Affordable and Resilient Housing Infrastructure
Affordable and Resilient Housing Infrastructure
Business Model Description
Invest in B2B/B2C models engaged in building affordable homes for the population in peri-urban, informal settlements, especially the areas surrounding Manila or those living in disaster-prone areas in Metro Manila, with a focus on sustainability. (15) In this model, the local government unit (LGU) plays a lead entrepreneurial (investor-of-first-resort) role.
Returns are arranged by the LGU and the Department of Socialized Housing and Urban Development, which range from 15% to 20%. To ensure transferability and sustainability of the program, the LGU will charge rental fees comparable to other public housing projects i.e. between USD 14 to 36 per month, lower than the average monthly rental for a comparable private apartment unit, about USD 50 to 70.
Valenzuela City Housing: With a total of 13 hectares, the Disiplina Village Ugong and Bignay accommodate around 4,594 informal settler families, clearing up Valenzuela City (a city within the Greater Metro Manila Area) from informal settler families (ISFs) living in danger zones. The floor area of each unit is 28 sq. m. including the loft. The project was initiated and implemented by the City Government with the funding support of the private sector such as the San Miguel Corporation and MERALCO, amounting to around USD 1.5 million. To ensure the transferability and sustainability of the program, the “Ordinance Establishing Disiplina Village as the Flagship Socialized Housing Program of Valenzuela City”, Ordinance No. 36, Series of 2011 was enacted by the City Council, that included provisions on basic services and funding being the responsibility of the city government to sustain a very low rental cost of only USD 50 per month, the lowest rate in a public rental housing project in the country.
Quezon City Housing: In 2014, Phinma Properties and the Quezon City Local Government partnered to build the Bistekville II Socialized Housing in Barangay Kaligayahan, with 1,101 housing units in the 4.8-ha land (4). Each socialized housing unit is amortized to the customer for around USD 50 per month for 30 years.
Between 2013 and 2019, 5,698 families have been provided safe and permanent shelters in Quezon City through social housing initiatives funded by the local city government. The current programme has finalized 37 communities and aims to complete 44 more communities by the end of 2019.
Expected Impact
Improving well-being and social security of low income households through providing affordable housing.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Philippines: National Capital Region (NCR)
- Philippines: Western Visayas
Sector Classification
Infrastructure
Development need
Infrastructure needs cut across multiple sectors including housing, transportation and utilities. Based on a 2015 study by JICA, the annual loss in GDP due to inadequate infrastructure amounts to USD 20 Billion.(4) With the implementation of the "Build Build Build" policy, government spending on infrastructure increased, amounting to ~19.5% of total government spending in 2019.
Post-pandemic, inadequacy in key infrastructure across agriculture, transportation and logistics, education and energy persists, thereby prompting continued interest in promoting public-private partnership for infrastructure development. (1)
Policy priority
The Philippine Development Plan for 2023-2028 specifically focuses on the criticality of the Infrastructure sector and recognises that there is further demand for the development of the sector across different aspects (energy, transportation, housing) and regions.
Additionally, DBM's report on the 2022 national budget in 2021 highlights the importance of greater investment in social and economic services in line with the government’s COVID-19 response and recovery agenda. In particular, health, social welfare, and infrastructure development continue to be prioritized to manage the risk of similar outbreaks and boost economic growth. (1)
Gender inequalities and marginalization issues
The Philippine Statistics Authority has noted that the areas in the Philippines with low income lack access to basic infrastructure, such as clean water sources and sanitation. Regions such as BARMM (84% access to water and 51.6% access to basic sanitation) and Central Visayas (94% access to water and 70% access to sanitation) were highlighted. (5)
Furthermore, according to the National Council on Disability Affairsin in 1982, the physical design of the infrastructures falls below the standards set in the 1982 Accessibility Law, and thus makes them difficult to access and use by pregnant women, parents with very young children, older people, and persons with disabilities. (1)
Investment opportunities introduction
Multiple policies introduced in recent years support creation of additional PEZA zones, and the target of 1 million new housing per year set by the Department of Socialized Housing and Urban Development. Devolution of national funding to local governments provides opportunities for investment to developers within the infrastructure space. (1)
Key bottlenecks introduction
The World Bank in its report titled, "Philippine Economic Update June 2021", pinpoints that the main challenges within the industry are long timeframes which result in slower budget execution rates. Coupled with the new policies, there's a need to improve the capacity of local government workers to effectively mobilize capital to create public-private partnerships.
Real Estate
Development need
The country's path towards acceptable housing is constrained due to several factors: (1) The ratio of unit housing cost to income has risen such that poor households have minimal to negative income left after paying for housing expenditure, while low-income but not poor households are vulnerable to experience the same.
(2) there are few low-cost alternatives to homeownership in the formal market while many low-cost housing projects are far from Metro Manila's city centers, which can significantly add to the households' transportation cost; and (3) innovative housing finance is limited. (10)
Policy priority
Acknowledging the persistent backlogs, the Philippine Development Plan 2023-2028 prioritises the provision of 12.5 million decent housing units for the informal settler families, homeless, and underprivileged. To fulfill the target of building one million houses annually until 2028, the government implements the Pambansang Pabahay para sa Piilpino (4PH) Program. (1)
Gender inequalities and marginalization issues
Aside from the property disputes that arise due to informal settling, it is important to note that majority of these dwellers are from low-income families, including women and children. Informality of such infrastructure leads to persistent issues related to inadequate sanitation, lack of access to safe and clean water, and safe electricity sources.
Providing low cost and sustainable housing can sufficiently improve the security for such families, especially women and children, enabling them to focus on other pressing matters. (1)
Investment opportunities introduction
With the target of 1 million housing per year, the government is in need of developers and investors that are willing to build such affordable housing infrastructure across the country. Multiple cities such as Quezon City, Valenzuela City, Iligan and Cebu have also expressed keen interest in partnerships to provide housing solutions. (1)
Key bottlenecks introduction
Industry and government agency leaders took note that Government budgets and priorities on the local level vary, and can be a challenge even for the national agencies to gather support to enable housing solutions to be built within the region. Government processes around permits and building accreditation are time-consuming and slow down the approval process.
Engineering and Construction Services
Pipeline Opportunity
Affordable and Resilient Housing Infrastructure
Invest in B2B/B2C models engaged in building affordable homes for the population in peri-urban, informal settlements, especially the areas surrounding Manila or those living in disaster-prone areas in Metro Manila, with a focus on sustainability. (15) In this model, the local government unit (LGU) plays a lead entrepreneurial (investor-of-first-resort) role.
Returns are arranged by the LGU and the Department of Socialized Housing and Urban Development, which range from 15% to 20%. To ensure transferability and sustainability of the program, the LGU will charge rental fees comparable to other public housing projects i.e. between USD 14 to 36 per month, lower than the average monthly rental for a comparable private apartment unit, about USD 50 to 70.
Valenzuela City Housing: With a total of 13 hectares, the Disiplina Village Ugong and Bignay accommodate around 4,594 informal settler families, clearing up Valenzuela City (a city within the Greater Metro Manila Area) from informal settler families (ISFs) living in danger zones. The floor area of each unit is 28 sq. m. including the loft. The project was initiated and implemented by the City Government with the funding support of the private sector such as the San Miguel Corporation and MERALCO, amounting to around USD 1.5 million. To ensure the transferability and sustainability of the program, the “Ordinance Establishing Disiplina Village as the Flagship Socialized Housing Program of Valenzuela City”, Ordinance No. 36, Series of 2011 was enacted by the City Council, that included provisions on basic services and funding being the responsibility of the city government to sustain a very low rental cost of only USD 50 per month, the lowest rate in a public rental housing project in the country.
Quezon City Housing: In 2014, Phinma Properties and the Quezon City Local Government partnered to build the Bistekville II Socialized Housing in Barangay Kaligayahan, with 1,101 housing units in the 4.8-ha land (4). Each socialized housing unit is amortized to the customer for around USD 50 per month for 30 years.
Between 2013 and 2019, 5,698 families have been provided safe and permanent shelters in Quezon City through social housing initiatives funded by the local city government. The current programme has finalized 37 communities and aims to complete 44 more communities by the end of 2019.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
5% - 10%
6.8 million housing backlog. 1 million yearly housing target.
Philippine real estate industry generated over USD 2.2 billion in the second quarter of 2021. (13) For affordable housing, total estimated market size is around USD 45 to 100 million (18) Construction industry's annual growth is projected to be at 7.3% from 2023–2026 (20) For affordable housing (sociliased, low cost, economic), annual growth rate is at 8.75% from 2022-2030 (18)
According to the 2023-2028 Philippine Development Plan (PDP), the Philippines' housing backlog increased to 6.8 million between 2017 and 2022. The Department of Human Settlements and Urban Development aims to construct 1 million housing units per annum and estimates required investment of ~USD 720 million to address this backlog. (17)
Between 2016 and 2030, an estimated 73,836 units of social housing will be in demand. (15) Most inhabitants in Metro Manila are those who have migrated from the countryside, or are the children of migrants. They are typically from low-income segments and lack facilities that are otherwise available to more affluent population segments.
Meanwhile, the selling price of electricity in the Philippines is among the highest in the world and the electricity cost constitutes a substantial part of household expenses, especially in the lower and middle income households. Also, many informal settlers in Metro Manila often live in disaster-prone areas. This underlines the need for affordable and energy efficient housing in these areas.
Indicative Return
15% - 20%
> 25%
Returns are project dependent but are targeted at 15 to 25% (18) 57.85% gross profit margin estimated from 1H19 overall numerations of 8990 Holdings. (19) Based on expert consultations, returns may differ based on the nature of projects, but are targeted at 15 to 25%. (18) Per industry leaders within the sector, if housing prices requirement is adjusted, around 10% to 25% returns can be generated
Investment Timeframe
Medium Term (5–10 years)
Constructing affordable housing under the DSHUD and local government program suggests that the payment for construction can be covered by Pag-ibig upfront for the developers. Therefore, investment returns start post construction of the infrastructure.
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - Highly Regulated
Political Support
Impact Case
Sustainable Development Need
In 2015, around 500,000 families out of 23 million households in the Philippines occupied houses and lots without paying rent and without the owner’s consent. An estimate of over 6.8 million housing units is required to cover the growing population as of 2022 (1).
Data shows that even if an average of 200,000 housing units will be produced annually from 2012, backlog will persist at 6.5 million households in 2030 (2). Rapid urbanization in the country results in an increase in slum population. In 2010, over 4 million people were estimated to be living in Metro Manila slums. By 2050, this is expected to rise to over 9 million (5).
The informal settlements face poor sanitation, inadequate water supply, insecurity of tenure, and insufficient incomes, among many concerns. (6).
Gender & Marginalisation
With the fastest urbanization rate at 4.1% in the Southeast Asian region, the Philippines has recorded 51.73 M people (51.2%) living in urban areas in 2015, which may result to congestion in urban cities, forcing population to live in slum areas. Violence, harassment, and poor health are among the risks faced especially among urban poor women living in informal settlements.
Absence of proper sanitation facilities requires women to go out of their homes at night to urinate or defecate, exposing them to risks of violent attack or harassment. Women giving births in urban slums are prone to infection or even death due to the unsanitary conditions of their environment.
The drug war launched in 2016 recorded the dire situation of women who were in constant terror due to the fear of their husbands or sons being killed even if they do not use illegal drugs (8).
Expected Development Outcome
Construction of affordable housing will contribute in the country's goal to provide 6 million decent housing units for the informal settler families, homeless, and underprivileged by 2028 (1).
The housing program is seen to generate 1.7 M jobs once it goes full blast with construction (9). These livable communities aim to provide equitable, inclusive, and resilient opportunities to improve human well-being and contribute to economic vitality (1).
With sufficient and accessible sanitation facilities that come with decent housing, families will be able to improve and take care of their health better. Children may perform well in school because they now have an environment at home conducive for learning.
Gender & Marginalisation
In building these secured and decent housing communities, there are opportunities to have shelter initiatives responding to practical needs of the underserved sectors, such as provision of livelihood trainings, access to health clinics and basic utilities.
Their health will be taken care of. Regardless of their sector, all families will have equal opportunities to improve their lives. Through affordable housing, women, and other marginalized sectors, would have the opportunity to own housing units registered to their names and will feel a sense of security from eviction.
Primary SDGs addressed
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
2015 baseline data shows 3.2% of population which translates to around 6.8 million housing needs.
2030 targets are set to <1%
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Financial: Socialized housing may affect property value and marketability which can discourage further private investment. Social: Socialized housing stigma may affect property values, community opposition leading to regulatory hurdles, displacement concerns, limited amenities affecting residents’ quality of life.
Environmental: Mismanaged housing construction may lead to environmental degradation due to soil erosion and deforestation. Urban sprawl causes congestion leading to pollution. Improper implementation of socialized housing due to politicking and lack of reliable data will further discriminate and disparage poor families, especially women and children.
Impact Risks
Social: Lack of affordable housing limits property ownership among low-income families. It increases the number of informal settler families, living in hazardous areas. Health and well-being: Poor living conditions affect physical and mental well-being of dwellers, and limited access to healthcare services impact health outcomes of low-income families.
Educational: Unsecured housing disrupts schooling due to relocation, limits access to quality formal and informal education, stunts academic and personal growth, and decreases employability. Environmental: Informal settlements, situated in non-residential zones, increase pollution and may lead to mismanagement of natural resources.
Gender inequality/marginalization: Informal settlements further limit disadvantaged groups to access government services, which hinder their social, economic and political development.
Impact Classification
What
Construction of Affordable Housing for Low-Income Informal Settlers
Who
Informal settlers belonging to low-income families benefit from availabilty of affordable housing.
Risk
Collection of payments from low-income families might be tedious to undertake, thus government intervention is needed
Contribution
Provide housing solution to address 6.8 million housing backlogs as of 2022
How Much
Around 3.6 million families that are low-income or living in informal settlements
Impact Thesis
Improving well-being and social security of low income households through providing affordable housing.
Enabling Environment
Policy Environment
RA 7279 or the Urban Development and Housing Act of 1992 provides that socialized housing be provided for the underprivileged and the homeless (Article V, Sec. 15).
National Housing and Urban Development Sector Plan 2040 is a long-term framework that guides the development of sustainable and resilient cities and communities in the Philippines. It aims to provide decent and affordable housing, improve urban infrastructure, and promote inclusive growth.
Philippine Development Plan 2023-2028: Subchapter 2.3. Establish Livable Communities expresses that by 2028, livable communities are established, and human settlements are upgraded offering equitable, inclusive, resilient and quality life for all Filipinos.
Financial Environment
RA 7279: Urban Development and Housing Act of 1992 (Article V, Sec. 20) provides several incentives for private sector participating in socialized housing including ease of doing business, namely: reduction and simplification of qualification and accreditation requirements and simplification of financing procedures, as well as tax exemptions such as capital gains tax or ordinary income tax.
RA 9679: Home Development Mutual Fund of 2009: Allocation of around USD 4.5 billion for developmental loan for affordable housing for small to medium developers and companies RA 10884: Balanced Housing Development Program Amendments: Subdivision and condominium developers are required to develop 5-15% socialized housing or “socialized condominiums” of their total project area.
Regulatory Environment
RA 7279: Urban Development and Housing Act of 1992: Philippine law aimed at providing adequate housing for underprivileged families and promoting balanced growth between urban and rural areas while enhancing the quality of life of the urban poor. RA 7644: New Rent Control Law, Section 1 sets the allowable maximum increase of rent for the five-year period.
RA 11201: DHSUD Act: Section 5.III.c Implement a single regulatory system that shall govern all activities relative to...housing and urban development projects. RA 7160: Local Government Code of 1991: Chapter 2. Section 17. Basic Services and Facilities (of the Local Government Units), (viii) Programs and projects for low-cost housing and other mass dwellings.
Marketplace Participants
Private Sector
Private sector: PHINMA Properties; Ayala Land; Megaworld Corporation; SM Prime; Vista Land; Filinvest Land; Rockwell Land Corporation; Robinsons Land, Corp.; Century Properties; DMCI Homes; Sta. Lucia Land; Federal Real Estate, Imperial Properties, Arthaland; Ayala Corporation's Ayala Ventures, Philippine Investment Alliance for Infrastructure (PINAI), BDO Unibank, Metropolitan Bank and Trust Company (Metrobank), Land Bank of the Philippines
Government
Department of Human Settlements and Urban Development; National Housing Authorities; Philippine National Railways; PAG-IBIG; Landbank; Bataan Province; Quezon City; Iloilo City; Bacolod City; Marikina City
Multilaterals
UN Habitat; Asian Development Bank; World Bank
Non-Profit
Habitat for Humanity; Galing Pook Foundation; Hilti Foundation, Gawad Kalinga Foundation
Public-Private Partnership
Pambansang Pabahay Para sa Pilipino (4PH) Program launched in Bulacan, Bataan, Iloilo City, Quezon City, Marikina City, Roxas City, Valenzuela City, Malabon City; Ayala Land, Inc; Filinvest Land, Inc; New San Jose Builders; Rising City Residential Project in Bulacan
Target Locations
Philippines: National Capital Region (NCR)
Philippines: Western Visayas
References
- (1) National Economic and Development Authority (NEDA). (2023). Philippine Development Plan 2023-2028. National Economic and Development Authority. https://pdp.neda.gov.ph/wp-content/uploads/2023/01/PDP-2023-2028.pdf
- (2) Board of Investments (BOI) Philippines. (n.d.). Securing the Future of Philippine Industries: Housing. Board of Investments (BOI) Philippines. https://industry.gov.ph/industry/housing/
- (3) United Nations Human Rights Office of the High Commissioner. (n.d.). Women and the Right to Adequate Housing. https://www.ohchr.org/en/special-procedures/sr-housing/women-and-right-adequate-housing
- (4) Business Call to Action. (n.d.). PHINMA Property Holdings Corporation: Improving the lives of informal settlers by providing affordable and decent homes. https://static1.squarespace.com/static/6049e33a3512a120620cfe14/t/604b2b541405de1cceb4d867/1615539029804/BCtA_casestudy_Phinma.pdf
- (5) Philippine Statistics Authority. National Annual Poverty Survey Indicator 2019. https://psa.gov.ph/content/two-every-three-families-owned-house-and-lot-they-occupied-results-2019-annual-poverty
- (6) Ballesteros, M. 2010 December. Linking Poverty and the Environment: Evidence from Slums in Philippine Cities. Philippine Institute for Development Studies. https://www.econstor.eu/bitstream/10419/126823/1/pidsdps1033.pdf
- (7) Acosta, R. 2015. Urban slums report the highest death rates for children under five. Philippine Council for Health Research and Development. https://www.pchrd.dost.gov.ph/news_and_updates/urban-slums-report-the-highest-death-rates-for-children-under-five/.
- (8) Commission on Human Rights. 2019 January-February. An Initial Situationer of Urban Poor Women Focusing on Violence, Social Protection, and Housing. https://chr.gov.ph/wp-content/uploads/2022/01/An-Initial-Situationer-of-Urban-Poor-Women-Focusing-on-Violence-Social-Protection-and-Housing_January-February-2019.pdf
- (9) Department of Human Settlement and Urban Development. 2022 November 06. PBBM's housing program to trigger economic activities to 80 allied industries. Philippine Information Agency. https://pia.gov.ph/news/2022/11/06/pbbms-housing-program-to-trigger-economic-activities-to-80-allied-industries
- (10) Philippine Institute for Development Studies. 2022. 30% housing price-to-income rule not fit for PH—PIDS study. https://www.pids.gov.ph/details/news/press-releases/30-housing-price-to-income-rule-not-fit-for-ph-pids-study
- (11) PIDS. 2002. The Dynamics of Housing Demand in the Philippines: Income and Lifecycle Effects. https://pids.gov.ph/publication/research-paper-series/the-dynamics-of-housing-demand-in-the-philippines-income-and-lifecycle-effects#:~:text=The%20path%20toward%20acceptable%20housing%20is%20constrained%20due,available%20suffer%20from%20liquidity%20problems%20and%20bureaucratic%20delays.
- (12) Crisostomo, S. (2022, December 27). Review sought for socialized housing price ceiling. PhilStar. https://www.philstar.com/nation/2022/12/27/2233447/review-sought-socialized-housing-price-ceiling-
- (13) InCorp Global Pte Ltd. (2022, 6 June). Everything You Need to Know About the Real Estate Industry in the Philippines and its Trends for 2022 (InCorp). PrimeGlobal. https://www.primeglobal.net/news/real-estate-philippines-trends-incorp
- (14) Cities100. (2019, October). Cities100: In Quezon City, resilient communities are replacing vulnerable, informal settlements. https://www.c40knowledgehub.org/s/article/Cities100-In-Quezon-City-resilient-communities-are-replacing-vulnerable-informal-settlements?language=en_US
- (15) Philippine Statistics Authority. (n.d.) Statistics for Housing Policy. https://psa.gov.ph/sites/default/files/6.6.3%20Statistics%20for%20Housing%20Policy.pdf"
- (16) DHSUD Interview
- (17) Galing Pook Foundation https://galingpook.org/what-we-do/awards/awardees/disiplina-village-bagong-bahay-bagong-buhay/
- (18) Industry.Gov. https://industry.gov.ph/industry/housing/
- (19) Manila Bulletin (2023). https://mb.com.ph/2023/3/25/dhsud-taps-more-private-firms-for-pbmm-housing-program"