How the Philippines Can Solve Its Housing Backlog

An improving economy, impressive growth in foreign direct investment, a newfound reputation for transparency, and a stable inflow of remittances from overseas Filipino workers (OFW)—all these best characterize the Philippines’ economic performance over the last few years.

One only needs to drive around Metro Manila to witness this economic boom happening at such an impressive pace. Road infrastructure projects, countless towers, and entire new business districts are currently under construction. However, many experts believe that this economic boom is not trickling down to the lower segments of the socioeconomic ladder, as evidenced by the Philippines’ massive housing backlog.

In fact, looking at government records show that the Philippines’ total housing needs are around 6,796,910 units this 2022 despite a Constitutional mandate on the state to implement an urban reform and social housing program for the underprivileged 35 years ago. The country’s housing requirement grows alarmingly fast and, if no drastic and effective solutions are put in place, the housing shortage could leap to almost 22 million housing units by 2040.

With this in mind, Lamudi Philippines looks at six possible solutions to the country’s massive housing shortage.

  1. Improve Filipinos’ access to financing

Making housing affordable and financing (such as housing loans) accessible to those who need it most are perhaps two of the most important elements of an effective shelter program. According to Ricky Celis, CEO of Ayala subsidiary Amaia Land and President of the Subdivision and Housing Developers Association (SHDA), one way to do this is make cheap and/or subsidized mortgage rates available to low- and mid-income families.

“The Philippine government needs to generate and mobilize funds for end-user financing, [to] reinforce what was a predominantly Pag-IBIG Fund-dependent sector,” said Celis.

This is a view that Atty. Ryan Christopher Tan, president of Organization for Socialized Housing Developers of the Philippines, shares. He said in terms of financing, the government’s solution is a provident fund through the Pag-IBIG Fund, or through the Social Housing Finance Corporation, whose task is to finance socialized housing, to identify beneficiaries, and subsidize interest rates. However, this is not enough as it merely subsidizes loan interest rates.

“We’re not yet at the level where the government is spending a fractional portion of our gross domestic product on housing for the poor,” Tan said.

© Flickr/Jimmy Hilario
© Flickr/Jimmy Hilario

  1. Give incentives to real estate developers

Real estate developers are in the business to earn their keep. Because building homes is a costly business venture, most real estate developers will go to the market segment where they can maximize their profit—particularly the high-end and luxury real estate sector. Although there is a gigantic need in the low- and mid-end segment of the market, not many developers venture into these as they are not seen as potentially profitable.

This is where the government comes in—by offering incentives to real estate developers like income tax holidays (ITH). Incentives could help attract more players to venture into affordable housing development, and they can pass their savings acquired through ITH on to buyers in the form of lower prices.

  1. Improve production capacity through technological innovation

Under its Housing Roadmap, SHDA aims to produce 2 million homes from 2017 to 2022 and another 7 million from 2023 to 2030. This means moving to standardize costs of common construction items and fostering stronger ties with manufacturers.

But the one thing that can make a huge difference is developing new building technology and systems to reduce construction time and cost, which is an important element of any effective shelter program, according to Tan.

Fortunately in 2014, the National Housing Authority started an accreditation program—dubbed Accreditation of Indigenous Technologies for Housing—for companies who develop technologies that can reduce the overall construction time and cost of building homes, especially affordable housing. As of now, eight companies have been accredited, whose technologies range from light steel frames to high-resistance steel meshes.

  1. Create a strong regulatory environment

Growth cannot be achieved without a strong regulatory framework. A good model is Singapore’s Housing and Development Board, which is credited for clearing up the city-state’s slums in the 1960s and resettling Singaporeans to low-cost, government-built housing.

One possible solution is the creation of the Department of Housing, Planning and Urban Development (DHPUD). In fact, this is the objective of the House Bill 1551, authored by Representative Felix William Fuentabella in 2013. The cabinet-level agency would ensure affordable and decent housing for underprivileged and homeless Filipinos.

  1. Boost government spending on infrastructure

A shelter program will have limited success without considerable investment in infrastructure. In fact, one of the reasons why the government’s housing programs failed in the past is because the majority of resettlement sites are located in inaccessible areas or places with limited employment opportunities.

Representative of San Jose del Monte City Florida “Rida” Robes is pushing for a bill called the National Housing Development and Production Fund after the House of Representatives approved Resolution No. 1677, declaring a housing crisis in the Philippines. This bill aims to allocate an initial PhP 50 billion to help solve the worsening housing backlog in the country. She said in the 2021 Habitat for Humanity Philippines housing Summit, “the consolidated bill will allot PhP 50 billion as initial seed money for the financing of public housing, resettlement program, government employees housing, subsidy for informal settlers, amortization support, a housing program for calamity victims, among others.” 

  1. Rethink strategy for shelter

Another possible solution for the housing shortage is the development of “in-city” or “near-city” resettlement sites, especially those that utilize medium-rise condo buildings. To do this, however, the government should revise and expand the definition of socialized housing to include vertical developments. At the moment, only house-and-lot projects can be considered as socialized housing. However, condos – if built specifically as an affordable form of housing – could provide a solution to the housing backlog.

Main image: Photo courtesy of Habitat for Humanity Philippines

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