobilize and administer resources for socialized housing. Such corporation should not be regularly dependent on the national budge for its operation. A financing strategy and financial administration plan should ensure fund sustainability for socialized housing, which should be provided to specific target beneficiaries. ↑

D. Preparation of proposed legislation

The implementation of the key components of the above reforms will require amending existing laws or passage of new laws. The drafting of new legislation and other enabling instruments will be prepared under this component. ↑

Expected Outputs

1. Housing finance policies assessment report
2. Housing finance policy reform report
3. Housing finance institutions assessment report
4. Housing finance institutional reform report
5. Design of the socialized housing finance corporation
6. Best practices and new schemes for housing provision for the informal sector
7. Draft bills

Project Management Arrangements

The HUDCC is the executing agency of the project. An inter-agency committee consisting of the HUDCC, DOF, DBM, the shelter corporations, POs, leagues, and business will be constituted to provide direction to the project.

Project Duration

Component A: 6 month
Component B: 4 months (design)
Component C: 4 months (design)
Component D: 1 month

Estimated Cost

US$ 200,000