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By Cai U. Ordinario / Photo & additional reports by Nonilon Reyes
Last of two parts
LAND is a finite resource and, hence, makes it expensive. In mega cities like Metro Manila, available land is very costly given that the National Capital Region (NCR) is already home to at least 12 million Filipinos.
The Philippine Statistics Authority (PSA) said in 2016 that the NCR is the most densely populated among 18 administrative regions with a population density of 20,785 persons per square kilometer (sq-km). “This translates to an additional 1,648 persons per square kilometer (8.6 percent) from the 19,137 persons per sq-km in 2010,” the PSA has said.
Apart from this, many businesses are located in the NCR. This is why the region accounts for at least 30 percent of the country’s gross domestic product and is usually where most economic opportunities are located.
Karaos said not having a land use policy is a real problem for the country, particularly where low-cost housing is concerned. She said while Republic Act 7279 or the Urban Development and Housing Act mandated Local Government Units (LGUs) to make land available for low-cost housing, LGUs are unable to do so because of the high costs.
“Our system favors making land easily available to private developers for malls and condominiums but not for social housing,” Marie A. Karaos of the John J. Carroll Institute on Church and Social Issues (ICSI), told the BusinessMirror.
IN a video interview, Subdivision and Housing Developers Association Inc. (SHDA) Chairman Raphael B. Felix said, however, that the high cost of land does not benefit private developers. Felix said these are especially those trying to reach the low-cost housing segments where most, or 70 percent, of the housing demand comes from.
Felix said the high cost of land not only adds to their development cost but also prevents them from undertaking any low-cost or mass housing projects.
Under the law, private developers are mandated to build socialized housing projects; and the government even wants them to prioritize these projects. However, given the slim margins and their long business cycles, developers end up unable to meet these obligations.
Typically, SHDA President Rosie Tsai Wang said, their business cycle runs for 18 months to two years. This takes into account the long process to secure permits to start a project to the time developers can sell the property.
Felix said the government even estimates that their business cycle up to the point of selling the project takes even longer, at three years.
Expenses, regulatory costs
IT would take a few more years before developers get paid and start on a new project, depending on the size of the project.
“It’s a very long business cycle which is totally unattractive to any investor at all,” Wang said.
Felix said that before developers can lay down the foundation for a project, they need to secure the approval of no less than 27 different offices or agencies. This process allows them to secure 78 permits signed by 146 signatories and contained in 373 documents.
He said that, ultimately, this adds to the cost of building decent and affordable houses. Felix added that regulatory costs alone account for about 10 percent of every project. If the processes could be streamlined through a one-stop shop, developers would be able to make housing even more affordable for Filipinos.
With the high cost of land, Felix said, they can only bring down their production cost to around P975,000 (about $19,714), particularly for cities. This is still higher by P395,000 (around $7,987) than the P580,000 (about $11,727.30) maximum cost for socialized housing. As it is, this cost ceiling is already higher than the previous one: the Housing and Urban Development Coordinating Council (HUDCC) and National Economic and Development Authority (Neda) raised it to this level in 2018 from around P450,000 ($9,098.77).
BASED on HUDCC Resolution 1 in 2018 (Price Ceiling for Socialized Subdivision Project), the socialized housing adopted a tiered price ceiling, which provides that the price ceiling for socialized subdivision projects from a minimum of P480,000 (9705.35) for a 24-square meter (sqm) property to as much as P580,000 for a 32-sqm property.
Wang said because of expensive land and regulatory issues, private developers find themselves in a “straitjacket.”
Felix and Wang agree with other experts that there should be a national land use policy; thus, passing this 30-year old bill is of utmost importance. Apart from that, they proposed that instead of land conversion being a matter for the national government, this power should be given to the LGUs.
They added that due to the low yield of many agricultural lands nationwide, these lands would be better used by developers to address the housing gap. Felix said if farmers are able to access modern farming methods and equipment, they can increase their yields even without much land.
IN order to address the housing gap, the DHSUD decided to craft a 20-year housing roadmap. Del Rosario said the housing roadmap, slated to be released in October, will identify short-term, mid-term and long-term strategies that will help boost the country’s ability to close the housing gap.
Del Rosario told the BusinessMirror the government is currently working toward increasing the number of housing units that need to be produced annually.
To close the housing gap of 6.5 million between 2017 and 2020, the government, he said, needs to build 250,000 houses a year. Currently, however, the housing sector can build only 203,000 units to 205,000 units annually between 2016 and 2019.
The housing czar said that while this is still short of the target, this has already been improved from the 172,000 houses built annually prior to the Duterte administration.
Del Rosario said priorities that the roadmap seeks to focus on include the following: addressing the availability of funds for public housing; enacting measures to improve housing planning and development coordination; and, streamlining the process for permits and clearances including “unlocking government lands for housing.”
“ANCHORED upon NEDA’s ‘AmBisyon Natin 2040’ and the country’s Sustainable Development Goals, the roadmap will re-examine existing policies to complement DHSUD’s strategies as well as streamline existing guidelines,” Del Rosario told this newspaper.
“We are doing this in consultation with our partner-developers to ensure that changes are in-sync with the private sector. I believe that stakeholder engagement is a key strategy in achieving our administration’s flagship Balai [Building Adequate, Livable, Affordable and Inclusive] Filipino program, which aims to provide housing assistance to 1.5 million families, particularly the informal settlers by 2022 and onward,” he added.
Former Socioeconomic Planning Secretary Dante B. Canlas told the BusinessMirror said that when creating housing policy, the government should focus on the needs of low-income groups and the poor. This means the government’s budget for housing should substantially be increased, Canlas said.
He added that any credit or tax perks as well as investment incentives should be extended to housing developers, particularly those who are serving the low-income market.
“Any credit, tax, or investment incentives currently accorded to big developers must be downsized,” Canlas said. “When big developers avail of these incentives, they crowd out the developers of low-cost housing for investment funds.”
THE incentives and tax perks is something that SHDA supports. Wang said affordable sustainable financing is something that low-income developers need to continue serving the market.
She explained that, usually, Filipinos in this segment of the housing market can only afford to pay 10 percent of the house cost spread over a period of 12 months or even 18 months.
With this, Wang said developers need to take up the slack on top of paying for land, constructing houses, processing loan applications and, at times, constructing road networks, especially in rural areas where there are no access roads to certain properties that are being developed.
“It’s a huge capital investment. If the government doesn’t come in to support in terms of incentives, especially if we are called upon to undertake one of the basic responsibilities of the government, which is to provide housing to the low-income families and even those who cannot afford,” Wang said.
Further, Canlas said, to reduce the cost of housing particularly in the city, complementary investments must be made in public transport such as light railway transit (LRT) systems. This will allow more low-cost housing units to be built in areas where real estate values are not too high.
THE SHDA said it also supports complementary investments.
According to Felix, developers are even thankful that the government created the “Build, Build, Build” (BBB) program. The infrastructure push of the current administration is, for SHDA, the key to unlocking the economic potential in rural areas.
It is only their hope that the government treats the housing sector as equally important as the BBB. Felix said the housing sector has a high multiplier effect that would be able to spur economic growth and development in the country.
“The BBB is a very welcome program of government. I guess what we’re trying to say in SHDA we’ve been saying this since last year is that SHDA would like the government to recognize the housing industry as important as the BBB” Felix said. “If they build all these roads, if there’s no housing, then what’s the use of the roads?”
“Second, as a pump primer, we feel that housing is even faster than BBB in pump priming. We don’t have right-of-way issues or Neda feasibility studies or government procurement processes to contend with. This is private money and developers are willing to go,” he added.
Canlas said it was also important for the government to assess if it has succeeded in its mandate, whether in terms of providing housing units or extending credit or purchasing mortgages. Good governance, he added, remains critical in delivering any public good.
THIS “introspection” should include housing programs that have not been successful. Canlas said programs that have been devolved to LGUs should be discontinued because these have not helped address the urban sprawl.
“Slum and squatter areas are still prevalent, posing public- health hazards. This should not persist and be tolerated in an environment where threats of pandemics like the Covid-19 hover,” he said.
Wang added that the SHDA hopes that through the roadmap, the government could also prioritize data production and management when it comes to housing. Currently, housing data is derived through the PSA’s FIES. But the data doesn’t take into account the housing gap, which leads to confusion on the numbers.
The SHDA said they hoped the new roadmap will also update building and design codes in the country. These should not be placed in a law but be included in the implementing rules and regulations (IRR) to make it more responsive to the housing needs of the time, the SHDA said.
According to Jessan Catre, Country Lead for Philippine Shelter Lab of Habitat for Humanity’s Terwilliger Shelter for Innovation, “On its own, the private sector is also unable to address [the] backlog.”
Catre believes that “incentives provided by the government will be helpful to spur” private sector actions.
“The government has also recently removed incentives like VAT [value-added tax] exemptions for socialized housing projects,” he said. “The private sector is faced with government-set price ceilings and increasing material and labor costs. Thus, they focus on the higher segments of the housing market, which are more lucrative and less regulated.”
ULTIMATELY, creating a roadmap, Karaos said, should include the following efforts: to prioritize land management to serve the public good; to upscale successful government housing programs; and, to give a leading role to LGUs in the country’s housing delivery system by providing them with land and resources for poor Filipinos.
She added it is also important for the government to recognize that housing for poor families is a public good that should be subsidized by the state.
Giving the poor more opportunities to access decent and affordable housing is fair given that these Filipinos are often underpaid for their labor and thus not be able to put up the funds needed for their housing needs.
“If the middle class and wealthy complain why the government should subsidize the poor, the answer is that the poor are providing many essential services to the operation of cities and to make the lifestyles of the middle class and wealthy comfortable,” Karaos said.
AS the rainy season ensues, Rodel and Ruben Mojica consider themselves lucky with a roof over their head in their pushcart home. (Update: Since the interview was done, the father and son have been evicted from their pushcart home during a clearing operation by Makati authorities).
This, despite earning only P150 ($3.03) a day through selling items like used plastic bottles. This is not enough to buy everything they need but enough for a meal sold on the streets.
Ruben’s father Rodel said that despite their humble means and his past criminal record, he could not bring himself to do something that would imperil his or his son’s life. He wants to only resort to honest means when feeding his child, even at this time of hardship.
Fortunately for him, news of his plight travelled fast, reaching an employer who is now willing to give him work in a construction site. The barracks of the construction site would become home for him and Ruben. There is hope, he thought.
With a brighter future to look forward to, he wonders about his neighbors living in condominium units across the Pasig River.
“(Ang) sarap siguro tumira dyan, ang tataas nila. Ano kaya ang tingin nila sa amin dito sa bahay namin? [It must be great to live there where you are so high up. I wonder what they think about us living in this house?],” he mused
Image credits: Nonie Reyes