Good Marks for Hitting Targets

By Anna Marie A. Karaos

President Arroyo did not try to outdo President Estrada with the promises she made regarding housing in her State of the Nation Address (SONA) last year. The targets she set for the housing sector were too conservative, in fact. Unlike President Estrada who promised a million houses a year, she only promised a third of that figure. The target of a million houses would have been closer to what is needed in order to lick the estimated housing backlog of 3.2 million until 2004. But this is obviously not achievable given limited resources. President Arroyo’s targets are more realistic and therefore assure us that they are more likely to be met.

But did she actually meet them?

Anyone who just looks at the numbers cannot come to the conclusion that she did not. Let us take a look at the SONA targets once more.
  
 • Granting security of land (and housing) tenure to 150,000 urban poor families every year, or giving this number of families the right to purchase and own their dwelling(“We will work double time to    give security of tenure to 150,000 urban poor families every year. Sandaan at limampung libong pamilya taun-taon ang magkakaroon ng karapatan na bumili ng sariling tirahan.”)

• Construction of 100,000 housing units for workers and 50,000 units for the urban poor every year (“Magtatayo ng sandaang libong tirahan para sa manggagawa at limampung libong pabahay para sa higit na maralita.”)

• Making available, through government financial institutions, P20 billion for housing loans to workers (“Nakahanda sa government financial institutions ang dalawampung bilyong piso para sa pabahay ng manggagawa. Itaga ninyo: dalawampung bilyong piso para sa tahanan ng masa – ito ang handog ng gobyerno para sa seguridad ng pamilyang Pilipino.”)

• To enable her administration to achieve these, she asked Congress to enact a law creating a Department of Housing that “will not only build homes for the poor, (but also) spark the housing industry and create jobs.” • In terms of new policy measures through legislation, the President pledged to set up a secondary mortgage market as one of several means to encourage private sector participation and increase the supply of funds for housing. She likewise urged Congress to pass laws, among these, the Securitization Act, to develop and revitalize the capital market.

• To reduce transaction costs due to red tape in dealing with government offices, the President vowed to reduce the number of signatures required for the granting of housing permits from 188 to 45, asking Congress’ cooperation should legislation be necessary to effect this change.

The first three targets pertain to services that the government hopes to provide directly to the people, and particularly, to the poor. In contrast, the last three goals are institutional and policy interventions aimed at providing incentives for the private sector to invest in and engage in the production of housing.

The Accomplishments

ü Presidential Land Proclamations. A major accomplishment of the Arroyo administration in its first year in office has been the proclamation of government-owned and public lands occupied by informal settlers as open for disposition to their urban poor occupants. The issuance of such presidential land proclamations has been the primary strategy for achieving the SONA target of granting security of tenure to 150,000 urban poor dwellers every year. As of March 14, 2002, a total of 137,220 households, mostly in the National Capital Region, were reported to have benefited from presidential proclamations. If one adds to this number the urban poor families that have been awarded titles on special government housing projects such as the National Government Center in Quezon City (3,565 households), and the loans approved under the Community Mortgage Program (16,552 households), a total of 157,400 families were given security of housing tenure.

ü A total of 23 presidential land proclamations have been issued and are at various stages of implementation. An additional nine sites have been recommended for signing while 19 more sites have been reviewed by Housing and Urban Development Coordinating Council (HUDCC) and are awaiting the endorsement of the government agencies that own these lands. These are expected to benefit at least 14,269 urban poor families. Nine other sites have been proposed by various urban poor communities, through the National Anti-Poverty Commission (NAPC), to be included in the list of lands to be proclaimed.

ü Housing Assistance to the Urban Poor. As of April 1, 2002, a total of 43,349 urban poor households have been provided with housing assistance through projects of the National Housing Authority (NHA) such as sites and services, Land Tenure Assistance Program, resettlement, slum upgrading, cooperative housing and medium-rise housing (34,775 households), Habitat for Humanity (150 households) and Pag-Ibig’s Socialized Housing Program (8,424 households). It must be pointed out, however, that not all the beneficiaries of these projects belong to the urban poor or the poorest 40 percent.

ü Community Mortgage Program. From January 2001 to April 2002, a total of 106 CMP loans were taken out, benefiting 13,474 urban poor families. This record represents a significant improvement compared to CMP’s performance in the previous two years under the Estrada administration. But it is low compared to the level of take-outs and number of beneficiaries in the years of the Ramos administration, and low compared to the actual need.

ü Housing loans. Housing finance assistance was extended to some 48,604 low-salaried formal sector workers through end-user financing and developmental loan financing programs of Pag-Ibig (31,229), and other government financial institutions such as the Land Bank (6,252), SSS (6,707), GSIS (2,002), and Development Bank of the Philippines (1,907). Some 507 households benefited from the disposition of unoccupied housing units by the Home Development Mutual Fund or Pag-Ibig (499) and the Home Guaranty Corporation (8). It must be noted that there can be some double-counting involved in these figures since some developmental loans extended to developers could be ultimately benefiting homebuyers who also avail of end-user financing.

ü Simplifying procedures. On October 25, 2001 President Arroyo signed Executive Order No. 45 “Prescribing Simplified Requirements, Procedures and Timetables for the Issuance of Housing Related Certifications, Clearances, and Permits, and Imposing Sanctions for Failure to Observe the Same.” The necessary implementing rules and regulations for the said EO have been issued by the concerned agencies and published in the newspapers.

The President’s commitment was to reduce from 188 to 45 the number of signatories required for issuing housing permits. EO 45 allows certain procedures to be performed simultaneously, instead of sequentially, thereby reducing the total length of time required for securing permits. In a presentation made by Secretary Mike Defensor in late 2001, he clarified that EO 45 would cover development permits, land conversion certification, Environmental Compliance Certification and License to Sell.

Although the implementing rules of EO 45 have been signed by the President, developers are still apprehensive that certain concerned departments, notably the Department of Agrarian Reform (DAR) and the Department of Environment and Natural Resources (DENR), may not give their full cooperation to the presidential directive. The DAR issues land conversion clearances while the DENR grants environmental compliance certificates. The effect of EO 45 in terms of facilitating the issuance of these certificates has not yet been felt.

ü Aside from EO 45, other measures have been taken to facilitate the processing of CMP loans. Three memoranda of agreement were signed by various government agencies providing for shorter time periods for the issuance of certain documents such as the capital gains tax exemption (from 6 months to 15 days), certificate authorizing registration (from 6 months to 15 days), transfer of title (from one month to 3 days for group applications of less than 5 titles and 15 days for more than 5 titles), and homeowners’ association registration. Operationalizing the agreements remains a problem, though, because the regional offices of the concerned agencies have yet to recognize these directives.

ü Department of Housing and Urban Development. The creation of the Department of Housing and Urban Development (DHUD) has been prioritised as an urgent legislative measure in both the Lower House and the Senate. Both chambers have come up with their respective consolidated bills that are now undergoing plenary deliberation.

Remaining Problems

From the above, it appears that the President has earned good marks for delivering on the quantitative targets she made in last year’s SONA.

It is to the credit of government and President Arroyo that a new approach for assisting poor families has been employed through the presidential land proclamations. This particular strategy has many advantages. It accomplishes the aim of providing shelter security swiftly. It reaches the poorest communities, and the poorest families within these communities. It does not require a large amount of funds especially if the lands to be distributed are government-owned. Nevertheless, the government will have to allocate some funds for the land transfer process to proceed, something it has not yet done. This cost is something that will have to be included in next year’s budget.

The remaining major problem lies in the absence of sustainable sources of funds for home lending, especially to the poor and informally employed, to which the government has not found an adequate and creative solution.

As far as funding for housing is concerned, the government faces two major limitations. One is its reliance on private sources of funds for the provision of housing assistance. The second is the tight fiscal situation of the government, which has greatly reduced its ability to provide subsidies to the poor from budgetary sources. Of the P5 billion budget Secretary Defensor had asked for his socialized housing program, he was given only P1.5 billion by the Department of Budget and Management (DBM). At an average of P100,000 per unit of assistance, this amount can only assist 15,000 poor families, which is clearly below the government’s targets.

The reliance on private sources of funds is a reality that government has not sufficiently faced up to. The housing finance system shows little indication of lessening its dependence on the government-managed pension funds. With SSS and GSIS already anticipating problems in servicing the pension needs of its members, the housing sector cannot hope to increase the amount of resources it can raise from these sources. Pag-Ibig, for its part, has also been tightening its hold on its funds. Underlying this conservatism towards homelending is the poor performance of the housing loan portfolios of the three government financial institutions.

The unwillingness of the pension funds to increase their exposure to housing and the inherent unsustainability of using these pension funds to bankroll the provision of housing loans present serious problems to the government. The government has resorted to the use of asset-backed securities to generate funds for socialized housing. It also hopes to create a vibrant secondary mortgage market to increase liquidity in the housing finance system. Unfortunately, both these strategies have not gained much headway mainly owing to the fact that home mortgages are not very attractive to institutional investors. It seems the government has encountered a dead-end as far as generating resources for housing is concerned.

The creation of a Department of Housing, a priority of the present administration, may not necessarily lead to an increased capacity to service the housing needs of the population unless the housing finance system is restored to health. The creation of efficient institutions may help in this effort by boosting confidence in the mortgage market but it is not the only thing needed. The development of alternative sources of funds is imperative.

This and other updates are found in the July 2002 issue of the Intersect.  Copies of this issue are still available.

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