The Need to Redefine Socialized Housing Under RA 7279

Atty. Christopher Ryan Tan and Mr. Ramon CF Cuervo III

Atty. Ryan Tan, a young brilliant lawyer and real estate expert prepared a position paper for OSHDP (Organization of Socialized Housing Developers of The Philippines) and with his permission, I will share this first part with you.

In relation to the proposed amendments of the Sec.18 of RA 7279 particularly the inclusion of condominiums under the Balanced Housing Development Act, stiffer penalties and related issues. We wrote that while we do not object to the inclusion of condominium, we believe that this is not the real solution to homelessness. We submit that government spending must be increased to support the poorest of the poor by way of direct subsidies to even afford the minimum standard housing unit. Unless we do so in this wise, the amendments may not yield the intended result. For OSHDP, the real issue remains: there is a need for government programs that increase production of housing such as production of socialised housing condominiums and not just inclusion of condominiums under RA 7279.

I. Background

From our perspective, being one of the leading organizations of private developers engaged in housing development under Batas Pambansa 220 standards, which covers both socialized and economic housing projects, there are policy gaps that must be addressed in order to address the current housing production issues.

A. OSHDP’s Advocacy: Socialized Housing Condominium Projects

Last October 2012, OSHDP submitted an Evaluation of Socialized Housing Price Ceiling for

Low-Density Subdivision Development and Medium Rise Building Multi-Family Dwelling[1]

In the study, we proposed that the socialized housing price ceiling (which was last adjusted in December 2008) be reviewed and adjusted as follows:

  1. Low-density socialized housing projects (typically horizontal subdivision projects under BP 220 design standards) – From P400,000 to P450,000 house and lot package; and,
  2. B. “In-City” and “Near-City” Socialized Housing DevelopmentOn the other hand, various studies indicate that relocation of informal settlers have been unsuccessful. Beneficiaries just keep coming back to the metropolis only to become informal settlers again. Projects cannot be situated very far from their sources of livelihood.

    It may be time to seriously consider housing production “in-city” or “near-city;” hence, our proposal for high density, vertical housing development.

    C. HUDCC Resolution and Findings

    Last December 2013, the Housing and Urban Development Coordinating Council (HUDCC), upon recommendation of the Housing Policy Working Committee (HPWC), partially approved our request and issued HUDCC Resolution No. 01-2013[2] resolving to adopt the adjustment of socialized housing price ceiling from P400,000 to P450,000.

    However, the second tier price ceiling for vertical developments was deferred for further study due to the recommendation submitted by the National Economic Development Authority (NEDA) to the HPWC, which states that “with regard to MRB[3], there is a need to validate the proposed cost with the costing of NHA including the cost of the land. If the amount being proposed is reasonable, then private developers should be allowed to construct MRBs as one of the modes of compliance to the balanced housing development provision of the UDHA. Since the current legislation specifically refers only to subdivision project for compliance, amendments to UDHA would be in order.”

    The HPWC secretariat followed suit when it observed that the definition of “Socialized Housing” under RA No. 7279 is restrictive. Sec. 3(r) provides,

    “Housing programs and projects covering houses and lots or home lots only, undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberalized terms on interest payments, and such other benefits in accordance with the provisions of RA 7279 (UDHA)” (Sec. 3[r], RA 7279)

    It is our impression that a restrictive interpretation of the definition of socialized housing, as suggested by our authorities, will not and cannot include socialized housing condominium projects.

    To enable government to spur production of socialized housing projects “in-city” or “near-city”, the definition under Sec. 3(r), RA 7279 must be amended.

D. Affordability vs. Acceptability

The other issue is affordability.

It has always been our view that minimum design standards must not be sacrificed in the name of affordability. Our housing units must not only be affordable, they must be acceptable.

The reality however is that these minimum design standards have price tags. And, particularly, when we speak of “in-city” or “near-city” development, these prices are not cheap.

To bridge the gap between affordability and acceptability, government must spend. Spending, to our mind, must include direct subsidies to the beneficiaries.

Quite frankly, the government is not spending enough in housing. And if not addressed, it cannot solve the housing problem.

E. Different Regions, Different Housing Needs, Different Affordability Levels

Consider also a shift in our framework of setting socialized housing price ceilings. Today, the legal basis of the authority of HUDCC to set the price ceiling is Sec. 15, RA No. 8763 or the Home Guaranty Corporation Charter. The ceilings for socialized and low-cost housing loan packages are jointly determined by HUDCC and NEDA. Such ceilings may be reviewed, revised and adjusted to conform to prevailing economic conditions at any time, but not more than once in every two (2) years.

The practice has always been a uniform ceiling nationwide but the realities on the ground tell us that in different regions, there are varying housing needs and affordabilty levels. These ceilings must adopt a multi-tiered approach in much the same way as wages are set.

We do not have that framework today.

As for OSHDP, we pushed the agenda to initially adopt a two-tiered approach. One, for horizontal development and two, for vertical development. As earlier discussed, the vertical tier was deferred.

Legislation must therefore rethink a policy along these lines.

F. Finding a Better Policy: Balanced Development Housing Requirement vs. Market/Economic Forces

If housing is essentially an economic function where the fundamentals of supply and demand is to be observed, private developers will be willing to supply socialized housing units if there is an effective demand. As a matter of fact, there may be no need for balanced housing development requirement if we follow this principle. Policy must simply be realigned to let the market forces work.

Housing needs do not necessarily translate to effective demand because of the issue of affordability. Government must elevate those “underprivileged and homeless” members of our society to a level where they can actually afford the minimum design standard housing unit. Then, their housing needs will become effective demand; and effective demand will drive up housing supply.

This is where subsidy comes in – to influence the behavior of the “underprivileged and homeless” and give them access to housing stock.

It is our position that the state must step up its direct subsidy program, because indirect subsidies are clearly not enough.

What is concerning us in the private sector is the seeming governmental attitude of passing on its obligation to provide housing for the poor by compelling developers to produce socialized housing, even if it is not in line with their business. This is the impetus for Sec. 18, RA 7279.

Today, the measure being pushed is the further expansion of this policy. It is now being proposed that balanced housing development requirement seeks to include “condominium projects” (not only subdivision projects).

While we do not object to this, we are however, very concerned that the state is not addressing the real issues.

To our mind, there is a need to amend the law; but the amendments must solve the real housing production issues and homelessness.

There is so much to share but I need to cut on this part. Tomorrow, we will continue on the second part of this article.

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