Dream on

The Philippine government has embarked on an ambitious low-cost housing project of one million units annually over six years to address the increasing numbers of families in Metro Manila and its environs who are unable to afford their own homes.

Initially, the Department of Human Settlements and Urban Development (DHSUD) had made an appeal to the Department of Budget and Management (DBM) for an appropriation of almost P100 billion in its 2023 budget, which not surprisingly was denied.

In fact, the DBM even reduced DHSUD’s approved budget for the year to about P4 billion, which was markedly lower than the 2022 budget of P7.4 billion. So much for the avowed priority declaration of the current administration to solve the country’s housing backlog.

In truth, the BBM government has many “priorities” with assigned numbers in a priority list, but remember that even these numbers are not set in stone. Definitely, a good indicator for defining what’s in the current priority list is what the Speaker of the House will say, and sad to say, mass housing is not at the top.

The need, however, cannot be denied. A minimum wage earner who is the head of a family, even if they hold a permanent job, already needs to appropriate a fifth of the monthly salary to pay for rent.

No wonder that fixed income earners make do with squalid living conditions while struggling to provide the most basic necessities for their growing children. For them, amortizing their own house on a piece of land is something that can only be dreamt.

Relying on the private sector

Not surprisingly, the DHSUD has shifted to a strategy that relies on the private sector to enter into mass housing for low-income families. The financial challenges, however, are too daunting that many only shake their heads and walk away.

Real estate developers have time and again enumerated the harsh realities that confront people who want to start putting in money to buy their own homes, as well as limitations that real estate builders face to address the country’s housing need.

Low-interest rates to finance a new home are available through the Home Development Mutual Fund (or Pag-IBIG) and through the National Housing Authority (NHA), but both government entities have sorely limited funds available for lending.

This means that real estate developers, even if they can secure the funds to build more low-cost houses, are immediately dissuaded from going into projects if their prospective clients will not be able to secure low-interest housing loans with favorable long-term repayment schemes.

Developers also point to the growing scarcity of land that can be devoted to housing. With the current high in-city land values, the only recourse is to move to the metropolis outskirts, but many of these lands are locked in for agriculture, and getting these to be categorized as non-agriculture is beset by bureaucratic limitations.

The DHSUD is toying around with a template for P1.5-million homes that can be available through other government financing institutions like the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP).

The mechanics are yet to be hammered out, but the objective should be for LBP and DBP to facilitate housing loans for interested individuals rather than real estate developers. If there are funds available for low-cost housing loans, capital for developers will open up.

Lending risks for low-income borrowers can be higher today, but as the country moves into higher-income level category in the next few years, the possibility of payment defaults is reduced as family income levels improve.

Land use issues

To convert agricultural lands for housing, the DHSUD is talking with relevant local government units (LGUs). Such undertaking is fraught with sensitivities, especially with agricultural lands that had been locked in under the Comprehensive Agrarian Reform Program (CARP).

Agriculture land beneficiaries under CARP are not allowed to sell their acquired properties, nor assign use of the land other than for agriculture. Yet, many of the small land holdings are already being left to fallow as land productivity makes earnings from its agricultural produce uneconomical.

How DHSUD will make its low-cost housing blueprint acceptable with LGUs at the boundaries of Metro Manila’s urban crawl is something that bears watching.

Pilot project

Towards the end of 2022, DHSUD showcased the groundbreaking of an 11-hectare township project in Barangay Atate in Palayan City, Nueva Ecija, of which 11,000 housing units of a planned 44 towers will be built in three phases under the DHSUD’s Pambansang Pabahay Para sa Pilipino Program.

The township is considered a pilot project of DHSUD for Central Luzon, which perhaps is a reason why this remote barrio located in a 5th class component city with a population that marks it as one of the most sparsely populated in the Philippines, was chosen.

Still, the press release that accompanied the lowering of the time capsule talked about replicating the township’s master plan in Bataan, Bulacan, Aurora, and Zambales, which subsequently kindled interest by the respective governors of the provinces.

Critical, of course, to this housing program will be the approval by the DBM of interest subsidies to make the housing units more affordable. According to the DHSUD, if things go as planned, the housing units will carry only a monthly amortization of P3,500 payable within 30 years.

The President, as well as House Speaker no less were the very important guests during the groundbreaking event. How this will bear on the future of the low-cost housing program can be summed up in a word: abangan! 

Facebook and Twitter

We are actively using two social networking websites to reach out more often and even interact with and engage our readers, friends and colleagues in the various areas of interest that I tackle in my column. Please like us on www.facebook.com/ReyGamboa and follow us on http://www.twitter.com/ReyGamboa.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.