Housing for All in the Philippines

Published: Tuesday, March 8th, 2016 by Michael Wootton

manila-shantyThe Philippines has a chronic housing shortage, but lessons from Europe’s post-World War II experience offer good insights that suggest current efforts are off base.

After the end of World War II, the UK faced a desperate housing shortage. Houses built before the war were obliterated by bombing, the military was returning home and the birth rate was expected to explode. Creating places for people to live was an urgent problem.

Government recruited the private sector at that time. Two development strategies came from that collaboration: 1) “prefabs” – prefabricated, quick-to-erect, single-story housing units of 59 square meters of floor area with a design life of 10 years under the Emergency Factory Made [“EFM”] housing program; and 2) an acceleration of the pre-existing construction of “council houses” by local governments – two-story shelters with a floor area of between 93 and 58 sqm, often with three to four bedrooms. Prefabs contained some innovative design features, and council houses were sometimes large developments of hundreds of units with limited infrastructure, such as shops and schools.

Between 1945 and 1951, 1.2 million new houses were built, resulting in state ownership of 15 percent of the national housing stock.

The Philippines’ similarly pressing housing shortage is being addressed through multiple government initiatives, the most recent of which is “social housing” development. These are low-cost houses targeted at low-income groups and built for private ownership. Floor areas are 20-25 sq m with construction costs budgeted between P250,000/unit and P450,000/unit (approximately USD 5,300 to USD 9,500) depending on land values in the area.

The Social Housing Finance Corp. leads this initiative. The organization aims to provide 530,000 homes to homeless and low-income families by 2022. In 2014, only 22,000 families were provided with either shelter or land tenure – well below target rates given the objectives. Deliveries would have to more than double from this rate to meet targets.

In post-war UK, 1.2 million houses were developed in six years. In the Philippines, the target is 530,000 through 2022. Why is the Philippines’ target so much lower than the UK’s actual achievement?

There are many reasons for this. Importantly, the UK initiative was firmly government-led to produce state-owned housing for rent to occupiers. In the Philippines, the program emphasizes home ownership.

In any Asian context, ownership is an important form of security and asset wealth. Asians prefer to own rather than rent. In Germany, by contrast, 50 percent of families rent their accommodations. The regulatory environment strictly enforces landlord and tenants rights. This helps build rental housing.

Another issue is obtaining and transferring land titles in the Philippines. Land conversions from government ownership to private ownership are a major hurdle. Because of the poor quality of land registrations and difficulties of finding owners, there are likely months and months of research and conveyance work to obtain clean title for development. This also may involve evicting squatters, which generates social anxiety as well.

Financing end buyers is another challenge. The pace of any social housing development in the Philippines is dictated by the ability of low-income families to obtain mortgages. Given the strict underwriting requirements for any form of formal borrowing, this is another nightmare.

Finally, there is the hidden added cost of “fixers.” Low-income people intent on buying their home have to employ expensive “fixers” to complete the paperwork. Otherwise they would probably be fired for the time required to fill in forms!

If decent housing is to be developed for all in a reasonable amount of time, four factors would dramatically improve the pace of this much needed work:

  1. government, or the private sector, should build low-cost housing for rent, potentially with options-to-buy during their tenure;
  2. government should exert a heavy hand in acquiring land for social housing using eminent domain or compulsory purchases;
  3. construction methods need to make greater use of offsite fabricated components; and
  4. simplified lending requirements for those who are able and insist on buying in the first instance.

Housing is needed, and it is needed fast. Currently, the private sector is largely left to its own devices to build affordable housing for owners. To ramp up, we need more proactive and involved government. With clear-thinking and commitment, the Philippines can also fill its housing gap.

Mike Wootton is the Founder and Chairman of Langogan Power Corp. This article is a modified version of an article, which appeared on the Manila Times here.