Housing Affordability and What the Government Can Do to Address This

In a comprehensive study on the different dynamics and facets of the Philippine real estate market by Lamudi Philippines, one the leading real estate websites of the country, published on its 2017 White Paper, it has been found that during the last decade, the housing needs of the Philippines have tremendously increased because of spiraling population growth. In the cities, this situation is more pronounced because of large-scale migrations from the rural areas of people looking for educational, employment and business opportunities.

The trend, however, has been accompanied by the increasing costs of land and building materials. This gives rise to a picture where housing needs are greater than ever before, but homes for sale also tend to be more expensive than in the years past. To be sure, real estate firms and construction companies are doing their best to make homes more affordable for the average Filipino worker without sacrificing quality through innovative designs and space distribution, but these efforts shall be more effective if they are to be accompanied by government policies geared toward the same end.

What policies then should be enacted by the government to help drive down housing costs?

First, it must enact tax incentives and breaks to real estate developers and suppliers. A step like this will surely lower housing costs because when you lower the cost of building homes for builders and sellers, naturally, they will be sold at a lower price.

Second, it must implement policies that foster loans with lower interest rates, affordable terms, and conditions like longer payment periods and lower monthly amortization. This second step complements the previous one. Lowering the cost of housing may not mean that much to typical homebuyers without easier access to credit and friendlier credit terms.

Third, it must strive to raise minimum wages. The logic behind this step is both simple and clear: More money means more purchasing power. When people have more disposable income, they can better afford to buy things, especially something as expensive as a home.

Let us face this reality: Buying even the more affordable houses available in the market today is still a considerable financial undertaking for the average Filipino. Most Filipinos save or avail of loans or both for them to be able to buy their own house. Government policies must reflect this reality by making available cheap credit and increasing wages at the same time. Lowering cost is not just about driving down prices; it is also about having more money. To illustrate the principle in the most basic example possible: A Php500,000 small bungalow in a mid-range subdivision, so affordable in common market standards, will still be considered expensive by someone who earns minimum wage.

Fourth, the government must make land conversion easier. The provisions of the Philippine Constitution and its implementing laws have been found to be too restrictive. To state it plainly, land conversion in the Philippines takes too much time and entails too much red tape, indirectly but indisputably helping lead to higher housing costs.

Fifth, the government must ease the restrictions on foreign ownership. The phenomenal economic growth of neighboring countries like Thailand and Malaysia are partly driven by their robust housing sector and this, in turn, is supported by liberal foreign ownership laws. Up to the extent that the country’s interests are protected, the government must make foreign ownership, so restricted under Philippine laws, easier.

Doing the fourth and the fifth steps will inevitably lead to more foreign investment. More foreign investment will mean more competition, and more competition will lead to lower housing costs.

To truly have a realistic opportunity to drive housing costs down, the government must have the focus, drive, and political will to enact these policy shifts, and these policy shifts, for each to work, must be enforced together for the simple reason that they work best when they work together. And work together, they should, for they make possible a very reasonable cornerstone of the Filipino dream: The security, dignity and happiness of having an own home.

This article was contributed by Lamudi Philippines.

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