Housing and Land Development

Access to shelter is a basic human right along with food and clothing. However, in the face of a housing industry and policies that fail to provide them with affordable conventional housing options, the poor worldwide have to resort to a range of other - often inadequate - means to house themselves . From a macroeconomic perspective too, housing is of great importance. In developing countries, investment in housing can account for from two to eight percent of the gross national product (GNP), and for 10 to 30 percent of gross capital formation. If housing investment and services are combined, the housing sector accounts for from 7 to 18 percent of GNP. And when considered as an asset, housing is even more important, making up from 20 to 50 percent of the reproducible wealth of most countries.

The value of mortgage loans in Latin America is very low by international standards: 2.9 percent of GDP in Peru and more than 10 percent of GDP only in Chile and Panama. By contrast, mortgage loans represent around 80 percent of GDP in the US, and more than 40 percent in the European Union. Less than one quarter of all housing in Latin America is financed through formal mechanisms, and housing mortgage credit accounts for a small fraction of total credit. Without long-term financing, the poor tend to build their own homes incrementally. In Mexico City an estimated 60 percent of the population lived in self-constructed homes in 1990 compared to 14 percent in 1952. The situation is similar in Caracas and Lima. While many of these houses are substandard in terms of basic services and construction quality, the percentage of low-income people who live in their own homes is not much lower than that of the population on average.

Over the years, the Bank's strategy for urban housing and land has gradually moved from financing particular housing investments to recognizing that the sector is made up of inter-connected markets, and that interventions are needed to extend access to these markets to underserved groups. Projects in the Latin America and Caribbean region now focus on: (a) improving the design of subsidies and using public finance to leverage greater private sector involvement in affordable housing; (b) promoting the development and improvement of the basic infrastructure that supports housing; and (c) supporting the policy and institutional framework for real sector interventions, including land titling and strategizing.

SELECTED PROJECTS AND ANALYSIS

 

Private Housing Finance Markets Strengthening Project (Mexico). The project aims to strengthen the financial capacity of Federal Mortgage Corporation (SHF) to develop and consolidate markets for housing finance and to expand access to lower income groups over the medium-term through debt restructuring – making available long term funding so that SHF can match the maturity and option structure of its assets, and in order to fund its expansion into lower income segments on a sustainable basis. Another objective is to improve SHF's technical capacity to expand access to lower income groups over the medium-term through technical assistance for the implementation of their new strategic plan 2008-2012.

 

Housing Sector Technical Assistance Loan (Brazil). The development objective of the project is to support the implementation, monitoring, and evaluation of the Government reform program supported by the Programmatic Loan for Sustainable and Equitable Growth: Housing Sector Reform. The Housing Sector Reform Loan aims to improve the policy environment for improving the living conditions of the poor and strengthening their access to assets, notably housing and serviced/serviceable land. There are four project components. Component 1supports the Institutional and Legal Framework for Housing Policy, Component 2, the Housing Finance Market Development Component, supports improving the legal and regulatory framework for housing loans. The focus of technical assistance activities in Component 3, Housing Subsidies for the Poor Component, relating to housing subsidy policy is the rationalization of the Government's various subsidy programs and the establishment of effective targeting, monitoring, and evaluation mechanisms. Component 4, Land and Urban Development, includes the provision of technical assistance for (a) the designing and implementing programs for the Ministry of Cities to strengthen local governments in their efforts to achieve accreditation of their institutional capacity to take the lead in local urban development policy setting and implementation; and (b) the development of a national urban upgrading program.

En Breve: Low-income Housing in Latin America and the Caribbean (457kb pdf). Jan 2007. A note (No. 101) which highlights the World Bank Group Housing Strategy in Latin America and uses Brazil and Mexico as case studies in recent housing reform. En Breve is a regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank‘s Latin America and Caribbean Region.

Peru's urban land titling program. Since the 1940s urban migration radically altered the structure and size of Peruvian cities. Migrants from rural areas were largely excluded by the established legal system that supported the formal sector, especially from legal access to housing. The migrants responded by establishing informal settlements in defiance of the law, that in 1995 represented more than 1.5 million informal urban properties located in eight of the largest cities in the country. To deal with this problem, several reforms were proposed in Peru's Urban Land Titling Program.

Managing investment climate reforms: the Peru urban land reform case study. The primary objective of the case study is to learn about urban land reform in Peru, in particular to understand the factors that motivated reforms, how the reform process itself was managed, what the results or outcomes of the reforms have been, and what lessons have been learned. The urban land reform is the land policy implemented in Peru since 1996 aimed at the creation of a system able to assure formal rights to real property in the settlements in large urban areas.

Mexico - Low income housing : issues and options, Volume 1. This report evaluates the shortcomings of current housing policies, and provides a framework for analysis of alternative policies. And it further reviews the significant challenges facing housing demand, supply, and government intervention, stating that in the absence of viable alternatives, many Mexicans households are under-housed, and suffer from insecure tenure, crowding, and poor quality of housing.

Brazil - Progressive low-income housing : alternatives for the poor. This report aims to analyze key aspects of the low-income housing sector in Brazil, and to provide an analytical framework for reviewing alternatives to addressing the lack of adequate formal housing and urban services for the poor.

Micasa: Housing Financing in Peru. In mid 2000, Mibanco, Latin America's second largest regulated microfinance institution, with 70,000 active borrowers, launched Micasa (my home) - its housing product. Within a short period of 12 months, Micasa achieved impressive results in terms of scale - 3,000 active clients and a $2.6 million portfolio. This newsletter details how this scale, combined with low incremental costs have ensured Micasa's profitability.

 

RELEVANT LINKS

 

UN Habitat Housing Policy and Development Section* (United Nations Human Settlements Program)

 

Current Housing Situation in Mexico 2005* (Harvard Joint Center for Housing) Prepared by Centro de Investigacion y Documentacion de la Casa (CIDOC) and Sociedad Hipotecaria Federal with support from Comision Nacional de Fomento a la Vivienda and Joint Center for Housing Studies of Harvard University.

 

Effects of Land Titling on Child Health* (Inter-American Development Bank)