Let’s do housing right

Should thousands of occupants who in recent weeks took over more than 5,000 idle government housing units in Bulacan be forcibly evicted? The National Housing Authority (NHA) had supposedly earmarked those houses for low-salaried soldiers, policemen and firemen, and for informal settlers living along danger zones and waterways in Metro Manila. But for one reason or another, these remained unoccupied. The Kalipunan ng Damayang Mahihirap (Kadamay), the organization to which the occupants belong, cites an NHA report that at least 53,000 such housing units have been left vacant nationwide, many supposedly rotting away. A standoff persists between the government and the illegal occupants, who refuse to budge even as President Duterte has described their move as “anarchy.” The occupants’ supporters fault the government for “wasting billions of pesos in public funds to build the abandoned housing units amidst pervasive homelessness.”

As it is, the government has actually spent far less than what’s been needed over the years to address the magnitude of our massive housing problem. According to the Housing Industry Roadmap submitted by the industry to the government, the housing backlog for low-cost housing, or the difference between supply and actual need, was estimated at 3.1 million units in 2011. But for high-end and mid-cost homes, there was actually an excess supply estimated at nearly half a million units (224,011 and 250,403 units, respectively). As of last year, the low-cost housing backlog was already estimated at 5.7 million, implying that if the housing gap is to be filled, at least 2,600 homes must be built each day, till the end of the Duterte administration.

Can the government do it? For it to happen, the government would have to make a dramatic departure from the past public spending record in housing. I have tracked cross-country data on public expenditures on housing over the years, and have found a glaring fact: Our spending levels on this basic human need have been pathetically lower than in most of our comparable neighbors. I’ve looked at nine countries for which the Asian Development Bank has the data: the original five Asean members (Indonesia, Malaysia, the Philippines, Singapore and Thailand), plus Bangladesh, Mongolia, Nepal and Sri Lanka. The numbers show that over the 15-year period 2000-2014, public expenditures on housing averaged 0.75 percent of gross domestic product for the other countries, ranging from Bangladesh’s 0.25 percent to Singapore’s 1.6 percent. The Philippines, the smallest public housing spender in the bunch, spent only 0.12 percent of GDP, even less than half of Bangladesh’s proportionate allocation, and less than one-sixth of the group average. Need we wonder why our country stands out with its informal-settler problem?

We simply need to allocate much more for public housing programs. Aside from meeting a basic human need, it makes eminent economic sense, as spending on housing has a potent multiplier effect on the rest of the economy, for at least three reasons.  First, low-cost housing is a labor-intensive investment, needing large numbers of construction workers, thus creating many more jobs than a more capital-intensive investment would.  The money is thus likely to circulate more among lower-income and lower-saving individuals, thereby keeping more money moving around in the spending-income cycle that leads to the multiplier effect. Second, low-cost housing would have much lower import content than alternative government expenditures (say, broadband equipment or hybrid seeds from China), thus keeping the money circulating here at home. Apart from the higher multiplier effect of keeping the money in the domestic economy, it would also generate more tax revenues from domestic transactions. Third, housing construction has numerous allied domestic economic activities, ensuring that the money spent on housing will permeate widely in the economy and create broader benefits for the people.

Still, it’s one thing to build thousands of homes, and another to ensure that they will actually be occupied and used. And on this, the Philippines still has a lot of shaping up to do.

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