乷 塋· Acce55 to Aff。rdable ．빅蛛1- and Low-1llc。me 璽nodu클稽麗cE●lfa●l를tAsia （츱［灌―! 졈 ·커―‘」―-,!&-!&‘·｀! -&& Sustainable Develㅇpment Department - East Asia and Pacific Regiㅇn  Access to Affordable and Low-Income Housing in East Asia and the Pacific Sustainable Development Department I East Asia and Pacific Region @ 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org 12 3 4 15 14 13 12 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Di- rectors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this work is subject to copyright. 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Contents Acknowledgments ............................................................. v Abbreviations and Acronyms ....................................................vii Report Overview..... ........................................................ ix Key Findings ................................................................ xi Summary of Key Issues and Suggestions for Action...................................Xii Affordable Housing.......................................................xii Housing Finance.........................................................xiii Support for Rental Housing.................................................Xiv Land Use and Development Standards..........................................Xiv Land Assembly..........................................................xv Data Collection and Dissemination.............................................Xv 1. Introduction ................................................................1 2. Context of Urbanization in EAP..................................................3 2.1 Urbanization and Wealth Distribution........................................... 6 2.2 Inequality, Housing Affordability, and Urban Services.................................7 2.3 Comparative Definitions of Urban Places..............xv.......... ..............9 2.4 Conclusion ..............................................................10 3. Regional Trends on Urban Housing Affordability ........................... ......... 11 3.1 Affordability Trends: Renting and Owning ................................. ......13 3.2 Affordability of Rental and Ownership Options ............................. ....... 14 3.3 The Prevalence of Rental Housing ............................................. 16 3.4 Conclusion ............................................................. 16 4. Overview of Current Affordable Housing Interventions.................................17 4.1 Homeownership Assistance ................................................. 17 Government Housing Finance Institutions..............16........ ...............20 Mortgage Subsidies.......................................................20 Housing Provident Funds...........................................................21 Privatization of Social Housing...............................................21 Cross-Subsidies and Set-Asides ...................................... ............. 22 III 4.2 Strengths and Weaknesses of Homeownership Assistance Schemes. ......... ............ 23 4.3 Public Rental Housing ...................................................... 24 Prevalence of Renting in EAP....................................................... 26 4.4 Strengths and Weaknesses of Public Rental Housing ....................... ......... 27 4.5 Incremental Approaches to Affordable Housing Provision .............................. 28 Land Pooling and Readjustment ...................................... .......... 28 Community Mortgages ......................................................... 29 Nongovernmental Organizations and Support for Homeownership ................... 29 Housing Microfinance.......................................................... 30 4.6 Strengths and Weaknesses of Incremental and Community-Based Approaches . ............. 30 5. Future Directions for Affordable Housing Provision ............................33 5.1 Urban Planning and Regulatory Frameworks ........................................ 34 5.2 Housing Finance and Institutions Supporting Housing Policy .......................... 34 5.3 Urban Land Acquisition .................................................... 34 5.4 Policy Options for Reducing Rental Market Constraints.............................. 35 5.5 Considerations for Future Research and Action ............ .................. ..... 36 Appendix A: Overview of Key Affordable Housing Policies and Programs in EAP Countries.....39 References .................................................................43 Figures 2.1: Population in Urbanized Areas by Region, 2005-15 ................................... 3 2.2: Total Division of Urban and Rural Population in EAP, 1950-2050 ............................. 4 2.3: Urbanization in EAP according to Income Classification, 1960-2012 ....................... 5 2.4: Distribution of GNI per Capita by Urbanization Level in Selected EAP Countries, 2011 .......... 6 2.5: Distribution of Income Quintiles in Selected EAP Countries, 2005-09 ............ .......... 7 3.1: Property Development and Housing Affordability in Selected EAP Countries and Economies, 2013............................................................................ 12 Tables 2.1: Slum Populations in Selected EAP Countries, 2005 ....................................... 8 2.2: Urban Place Definitions in Selected EAP Countries ................9..... .............9 3.1: Urban Tenure in Selected EAP Countries, 2006-11 .............................. ..... 13 3.2: Characteristics of Homeowners in Principal Cities of Selected EAP Countries, 2000-11...............13 3.3: Characteristics of Renters in Principal Cities of Five Selected EAP Countries, 2000-11 . ........ 14 3.4: Median Urban Income and Median Urban Home Prices in Selected EAP Countries, 2008, 2011..... 15 3.5: Home Affordability in Selected EAP Cities, 2006............ .................. ..... 15 4.1: Summary of Key Affordable Housing Policies and Programs in EAP Countries ............... 18 4.2: Homeownership Assistance Programs in Selected EAP Economies ................. ...... 19 4.3: A Typology of Rental Tenure Forms ........................................ ..... 25 iv I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Acknowledgments This report was carried out by a team led by Meskerem initial findings were discussed at a Brown Bag Lunch or- Brhane (Senior Urban Specialist) and comprising David ganized by the Land Thematic Group, which also provid- Mason (Consultant, Housing Specialist and Urban Plan- ed valuable guidance. The report was also presented at ner), Geoff Payne (Consultant, Housing Specialist and the East Asia and Pacific Urban Communities of Prac- Urban Planner), and Paavo Monkkonen (Consultant, tice Meeting held in November 2013. Peer reviewers are Housing Finance Specialist). Huong Mai Nguyen pro- Bob Buckley (Senior Fellow, The New School), Peter Ellis vided research support. Geoff Payne prepared a series of (Lead Urban Economist, SASDU), and Ellen Hamilton background papers on the basis of existing studies and (Lead Urban Economist, UDRUR). available data and David Mason was responsible for syn- thesizing those studies. The work was carried out under the guidance of John Roome (Sector Director of Sustainable Development for This document has been enriched by advice from Abhas the East Asia and Pacific Region) and Abhas Kumar Jha Kumar Jha (Sector Manager of Transport, Urban and (Sector Manager of Transport, Urban and Disaster Risk Disaster Risk Management for the East Asia and Pacif- Management for the East Asia and Pacific Region). ic Region), Judy Baker (Urban Practice Leader, EASIN), Victor Vergara (Former Urban Practice Leader, EASIN), This study was financed by the East Asia and Pacific Aus- and Arish Dastur (Urban Specialist, EASIN). In addition, Aid Infrastructure for Growth Trust Fund. V  Abbreviations and Acronyms ACCA Asian Coalition Community Action GNI gross national income ACHR Asian Coalition for Housing Rights HDB Housing and Development Board BRIC Brazil, the Russian Federation, India, and HMF housing microfinance China HPF housing provident funds CODI Community Development Organization KIP Kampung Improvement Project Institute NESDB National Economic and Social COHRE Centre on Housing Rights and Evictions Development Board EAP East Asia and the Pacific PIR price-to-income ratio FLPP Liquidity of Housing Finance Facility PLCH Public Low Cost Housing GDP gross domestic product SHF Social Housing Foundation GIS geographic information systems Vil  Report Overview The East Asia and Pacific region (EAP) is among the world's nationally recognized affordability level of 30 percent. most rapidly urbanizing areas. The United Nations (UN) Governments have responded by promoting homeown- estimates that by 2015, more than 1.1 billion people in ership programs but these tend to exclude lower-income EAP will live in urban areas. Cities are also the key driv- households. Some countries have attempted limited ers of economic growth because they contain a large and public rental programs, but these too tend to favor mid- diverse labor force and provide production and distribu- dle-income households; and when they serve the poor, tion advantages to manufacturing and service industries. the units tend to be of substandard quality. Although the However, along with the economic dynamism that cities private rental sector provides a proportion of housing in provide, they can extend and reproduce existing income most countries, it invariably serves young professional or inequalities. Housing is the primary form of asset accu- expatriate households. The urban poor are therefore left mulation for the poor. Furthermore, its quality and lo- to seek housing in informal settlements. cation are closely linked to educational and employment opportunities as well as access to health and transpor- This report highlights several important issues necessary tation services. A comprehensive and inclusive housing for countries in the region to develop comprehensive and policy is hence a critical tool for promoting shared pros- inclusive housing policies. The issues include improving perity. It supports low-income workers' efforts to increase the recording and tracking of demand- and supply-side their assets and helps them access to opportunities that data on housing and land markets; reviewing regulatory can lift them out of poverty. and development standards for new and existing con- struction; considering an array of urban land acquisition With a few exceptions, much of the region faces a critical techniques in partnership with civil society groups; and challenge to improving housing affordability in its growing improving support for a diversity of tenure forms, espe- cities. As homeownership is more common in rural areas, cially by promoting various private and nonprofit rent- it likely disguises the distribution of tenure in growing al housing options as an alternative to homeownership. cities. As a result, homeownership across EAP is high- Housing policies in EAP should aim to lower rental hous- often more than 75 percent-compared to a world aver- ing expenditures to no more than a third of net house- age of around 68 percent and rates of below 60 percent in hold incomes. For those seeking homeownership, the the Republic of Korea and Japan, which are heavily ur- price-to-income ratio for ownership and rental housing banized. But the cost of homeownership in cities across options in urban areas should be reduced from current much of the region exceeds 50 to 60 percent of annual levels that exceed 7:1 to UN-recommended levels of be- household incomes, significantly higher than the inter- tween 3:1 and 5:1. X Governments, the private sector, and civil society organi- to investments in public transportation systems. Flexible zations can all help shape a comprehensive housing strate- and innovative development and land use regulations gy that can affordably meet the scale and nature of existing and administrative procedures that allow for density bonus and future demand. At the national level, governments can agreements or incentives for set-asides can enable the pri- create databases that track registration and transactions vate sector to improve housing affordability through mar- of land and real property. This would provide valuable in- ket mechanisms while also providing public benefits to formation on the nature of demand for different types of urban residents. Local governments can also partner with housing among different income groups. Policy makers civil society groups and private interests in negotiating would thus be able to better direct subsidies for affordable for land acquisition, developing affordable alternatives to units, and private and nonprofit groups would be given a traditional commercial mortgages, and reducing barriers better understanding of land and housing markets. Local to the provision of small-scale rental housing. Once these governments should review development standards to en- measures are put in place, the availability of affordable courage infill and mixed-use development and link them housing options in EAP cities is expected to improve. x I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Key Findings The East Asia and Pacific region (EAP) is rapidly urbaniz- the Lao People's Democratic Republic, the Philippines, ing and will soon have the largest total population of urban Cambodia, and Myanmar do not provide access to water dwellers in the world. The United Nations (UN) estimates for all residents. that more than 70 percent of the region's population will live in cities by 2040, up nearly 20 percent from the cur- Housing is a critical component of stable and equitable ur- rent total. This represents an average of 15.4 million new ban development because it is deeply linked to thefunction- urban residents per year through the middle of the cen- ing of other urban services. The location, cost, and qual- tury. The scale and speed of this transition presents a crit- ity of housing are closely related to urban poverty and ical challenge for policy makers. They need to ensure that quality of life. Development at the urban fringe has low urban growth includes diverse and appropriate housing initial costs, but may carry very high costs over the long options and proceeds in an economically and ecologically term. Fringe housing development places additional bur- sustainable manner. dens on transportation and public transit infrastructure; it increases congestion and costs people and businesses Cities attract private investment because of the locational time and money. Traffic congestion also contributes to and market advantages they afford firms. They also attract air pollution, which presents immediate public health rural migrants who seek better employment opportunities. risks. People who live in areas that are illegally sited and Across the region, per capita incomes are higher in coun- constructed are also at increased risk for natural disas- tries with a greater share of urban populations. However, ters such as floods, landslides, and earthquakes as well as while cities play a key role in national economic growth, infection from water-borne illnesses and parasites. These current patterns of urban growth also contribute to in- risks impose hidden costs on long-term investment in equality. Informal settlements develop in urban periph- transportation, infrastructure, and public health sectors. eries due to the scarcity of affordable housing options Fringe housing also reinforces deep inequalities among nearer to employment hubs in central city areas. Rural inhabitants of urban areas. migrants tend to have lower education and skill levels. In at least eight countries, the lowest income quintile has Nearly every EAP country promotes homeownership less than 10 percent of total income. Poor migrants will through consumer demand subsidies. Demand subsidies be unable to afford new housing without substantial gov- are an important means of improving access to housing ernment subsidies to reduce the price of renting or buy- finance and homeownership. However, policy makers ing property. Additionally, governments are struggling should be aware that the urban poor may remain ineli- to provide basic services to the urban poor. For example, gible due to a lack of required savings or income levels. cities in rapidly urbanizing countries such as Indonesia, These interventions are also not suitable for urban dwell- X I ers who wish to invest in their homes incrementally or land uses and integrate new development into existing who may prefer the flexibility and mobility offered by transportation and infrastructure networks can improve renting rather than owning a home. For these groups, the supply of housing and the quality of life of residents. supply interventions such as land readjustment, sites and More cost-effective ways to assemble urban land and pro- services, or slum upgrading may be more appropriate al- vide financing to upgrade informal settlements can also ternatives. Another alternative would be subsidies sup- improve housing quality and stabilize the housing supply. porting specific, in-kind home improvements, such as floors, roofs, or building materials for incremental con- The reportfinds that housing is comparatively more afford- struction.' These programs are comparatively less costly able in countries where property rights are protected and and risky for governments than subsidized credit because construction permitting is rapid. Property registration, am- they are targeted directly to those who may need assis- biguous or restrictive development rights, and construc- tance for home improvements, rather than those who tion permits add to the cost of housing production. Apart would consume housing for speculative reasons. from the Republic of Korea and Japan, which are compar- atively wealthier, more urbanized, and have a broader set of public and private housing finance support, housing SUMMARY OF KEY ISSUES AND in most of the region's growing cities is very expensive. SUGGESTIONS FOR ACTION Price-to-income ratios (PIR) depict the amount of in- Governments, private sector actors, and civil society groups come households spend on shelter costs. Affordability can play an important role in developing a comprehensive falls with range of 3:1 to 5:1, or about 25 to 30 percent of and inclusive housing sector. The section below reviews annual household income. Singapore, Japan, and Hong key issues related to affordable housing provision iden- Kong SAR, China, for example, have efficient property tified in the report and the potential roles of public and registry and permitting systems and also have compar- private stakeholders in improving access and affordabili- atively less-expensive housing. Home prices can exceed ty. A brief conclusion summarizes the expected outcomes this range by a factor of three or more, and are even high- of these initiatives. er in secondary cities with less diverse housing markets. Rental housing should hold a larger share of urban tenure Affordable Housing choices. Overall, data on home and rental prices is limit- Housing affordability is an important component of equi- ed and skewed toward luxury, expatriate, or foreign in- vestor market segments. Nonetheless, the proportion of prove data collection and dissemination in order for gov- tional urbawne stars sol atv lato 0pertorc motre.aTh ernments and private sector actors to better understand quoaltyan supplyrd of eaosin 3pecnt e imred bye demand for different types of housing in growing urban ar-p y eas. Low- and middle-income residents, who comprise the introducing reasonable lease contract protections and by majority of urban residents, have few options for financ- supporting petty or small-scale rentals and sublets. ing home purchases or affordable rental housing. Land Prospective and innovative urban planning and housing use regulations that support a diversity of housing and finance tools can improve affordable housing options for the low- and moderate-income urban majority. Access 1. For floors, see for example Mexicos Piso Firme program; for roofs, to secure housing and tenure options can be improved see the the activities of the international nongovernmental organiza- through well-designed, local-level regulatory institutions tion (NGO) Un Techo Para Mi Pais and Peru's Programa Techo ProAao; and for subsidized building materials, see Mexicos Patrimonro Hoy for land use and development; clearly targeted subsidy program, operated through the materials company CEMEX. programs; and government collaboration with lenders, xii I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC developers, and civil society groups. Affordable housing tance to the construction sector. Speculative land develop- in turn reduces concentrated poverty, tenure insecurity, ment can diminish the supply of available land and skew and public exposure to diseases and natural hazards. Ur- investment in housing and commercial development to- ban centers that support and integrate a diversity of uses, ward the high end of the market. Most EAP countries re- transportation modes, and income groups can also sus- strict foreign ownership of property for this reason. Oth- tain economic growth, promote efficient public service er interventions such as taxes on unimproved land, stamp delivery and energy usage, and help to protect air and fees, and certain restrictions on mortgage eligibility can water quality. reduce speculation by raising holding costs and lowering the expected return on sales transactions. This can lower the price of vacant property and invite housing develop- Housing Finance ment that caters to a broader market. National govern- Acros EP, ommecia motgags ae asmal potio Of ments can also offer subsidies or tax credits to reduce Across EAP, commercial mortgages are a small portion the cost of construction finance. Local governments and housing finance. Commercial mortgages have income and down payment requirements and repayment terms that chambers of commerce can help the construction sector are too onerous for the urban poor. The ratio of mort- cultivate local labor sources, building materials suppliers, gage debt to GDP across the region is less than half that and manufacturers. of Western Europe, which averages over 50 percent. By Provincial and national housing agencies can also consider contrast, Indonesia, the Philippines, and Vietnam have ratios of less than 10 percent, despite their large popula- prteringmwit-civilsocietagroup htoesuportiofunder tions and growing economies. Access to formal credit is low; across EAP only 39 percent of the poorest 40 percent settlement upgrading programs. The Philippines' Com- of the population have an account with a financial insti- munity Mortgage Program extends mortgages to poor tution. households through partnerships with representative community groups that collected pooled savings from National governments have several options to develop residents, held property titles, and screened borrowers. sources of consumer housing finance. National govern- On a smaller scale, Thailand's Baan Mankong slum up- ments or housing banks can also design targeted mort- grading program, an extension of the work by the Asian gage subsidies in the form of down payment assistance Coalition for Housing Rights (ACHR), links civil society (rather than mortgage interest rate subsidies) to lower the groups with the local office of a special federal agency cost of borrowing from private lenders. However, subsi- that evaluates and monitors plans and provides subsi- dies should carefully target groups that are underserved dized finance. The key benefits of this approach include by private lending markets and should include mecha- access to alternative financing sources, a lower per-unit nisms to verify eligibility through an income or savings cost for housing unit upgrading than direct provision of requirement. National housing provident funds, which public housing, and a diminished threat of displacement draw from contributions of public and or formal sector (World Bank 2013a). workers, can be used to fund specialized housing finance products. Weakly designed provident funds can be sub- Commercial and nonprofit microfinance lenders can ex- ject to political capture, poor payment collection, and periment with housing microfinance products to support corruption. These failures reduce the solvency of lending common types of incremental housing investment in poor institutions. neighborhoods to the mutual benefit of owners and renters. Conventional mortgages feature terms and ticket sizes National governments can also set regulations to discour- that are incompatible with incremental housing invest- age speculative investment and allocate funding and assis- ment. Loans of smaller sizes and shorter terms, coupled KEY FINDINGS I XIII with technical assistance, subsidized construction mate- rental market data, housing developers can better assess rials, or even in-kind loans of building materials can pro- the demand for new rental housing or the feasibility of mote housing improvement among the poor. rental conversions. National governments can offer tax exemptions or soft loans to developers that construct af- fordable rental units. Governments can also provide as- Support for Rental Housing sistance to renters through portable voucher programs Formal rental housing is comparatively uncommon in EAPwould but should be considered s compative allow renters to find housing in locations that suit their to ownership in urban areas. Across the region, govern- ner-ocupierhent ros or ancryunits ments tend to support and promote homeownership as a preferred tenure form. It is also much more common Local social support agencies, in partnership with civil so- in rural areas, where nearly all residents own their home. Benefits of homeownership include the housing itself, cetanlgladocyrup,suddafrgltis Beneitsof omewneshi incudethehouingitslf, clarifying and regulating tenant and landlord contracts. As which functions as a large and transferable asset, and ad- the majority of urban renters are poor and their contracts ditional neighborhood social stability and incentives for are informal or cash arrangements, landlords have wide future investment. However, the housing needs of urban latitude to discriminate or unfairly evict tenants. Regu- populations are diverse. Renting can be appropriate for lations should provide basic protections to tenants and those who cannot afford or are not interested in long- landlords for short- and long-term rental agreements and term finance for housing such as young professionals, students, and elderly, retired, or disabled people. Rent controls, in the form of price ceilings, carry the benefit of a short-term supply of affordable units, but over time reduce investment in new and existing rental housing stock. Renting provides tenants the flexibility to adjust Land use plans and regulations aim to promote orderly ur- to employment and income changes and requires little ban development, but they can also impose high costs on or no savings. The provision of rental housing is also an new development if they impose standards that are over- important supplementary income source for homeown- ly restrictive, or if required approvals are uncertain and ers, enabling housing to fulfill its developmental role at time-intensive. Such costs and development restrictions no public cost. on urban land encourage development in fringe areas that may be far from established employment and commercial Apart from public housing, much of the urban rental mar- centers. Informal and illegal settlements may develop on ket is likely informal and not well understood. Except for vacant land in fringe areas with low market value, but the high-end apartments, the majority of rentals in urban ar- settlements may nevertheless present large burdens to eas are obtained informally. Rentals can range from spare local public service providers. New development that is rooms, accessory dwelling units, and work dormitories to dense, features a mix of residential and commercial uses, large publicly or privately owned buildings with dozens and has proximity to public transportation concentrates or hundreds of units. Landlords who are owner-occupiers economic activity and reduces reliance on automobiles. have vested interests in maintaining the quality of the rooms or units they lease and deserve policy support. Local governments can review zoning and development standards that regulate new and existing development and Local governments should draft land use and occupancy identify barriers to upgrading existing housing or building regulations that support rental housing investment, es- new stock. International experience shows that govern- pecially petty or owner-occupied rentals. With adequate ments have a number of tools to promote infill develop- xiv I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC ment and promote housing affordability through flexible Land readjustment and pooling schemes have been used and coordinated land use policies. For example, these for decades in Japan and Korea to consolidate irregular tools can include development agreements, transfers of parcels and extend services into informal or squatter set- development rights, special assessment districts, densi- tlements. Under these strategies, the local government ty bonuses, mixed-use development, and cross-subsidy purchases occupied land or negotiates with a landowner schemes. Planning authorities should also review and for purchase and the right to subdivide the property. The consider clarifying and streamlining approval and per- government subdivides the land and extends infrastruc- mitting procedures and publicize amendments to land ture coverage street access to the parcels. Residents are use and master plans. Local governments should also assigned a parcel based on the size of the previous plot consider areas where technical assistance and training they held and benefit from the increased value of their may strengthen the administration of land use and zon- improved property. ing regulations. Local governments can take the lead in creating supporting Local planning authorities should develop zoning and land regulation and initiating land readjustment and pooling use regulations that encourage infill development, density, projects. With the support of specialized public agencies residential diversity and a plurality of uses. Land use plans or councils as mediators, civil society groups can orga- should promote density and should align with current and nize and represent residents in negotiations with proper- future public transportation networks. Segregated land ty owners. These agencies can also help informal settlers uses and sprawling development contribute to congestion find suitable land to purchase, assist in brokering trans- and require costly investment in additional roads, which fers, and provide mapping and subdivision assistance. over time, actually induces more congestion. New develop- With national government funding, local or provincial ments should allow for integrated commercial, office, and governments can develop policy support for land bank- residential uses. Designs should also accommodate home- ing. Land banking allows local governments to assemble based enterprises, which are a common income gener- seized vacant or damaged real property for consolidated ator in informal settlements. Similarly, inclusive zoning, sale to private or nonprofit developers at below-market cross-subsidy developments, and set-asides for affordable rates, reducing the cost and risks for investment where units also reduce the concentration of poverty and like- construction finance may be scarce. lihood of social unrest by allowing more equitable access to public services and employment centers. Data Collection and Dissemination Land Assembly phere is limited data to adequately assess demandfor af- fordable housing options or the extent and nature offormal Land assembly is often one of the most expensive and dffi- and informal housing markets. An important finding of cult steps in urban infill development. Fragmented, absen- this report is the lack of adequate demand data segment- tee, or disputed ownership claims can delay or discourage ed by income and demographics. Indeed, in most EAP consolidation and subdivision of vacant land for housing countries, it is difficult to establish the median income or commercial uses. Informal settlements grow incre- and the relative number of households within each in- mentally and the marginal cost to extend sewage, water, come quintile. Consumer preferences for tenure, type and electricity infrastructure to these areas can become of housing, and location are also not available. On the very high. Furthermore, evicting residents and razing supply side, there is limited information on the number, squatter settlements is politically contentious, expensive, location, pricing, and type of either new or existing hous- and does not solve underlying housing affordability prob- ing units or their condition. These data are extremely lems that contribute to informal settlement growth. useful for several reasons. First, they can help national KEY FINDINGS I XV governments understand gaps in housing affordability prices and building, finance, and permitting costs. Local and can enable them to more efficiently create and tar- governments can track and report the issuance of new get demand-based subsidies such as vouchers or mort- housing permits. These data can help to illuminate the gage assistance. These data can also help policy makers role of the housing sector in the national economy and better understand how changes in the supply of housing allow central banks to better coordinate broader mone- or availability of housing finance can change prices and tary policy goals. consumption patterns. Second, developers can gain a better understanding of urban housing market dynam- Local and national governments involved in land use and ics and reduce redundancy or inappropriate investment master planning should publish and disseminate plans, un- in housing stock for different market segments. Third, derlying data, and assumptions to developers, real estate civil society groups and housing advocates can make groups, and civil society organizations to improve trans- use of such data to illuminate affordable alternatives to parency and accountability National governments can homeownership, such as renting or shared/cooperative also improve the collection, recording, and availability housing. of property registration and ownership data. Such data is important for establishing ownership claims, streamlin- National governments can create housing market observa- ing property sales and transfers, and finally for accessing tories through regular censuses and through more frequent commercial mortgage finance by providing the basis for specialized surveys. Universities, developer and real estate collateral. In short, these data can improve the function- groups, and market research firms can also track sales ing of local property and housing markets. xvi I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Chapter 1 Introduction Across the world, the housing sector plays a key role in local This report surveys current policy interventions designed and national economies, and expanding access to housing to encourage affordable housing in EAR The report is a can encourage more equitably shared economic growth. synthesis of English-language desk reports and studies. The production and consumption of housing brings pos- It also makes use of existing databases that track urban itive externalities to both cities and countries. Housing population changes, income, tenure choices, and housing policy that considers a diversity of groups and tenure prices, where available. In addition, it reveals that basic forms can improve education, crime, public health, and available data on supply and demand are scarce, especial- employment outcomes in urban areas. The lack of qual- ly in informal and low-income housing markets. There is ity, low-cost housing options typically excludes the poor ample need for future research to provide additional es- from stable tenure and adequate public service access, timates of the tenure prevalence, land and property own- which exacerbates and extends cycles of poverty. Housing ership costs, and the quality of available housing stocks. must be considered an investment that is complementary This report follows the World Bank's geographic defini- and interdependent with the use and delivery of urban tion of East Asia and the Pacific (EAP), which includes services such as transportation, infrastructure, educa- 25 countries: Cambodia, China, Fiji, Indonesia, Japan; tion, and healthcare. Hong Kong SAR, China; Kiribati, the Republic of Korea, the Lao People's Democratic Republic, Malaysia, Myan- There has been a renewed interest for subsidized housing in- mar, the Marshall Islands, Micronesia, Mongolia, Palau, terventions in BRIC' countries. These and other countries Papua New Guinea, the Philippines, Samoa, Singapore, have experienced rapid economic and urban growth. In the Solomon Islands, Thailand, Timor-Leste, Tonga, Van- the East Asia and Pacific region (EAP), several countries uatu, and Vietnam. have expressed interest in seeking the Bank's support in direction and policies for urban affordable housing pro- The purpose of this report is to provide a general overview vision. This report documents existing policies and pro- of the recent trends in urbanization and development in vides critiques and recommendations based on current EAP and to consider differentforms of government, mar- demographic, economic, and housing affordability con- ket, and nonprofit actions that support housing affordabil- ditions in the region. ity. It will also highlight key constraints and barriers that restrict the provision of low-cost housing in urban areas. 1. This term refers to large middle-income countries, specifically Bra- Housing is important because it represents a significant zil, the Russian Federation, India, and China, household expenditure. Moreover, the quality and prox- avial1aao upyaddmn r cre seil imity of housing to schools, jobs, and public services have tions have facilitated access to finance for residents in an important role in determining the future health and informal settlements and help them secure tenure rights economic prospects of urban residents. The United Na- and upgrades. Overall, this report relies on a supply-side tions (UN) defines housing as affordable provided that it perspective, due to the lack of data on housing demand "is adequate in quality and location and does not cost so across EAP More information is needed to illuminate much that it prohibits its occupants meeting other basic the quality and costs of different urban housing options, living costs or threatens their enjoyment of basic human and better descriptions are needed of the likely residents. rights" (UN-Habitat 201 la: 10). Data should better describe the contours of local housing markets, including the income distribution of urban pop- Housing policies have a direct impact on the form and ulations and variations in housing prices and rent rates economy of cities. As such, housing should be consid- over time and across local urban markets. ered alongside urban energy, transportation, and infra- structure programming. Planning that promotes density, This report offers broad conclusions that account for the mixed uses, and infill development in central city areas broad social, political, and institutional variation among may have high initial costs, but benefits accrue steadily EAP countries; as such, these conclusions may well be ap- over a longer time period. These benefits include a more plicable to more than one country context. The report also cost-effective provision and maintenance of infrastruc- provides specific recommendations for improvement ture and public transportation, as well as support for eco- where existing interventions are new or have proven less nomic growth through the close proximity of mixed uses successful. This general overview of regional trends will and a large, diverse labor force. On the other hand, devel- help EAP countries compare existing practices with other opment of urban fringes presents a low initial cost, but countries in order to better identify policy priorities and lower density and segmented land uses promote long- available options for addressing them. World Bank teams term cost burdens for cities. Fringe development contrib- can also use the report in country-level engagements to utes to increased traffic and diminished mobility, which introduce or deepen policy discussions on urbanization slows economic growth, and also contributes to regional and housing affordability. air pollution, representing a higher public health cost. Furthermore, there is a greater marginal cost for govern- The report is divided into four additional chapters. Chap- ments to extend and maintain public transportation, in- ter 2 examines trends in urbanization rates, economic frastructure, and public service coverage to more sparsely development, and inequality in order to introduce the populated areas. need for high-quality, low-cost housing options. Chapter 3 examines EAP regional trends in urban housing afford- The report assesses the strengths and limitations of afford- ability for owners and renters from select cities. Chapter able housing strategies used by different countries through- 4 outlines future directions for affordable housing pro- out EAR Although homeownership is the dominant poli- vision based on a comparative consideration of interna- cy preference in the region, rental housing offers distinct tional best practices. Finally, Chapter 5 surveys different advantages and should be considered as an important affordable housing policies currently in place in EAP and alternative option. To this end, civil society organiza- summarizes their strengths and weaknesses. 2 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Chapter 2 Context of Urbanization in EAP Consistent with a global trend, the population of countries than 1.5 billion by 2050; an annual average growth of 15.4 in the East Asia and Pacific region (EAP) is approaching million people per year. EAP's overall rate of urbanization an urban majority. Figure 2.1 shows the total urban pop- is also comparable with the rapid urban growth in the rest ulation of EAP relative to other world regions since 2005. of Asia and Africa. By contrast, Europe and Latin Ameri- EAP currently has more than 944 million people living in ca, which have higher overall per capita GDP and greater urban areas, more than anywhere else on earth. The Unit- urban-dwelling shares of their total populations, show a ed Nations (UN) estimates this figure will reach more leveling in urban population growth rates. Figure 2.1: Population in Urbanized Areas by Region, 2005-15 1,200- 1,000- 2005 -0 5 800- 02010 0 600- 2015 .0 400- 0. 0 East and South and Africa Europe Latin Oceania Southeast Asia West Asia America and Region the Caribbean Source: UN World Urbanization Prospects, 2009 Database. Note: EAP corresponds closely to "East and SE Asia." It includes Japan, but excludes Fiji, Kiribati, the Marshall Islands, Micronesia, Palau, Samoa, Tonga, and the Solomon Islands, which are included in Oceania. 3 The rate of urbanization in EAP is higher than at any time are the most heavily urbanized; but they also have natu- since the 1950s. At that time, the region was decidedly ral growth constraints or rely on an urbanization mea- rural; the urban population share was only 12 percent sure that includes a single island or principal settlement. in 1950 and only passed 20 percent in 1980. Figure 2.2 Nonetheless, nearly every country has a greater percent- shows that the rate of rural-to-urban migration increased age of population in urban areas than just 20 years before. around 1990 and is expected to continue through the middle of this century. In the 45 years from 1950 to 1995, Urbanization varies in scale across the region, though most urban growth every five years averaged 2.2 percent. Be- countries have had substantial absolute growth in urban ginning in 2000, urban growth doubled and is expected populations in recentyears. Between 2000 and 2010, Chi- to continue to average around 5 percent through 2050 na led absolute urban growth, adding 204 million urban (UN 2011a). Since 2000, urban population levels across residents, or nearly the entire population of Indonesia. EAP countries have converged and by 2050 more than 70 According to UN projections, the country will top 1 bil- percent of EAP's population will live in urban areas. lion urban residents by 2050 (UN 2011). Over the same period, Indonesia added 30 million urban residents, the Some EAP countries and economies are more urban than Philippines 8 million, and Vietnam 7 million. Urban others, but the trend toward urbanization is ubiquitous. As growth has also occurred in less populous countries. shown in figure 2.3, the proportion of EAP population living Cities in the Lao People's Democratic Republic added in cities has been steadily increasing, with rates of urban- approximately 900,000 people between 2000 and 2010, ization increasing in Indonesia, Cambodia, Malaysia, the effectively doubling the country's urban population. The Philippines, and China during the 1990s. Different urban- population of Timor-Leste's urban areas (living princi- ization rates are due in part to the inconsistent definitions pally in the capital Dili) increased by more than 50 per- of urbanization utilized across the region. For instance, cent, from 201,000 to 314,000 over the decade. The UN Hong Kong SAR, China, Palau, and the Marshall Islands expects the Timor-Leste to have an additional 1 million Figure 2.2: Total Division of Urban and Rural Population in EAP, 1950-2050 100- 90- 80- 70- 60d n aRural S50- -Urbanr n 40- 30- 20- 10- 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Year Source: United Nations 2012. 4 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Figure 2.3: Urbanization in EAP according to Income Classification, 1960-2012 Urban population (% of total) in Urban population (% of total) in high-income countries and economies IBRD countries 100- 60- 80_ 50- 40- 2 60- ov 30- 2 40- 20 - 20 - 10- 0 - 0 1960 1980 2000 2012 1960 1980 2000 2012 Year Year - Hong Kong SAR, China - Malaysia - China - Indonesia - Japan Thailand - Philippines - Vietnam -Korea, Rep. Urban population (% of total) in Urban population (% of total) in IDA/IDA-blend countries small island countries 80- 100- 70- 60_ 80- 50- 60- 40- O.30- 0- 40- 20- 0 104 0 0 1960 1980 2000 2012 1960 1980 2000 2012 Year Year - Mongolia - Myanmar - Kiribati - Marshall Islands - Lao PDR - Cambodia - Solomon Islands - Vanuatu Palau - Timor-Leste Tonga Source: World Bank staff calculations based on data drawn from http://databank.worldbank.org/. urban dwellers by 2050 (UN 2011). Given the differenc- urban growth, managing growing informal settlements, es in the capacities and resources available to central and financing infrastructure and service provision, as well local governments in these countries, urban growth will as identifying and targeting beneficiaries for subsidized present a range of challenges for adequate housing pro- loans, rental vouchers, or other affordable housing inter- vision. These challenges include planning and directing ventions. CHAPTER 2: CONTEXT OF URBANIZATION IN EAP I 5 2.1 URBANIZATION AND Urban areas attract migrants because they are increasing- WEALTH DISTRIBUTION ly the principal drivers of national economic growth and Over the last decade, EAP has enjoyed robust and sustained spelizon oincie wi naes ofianian. economic growth. Urban residents are on average wealth- Freale,expot-oientedmanuacturnpations ier than their rural counterparts. Cities are key drivers m akeluse portain infacture, specalized of national economic growth because they encourage ag- training tanpdu ation isrndudivesea zmr glomeration economies of production and consumption. kets. Major cities such as Hong Kong SAR, China, Seoul, For rural migrants, cities offer a diversity of employment Singapore, and Shanghai are hubs for financial services opportunities, both formal and informal, and improved and banking, and increasingly are centers for research, coverage of basic infrastructure and services. Cities also development, and technology sectors (UN-Habitat 2012). allow firms access to a diverse labor market, proximity to For example, the Bangkok metropolitan area alone creat- complementary suppliers and distributors, and a concen- ed just under half of the entire GDP of Thailand in 2012 tration of wealth to consume goods and services. In EAP, (NESDB 2012). Urban areas of the Philippines accounted the growth in urban populations has also largely coin- for 80 percent of the country's economic growth (World cided with an overall reduction in poverty levels (World Bank 2005). The diversity of employment opportunities Bank 2013b). Figure 2.4 shows EAP urbanization rates and the availability of urban amenities encourage migra- and per-capita gross national income (GNI) and suggests tion from poorer rural areas. that they are intertwined. As more of the region's popula- tion moves to urban areas, overall income levels will con- Despite rising incomes, urbanization is also linked to in- tinue to rise, consistent with a global correlation between equality. The economic growth of urban areas is not levels of urbanization and economic development, distributed equally (World Bank 2009). Poor urban res- Figure 2.4: Distribution of GNI per Capita by Urbanization Level in Selected EAP Countries, 2011 100- 90- 80 -Palau >i 7 Philippines 0 n50r Indonesiaa kets.at MCiajo iissc sHn ogSR hn,Sol ~40- Land sg rnPacific island small states tThailand 30- Vietnam"nu# Timor-Leste ,#Cambod* Tonga t *7amoa 20- Micronesia, Fed. Sts. deelpmntomdoehnloy ecorsUNHaittd01) 10 example the B Papua New Guinea 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 GNi per capita Source: World Bank staft calculations based on data drawn from http://databank.worldbank.org/. 6 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Figure 2.5: Distribution of Income Quintiles in Selected EAP Countries, 2005-09 70- 60- a) E 50- 0 U .S 0 Highest m 40- income quintile o 30- ) IS Lowest . 20 -income quintile 10- 0- E _a) _0 - ~ a) 0 - U C CL 0 0 1F- U E ' Country Source: World Bank, World Development Indicators. Note: Data are from 2005 for China and Indonesia, 2006 for Vietnam, 2007 for Cambodia and Timor-Leste, and 2009 for the others. idents may have comparatively higher incomes than peo- groups are priced out of formal land markets and unable ple in rural areas, but they also have higher costs of living to afford collateral-based loans or mortgages. As a result, and face larger and more competitive labor markets. As informal settlements and slums emerge where residents shown in figure 2.5, the wealthiest population quintiles do not have land title and are unable to pay for infrastruc- hold nearly half of the wealth in select EAP countries. ture coverage or public safety services. The unequal access to land and property ownership plac- 2.2 INEQUALITY, HOUSING es informal settlers at riskfor eviction. The region's urban AFFORDABILITY, AND poor are also more likely to be forcibly evicted or invited URBAN SERVICES to resettle. In Cambodia, for example, where land records were destroyed by the Khmer Rouge regime, 10 percent Such extreme inequality has particular consequences for of the population of the capital city of Phnom Penh was urban residents. Urban land and locational amenities are forcibly evicted or invited to resettle beginning in 2001 finite, immobile, and exclusive. The wealthy are able to (Amnesty International 2012). The UN estimates some own and acquire premier land and properties proximate 1.5 million Beijing residents were moved over the course to employment centers, schools, and transportation net- of eight years in order to accommodate construction for works. They are also able to pay for public service cov- the 2008 Olympic Games (UN-Habitat 2011a: 23). In erage for their own neighborhoods, but less inclined to 2008, more than 14,000 families were evicted from camps subsidize these services in poorer areas. Low-income alongside a toll road in Jakarta (COHRE 2009: 83). In CHAPTER 2: CONTEXT OF URBANIZATION IN EAP 1 7 Pacific island states, where the majority of land is held Table 2.1: Slum Populations in Selected EAP through customary systems, efforts to evict informal set- Countries, 2005 tlers aggravate long-standing tribal disputes over land (Larden and Sullivan 2008). Urban population Country in slums (%) The scale and rate of urban growth presents tremendous challenges for the provision of quality affordable housing Indonesia options. Urban growth has outpaced the ability of city and regional governments to direct and regulate new housing development and extend infrastructure to newly settled areas. Informal settlements and slums concentrate on the Myanmar 45.6 urban fringe with residents who can face eviction because they lack land tenure security. Newly built structures do not meet building and safety standards and unplanned Thailand 26.0 roads and footpaths inhibit circulation and access for emergency and public safety services. Service provision also struggles to keep pace with urban growth. More than Source: UN Department of Economic and Social Affairs, Popu- 10 percent of urban residents in Indonesia, Lao PDR, and lation Division (2008). Cambodia had no access to water in 2008. Myanmar and Note: The UN definition of slum is broader, and includes a Lao PDR actually had five percent less coverage in 2012 threshold of three or more occupants per room, as well as a scale of shelter deprivation (UN-Habitat 2011 a). As a result, (75 percent) than in 2000 (UN-Habitat 2012: 7). these estimates may overstate the incidence of slums charac- terized by tenure and infrastructure deficiency. For example, Many urban residents live in slums. Slums are character- the prevalence of slums the UN identifies in China may be izedby lac ofaccss t waer nd snittio faclites, due to a difference in the definition of urban residency (see ized by a lack of access to water and sanitation facilities,2006a). disputed or ambiguous land tenure claims, and imperma- nent structures (Gulyani and Talukdar 2008). As shown in table 2.1, slums house between one quarter to over half world. A number of different measures are used in EAP of urban residents in some EAP countries. Across South- countries, which present challenges for comparing trends east Asia as a whole, approximately one in three urban across countries and aligning policy interventions. First, residents lives in a slum (UN-Habitat 2011a: vii). Since EAP countries reflect a wide variety of linguistic, institu- the 1970s, there has been an increased focus among pol- tional, and economic variation. For example, Mongolia icy makers and practitioners on upgrading and improv- and Lao PDR are landlocked countries, while island na- ing slums, rather than evicting residents and razing them tions such as Fiji and the Solomon Islands are thousands (Abrams 1964; Turner and Fichter 1972). Slum upgrading of kilometers from mainland Asia. Definitions of urban schemes in Indonesia, the Philippines, and Thailand rep- areas may rest on political or administrative jurisdic- resent some of the world's most sophisticated and com- tions, population densities, coverage of municipal services prehensive approaches to improving tenure security and or infrastructure, or labor market conditions, among other municipal service coverage with limited displacement of markers. The next section examines the difficulties in defin- residents (Buckley and Kalarickal 2006). ing urban places and tracks trends and predicted urbaniza- tion patterns across the region. The analysis suggests that Despite a global trend toward urbanization, urban places while cities play an important role in economic growth, the themselves are defined and measured differently across the benefits are not distributed evenly among urban residents. 8 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC 2.3 COMPARATIVE DEFINITIONS bodia and Vietnam rely on place population thresholds. OF URBAN PLACES Cambodia requires that places meet either a population or a density threshold or that male participation in agri- Urban places are defined differently across the region. As culture falls below 50 percent. Island states such as Tonga table 2.2 shows, these definitions are often at least partly and Samoa count one city as the urban area, while others tied to administrative districts, as in China or the Phil- such as the Marshall Islands, Kiribati, and Palau restrict ippines. They are also used exclusively, as in Mongolia, urban areas only to specific islands. By contrast, Myan- Indonesia, and Thailand. Other countries such as Cam- mar has no formally defined urban areas. Table 2.2: Urban Place Definitions in Selected EAP Countries Country (year of Population Access to definition) Administrative Population density services Economy China (2000) Located within City City Districts Includes villages District, and or has a with mean or towns that "contiguous built-up density of receive services area," local govemnment, 1,500/sq km from urban street, or Resident municipalities Committee Mongolia (2010) Capital and district centers Cambodia (2005) Communes that meet at Commune Greater than Less than 50 east one of the criteria population 200/sq km percent of male isted to the right. exceeds 2,000 labor force engaged in Indonesia (2010) Municipalities (kotamnadya) and regency capitals (kabupaten) Philippines (2000) Administrative centers with Barrios of at least Cities and at ceast 2,500 residents 2,000 residents municipalities and barrios with with at least at ast 1,000 that 1,000/sq km C Pe contlUuous to an administrative center Thailand (1999) Municipalities Includes classification of sanitary districts Vietnam (2009) Places with at least 4,000 residents Fiji (2007) Places with at least 1,000 residents Source: United Nations 2012. Note: The most recent definition provided by the statistical agency is in parentheses. sq km = square kilometers. CHAPTER 2: CONTEXT OF URBANIZATION IN EAP I 9 One of the weaknesses of this conceptual variation is the places. Under this approach, an index is constructed by difficulty of comparing urbanized places across these coun- using census and geographic information systems (GIS) tries. A place with 4,000 people or more is defined as ur- data to set thresholds of population, density, and the trav- ban in Vietnam, whereas Fiji classifies places that have el time to the center of a large city (Uchida and Nelson one quarter as many people in the same way. Urban places 2008). The main assumption is that population density in the Philippines must have at least five times the popu- increases and travel times decrease the closer a given area lation density as their counterparts in Cambodia. Second, is to the city center. The advantage of the index is that there is little or no reliance on a city's physical size or foot- it more accurately reflects the general characteristics of print: "urban" administrative and political jurisdictions urban forms, independent of arbitrary administrative or may vary widely in area and in frequency within a coun- political boundaries and designations of urban places. try. Indonesia, for example, classifies both municipalities This allows for more accurate comparisons of urbaniza- and regional capitals as urban, even though the country tion rates both within and between countries. has four times more of the former than of the latter. This uneven characterization of urban regions presents diffi- culties for collecting accurate data and making valid in- 2.4 CONCLUSION terpretations about existing housing stock, the demand The EAP's urban transformation will be substantial in ab- and supply metrics for different housing forms, and the solute terms and is expected to continue apace. This transi- extent of infrastructure and public service coverage. tion presents an enormous challenge for the provision of quality affordable housing in growing cities throughout Official urban designations influence public investment the region. While strong economic growth has coincided decisions and have important consequences for housing with urbanization, it has also sustained deep wealth in- markets. In China, growing urban areas can surround or equalities in urban areas (World Bank 2009). The urban abut formerly rural villages. Land use controls in these poor have few housing options as they typically cannot designated "urban villages" allow local farmers wide lati- afford to purchase land, obtain a commercial mortgage, tude to develop farmland to build housing for new urban or afford commercial rents in the formal market. As a re- migrants from rural areas, often with poor site planning and sult, slums and informal settlements proliferate on public construction standards (Zhang et al. 2003). City govern- and private lands around cities and pose safety and public ments have limited resources to purchase the land of these health risks to residents. Appropriate land use and plan- urban villagers or pay for their relocation; and when farm- ning measures can encourage the development of denser, ers are relocated, their residency status precludes them from more compact cities with multiple housing options and obtaining housing apart from in other urban villages around promote efficient and sustainable investment in trans- the city. This cycle encourages residential segregation and portation and infrastructure. The next chapter provides concentrated poverty in growing Chinese cities (Song 2011). an overview of regional trends in affordable housing. It also identifies the existing policy tools to address housing Recent work has focused on developing an index of urban needs and the barriers that constrain their wider adop- agglomeration as a more universal definition of urban tion and use. 10 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Chapter 3 Regional Trends on Urban Housing Affordability The most common measurement of housing affordability liabilities, configurations of property rights, and building is the proportion of household income spent on housing and construction standards that control future renova- consumption in a given period. The price-to-income ratio tion or modifications. Capital costs may vary according (PIR) is used to assess the affordability of homeownership to location, unit age and quality, availability of loan or by comparing median home prices to median household mortgage products, and the relative quantity and demand incomes in a given area. The United Nations (UN) con- preference for alternative tenure forms such as renting. siders a PIR of between 3 to 5 as an appropriate range for Occupancy costs are also influenced by access to transit affordable homeownership (UN-Habitat 2002). A more and the price and quality of infrastructure service. Defi- general indicator, the residual income assessment, cata- nitions of affordability must consider the variation of logs the proportion of total household income spent on both of these types of costs in order to reach low-income housing expenditures, of which affordability is typically populations. expressed between 25 and 30 percent (Dowall et al. 2013). Finally, it is also important to consider a number of an- Affordable housing strategies in EAP countries typically cillary costs that are at least partly mediated by housing fall into one of two categories: mortgage subsidiesfor home choice and housing costs. These include transportation to purchase and subsidized public rentals. Homeownership work, school, or markets, as well as unit repair and main- is widespread, and governments offer assistance with the tenance costs, property taxes, insurance, and utilities. The mortgage borrowing or land and title acquisition. Na- demand for more affordable housing options is only like- tional provident funds, such as those in China, Indone- ly to increase in the East Asia and Pacific region (EAP). sia, the Philippines, and Singapore, rely on contributions The UN predicts that by 2025, cities in the region will be of formal or public sector workers to finance subsidized home to at least 360 million more residents (UN 2012). mortgages. Public rental housing is found in eight coun- tries, though this comprises a small portion of available Housing affordability is determined by three principal cost housing options. Social housing resembles public hous- considerations. These include the capital cost of purchas- ing in that its cost is subsidized and it is targeted to cer- ing a plot and completed dwelling unit, the price and tam income groups or workers (such as civil servants) but availability of finance, and the ongoing costs of occupying it can also include owner-occupied units. For example, it (Struyk 1988). Depending on the tenure arrangement, China and Vietnam have moved toward privatizing so- these costs may be borne by landlords, owner-occupiers, cial rental housing for civil servants and workers in state- renters, or a combination of each. The recurring costs owned enterprises by transferring ownership and sales include transportation expenditures, utility user fees, tax rights to tenants. 11 Despite their prevalence, these policies are incomplete and litical interference. Governments, private developers, and at times inappropriate under current market and institu- nongovernmental organizations all have distinct roles in tional conditions. Homeownership is common through- improving the overall quality and supply of urban hous- out the region and provides households with secure ing stocks. The rapid urbanization of EAP has put new tenure, increased equity, and access to credit. However, pressures on these actors to expand the creation and pro- the benefits of mortgage subsidies in the region tend to vision of affordable housing interventions. Broadly, the accrue to formal sector and upper-income workers. Pub- main challenges are the uneven distribution and claims of lic rentals and social housing represent subsidies that are land ownership, housing and mortgage finance systems misdirected to residents who could afford other options that do not cater to low-income groups, the lack of com- and as such reinforce, rather than reduce, wealth inequal- prehensive housing and land-use planning institutions, ity. The direct provision of public rental units carries two and policy preferences for homeownership over other immediate risks. First, these developments typically do forms of tenure. These market distortions are also reflect- not respond to local market demands for price, location, ed in the prices of available housing options. Many urban amenities, and employment opportunities. Second, inter- newcomers find themselves priced out of ownership and national experience has suggested that over time, rental rental options and private or nonprofit developers make housing tends to suffer from lack of maintenance and up- up a small, but growing, segment of providers. keep of common areas, especially when these buildings are privatized. This deters investment and reduces hous- Housing tends to be less affordable where property registra- ing stock quality (Peppercorn and Taffin 2013). tion and construction permitting is costly and slow. Figure 3.1 details the PIR of homeownership from selected EAP There are many barriers that limit housing affordability. countries and economies in comparison to the most recent These include market distortions, restrictive regulatory assessment of ease of property registration and construc- environments, inadequate financial instruments, and po- tion permit approvals. Even in high-income urban areas Figure 3.1: Property Development and Housing Affordability in Selected EAP Countries and Economies, 2013 Taiwan, China Singapore Hong Kong SAR, China h i eein Japan property .t Malaysia (out of 185) prhnsvhouiganiad-sllannaisiutos andTh ailandfDealingwith Indonesia construction permits newcomers (out of 185) China 319 o Price to income Cambodia ratio India 760as lbug wnsge oprir 300 200 100 0 100 200 '300 Price to Income ratio Permits (out of 185) Sources: Cruz 2008; World Bank's Doing Business Survey 2013. Note: "Registering Property" and "Dealing with Construction Permits" are rated in the Doing Business Survey on a scale of 1 to 185 points. 12 i ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EASTA a IA AND THE PACIFIC such as Singapore and Japan, housing is comparatively more Table 3.1: Urban Tenure in Selected EAP affordable, likely in part because of the ease and security of Countries, 2006-11 property and development rights.' Restrictions and delays in property registration and construction permit review can Country Year Owners (%) Renters (%) increase the costs of providing housing, which limits invest- China 2011 89 ment in new stock and raises the price of existing units.2 Indonesia 2008 67 8.36 3.1 AFFORDABILITY TRENDS: RENTING AND OWNING Philippines 2009 80 - Throughout the region, ownership is the most common form of tenure in urban areas. As table 3.1 demonstrates, Source: HOFNET 2013. at least two thirds of urban residents report owning their Note: Not available. home. However, these data may best reflect formal rental and ownership markets, excluding owners without title Despite the high rate of urban homeownership, there or those who rent through informal lease agreements. remain significant barriers to extending homeowner- ship to new urban immigrants. First, PMRS for new and 1. Due to its size and government, Singapore also enjoys the advantage com eial mortgags aregn areted to l -come of being able to capture and retain tax revenue generated through eco- nomic activity without the need to transfer any portion to other levels groups both because the typical terms and ticket sizes are of government as occurs in most countries. too great and because they require proof of income and a 2. The limited availability of price data suggests that these relationships clearly defined property title. should be treated with caution. First, PIRs in countries with lower in- equality and a lower incidence of urban poverty are likely more rep- resentative of housing affordability than PIRs from poorer countries Homeowners in principal cities and other urban areas are where reported housing prices tend to be at the highest end of the mar- similar. This sugests that the opulation characteristics ket. Second, property regulation and rights regimes are also likely to be correlated with economic development and are probably reflective of of urban homeowners are consistent within a given coun- broader social and economic reforms (Monkkonen and Roncom 2013). try, as shown in table 3.2. The mean ages (around 30) and Table 3.2: Characteristics of Homeowners in Principal Cities of Selected EAP Countries, 2000-11 Ownership rate (%) Household size Mean age Married (%) gte Orp bohbcue thepclrm an Oik thesre Bangkok (Thailand) 52 54 4.1 4.1 33 31 66 73 Hoewnr ini prinipa citie and othe urba area are2728 Jakarta (Indonesia) 57 69 1.5 1.8 29 30 81 80 Kuala Lumpur 54 68 4.5 4.6 28 28 77 78 (Malaysia) Sources: National Institute of Statistics Cambodia, 2008; Statistics Indonesia, 2010; Department of Statistics Malaysia, 2000; Nation- al Statistical Office Thailand, 2000; General Statistics Office Vietnam, 2009. CHAPTER 3: REGIONAL TRENDS ON URBAN HOUSING AFFORDABILITY I 13 household sizes of homeowners, and to a lesser extent the widows may decide to rent after selling a previously held domestic status (a majority are married), are consistent property. They tend to favor smaller units proximate to between primary and secondary urban areas. However, services and transportation networks. Finally, foreign ownership rates are higher outside of the principal cities professionals and expatriates rent large, expensive units in each country except Cambodia, suggesting that there in premier neighborhoods. is a price disparity for homes in different urban markets. Renting is more common in urban areas, but data on the 3.2 AFFORDABILITY OF RENTAL rental markets and stock quality are universally scarce. For AND OWNERSHIP OPTIONS example, 41 percent of Bangkok residents rent, compared The cost of buying a home in EAP cities is very high. As tables to just 13 percent of Thailand as a whole (UN-Habitat 2008: 3). Renting is also more common in principal cities ho w, te cs of purha a new or existing than in other urban areas as table 3.3 shows. This may h in urba res is ver the iR so tha suggest that supplies are greater and renter incomes are higher. However, based on available data, renters from residents. Japan, with high per capita incomes, progressive different urban areas within these countries are other- housing support, and a robust commercial lending sector, wise very similar in terms of mean age and household has a PIR that is among the region's lowest, despite tradition- size. Large cities appear to draw more unmarried renters, ally high land values. Jakarta and Manila have among the possibly due to differences in labor markets or housing highest PIRs, as does Vientiane, the capital of the Lao Peo- stocks. Young professionals may formally rent until they ples Democratic Republic, with a PIR of 23.2 (UN-Habitat are able to save or establish credit history to purchase a 2011 a). There are several reasons for this disparity. In the home in the future. They prefer smaller units near work case of Thailand, for example, these data are likely skewed locations and urban amenities. As they are also likely to by prices for properties geared toward wealthy foreign or be single and their incomes increase over time, they are absentee investors who do not report their incomes. This likely to rent larger units sequentially over time. When is one reason why many countries in the region have ad- they retire or their children move out, elderly people and opted restrictions to foreign property ownership. Table 3.3: Characteristics of Renters in Principal Cities of Five Selected EAP Countries, 2000-11 Rental Rate HH Size Mean Age % Married 3.4e ande 3. hwh Otheprchsn a Onew rtn ContyaiCty uran Ma i uan M i rices fara exedteMin icmey o urban Bangkok (Thailand) 35 24 3.01 3.16 29 28 68 73 Jakarta (Indonesia) 35 18 5.29 5.02 25 25 83 83 Kuala Lumpur (Malaysia) 31 23 3.94 4.04 24 23 72 80 Sources: National institute of Statistics Cambodia, 2008; Statistics Indonesia, 2010; Department of Statistics Malaysia, 2000; Nation- al Statistical Office Thailand, 2000; General Statistics Office Vietnam, 2009. 14 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Table 3.4: Median Urban Income and Median Urban Home Prices in Selected EAP Countries, 2008, 2011 Yearly income New home Price-to-income Existing home Price-to-income Country Year (US$) price (US$) ratio price (US$) ratio Thailand 2011 6,588 100,000 15.18 70,000 10.63 Mongolia 2011 6,156 41,600 6.76 42,720 6.94 Source: HOFINET 2013. Note:- Not available. Homeownership is comparatively more expensive in poor- Beijing is 37.2 (Barth et al. 2012: 14). While China has er countries, reflecting intense competition for urban land. restrictions on foreign property ownership, urban land PIRs tend to decline as per capita income increases. Ta- markets are heavily distorted by municipal governments, ble 3.5 summarizes PIRs from select cities in the region. which derive a large revenue stream from land sales and However, due to data constraints, the price of condomini- are inclined to limit the supply of new housing for price um units listed in available data sources may skew toward inflation (Barth et al. 2012). Furthermore, there is a large the higher end of the market (reflecting investment or population of low-income residents who cannot afford luxury properties), which distorts the PIRs calculated for conventional mortgages. For these reasons, EAP govern- the lower-income countries and economies shown. Chi- ments have actively promoted ways of reducing the cost nese cities are among the most expensive; Shanghai holds of housing finance and land acquisition. The following a PIR of 31.1, while the PIR to buy a home in central section briefly surveys these interventions. Table 3.5: Home Affordability in Selected EAP Cities, 2006 city Income per capita (US$) Condominium price (US$) Price-to-income ratio Taipei 13,036 81,550 6.3 inflation (Barth et000 al702..utemre3hr i ag Hong Kong SAR, China 27,670 224,945 8.1 Seoul 10,305 115,500 11.2 Table 3.5:7 Home0 Afodbliyi0eece.A5ite,20 Jakarta 1,861 43,750 23.5 Shanghai 2,474 77,000 31.1 Source: Cruz 2008. CHAPTER 3: REGIONAL TRENDS ON URBAN HOUSING AFFORDABILITY I 15 3.3 THE PREVALENCE OF mal renters occupy a spectrum of shelters, some of which RENTAL HOUSING can be inadequate or constructed ad hoc. They may rent Rentingor sublet rooms in privately held tenements, apartments, rental units serve a diversity of populations. Across the region, about one third or less of urban residents rent their homes (see table 3.3). Renting carries benefits dis-fields, tinct from homeownership and is suited to a variety ds parks, cemeteries, or at their place of work. These types of population o meon e i n d is s edto a v o f inform al rental agreem ents, especially in illegal or squat- ers a broad variety of social and physical arrangements. or sut an aomodons otenvithoutnferof Tenants may be individual family members to strangers; or leal rcoefo tent landlords can range from owner-occupiers to absentee holders who manage the property through an agent or Public housing provided by governments or administered firm. Property owners may rent units or land temporarily by housing agencies or nonprofits can be affordable rent until they can be sold off for a better return, or they can optionsas long as tenants meet eligibility requirements. invest in permanent rental housing developments. Large companies can invest in housing for workers and Formal rental housing is expensive. The preference for charge a subsidized rent or deduct the cost from workers' homeownership is reflected in comparable urban rents.rent extra rooms or an- The rent-to-income ratio is the share of the median an- cillary units to students, family members, domestic work- Thel rent-o- im ati the hae h median ahl n- ers, or other low-income tenants. This type of small-scale nual rent of a unit and the annual median household in- ifra etlshm scmo nEP cosbt come. Across Asian cities, rent-to-income ratios are about informal steme n an slms Iros twice those of developed countries (UN-Habitat 2011: lor d whorthemselemant be muc wtier 23). In secondary cities, rental housing is even scarcer. tantr tenat s an a o semuof renue In Surabaya (Indonesia) the rent-to-income ratio is 19, en the toimprov adina their rperes in Chiang Mai (Thailand) it is 22, and even in Hanam (Pepeorn and abnte lnors (the Republic of Korea) it is 14 (UN-Habitat 2003b: 275). The UN estimates informal renting comprises 60-90 property management firms are comparatively less ac- percent of all low-income urban rental units across Asia commodating to tenant demands. (UN-Habitat 2008: 18). In China, informal private rentals Renting is an often undervalued alternative to homeown- in urban villages were estimated to account for one third ership. However, it contravenes explicit government poli- of housing in major cities (Logan et al. 2011). cies to support homeownership. In recent decades, subsi- dized units in public and social rental housing projects in 3.4 CONCLUSIONcountries like China, Mongolia, and Vietnam have been CONCLSIONsold to tenants. Furthermore, a lack of construction fi- Poor and low-income residents, often including recent mi- nance and incentives for developers discourages both the grants from rural areas, are mostly likely to rent in urban production of new units and the maintenance of existing areas. They typically do not have the savings or assets to structures. Linking mortgage contracts to construction acquire a mortgage and they must retain the ability to finance can provide developers with the necessary capital move quickly according to work opportunities. Due to to complete residential projects. Construction finance is the declining share of public and formal rentals, informal typically raised through pre-sale contracts, where units renting is the most commonly held tenure form. Infor- are sold at discount prior to construction. 16 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EASTA AIA AND THE PACIFIC Chapter 4 Overview of Current Affordable Housing Interventions Affordable housing strategies vary widely across the East ers that cities want to attract to grow their economies. Asia and Pacific region (EAP), though most countries have The Republic of Korea, Malaysia, and the Philippines at least one demand-side program to reduce the cost of have introduced legislation to place limits on the prices homeownership. As table 4.1 shows, consumer demand of new units and to require new developments to set aside subsidies consist of two policies: (i) government-subsi- affordable units, though these measures are either con- dized mortgages or down payment assistance programs, tested or ignored by developers. Finally, restrictions on (ii) or national-level compulsory savings programs. Sub- foreign ownership are found in a majority of countries, sidized mortgages offer a below-market interest rate and though this is at best an indirect way of supporting hous- may be coupled with down payment assistance. Mon- ing affordability as these measures simply aim to control golia, for example, has experimented with subsidized price speculation. mortgages and publicly built housing, which has im- posed substantial costs, generated inflationary pressure on housing prices, and has had very limited success in reaching low-income groups (World Bank 2012). Com- In EAR homeownership is the most prevalent official ten- pulsory savings programs, or provident funds, use man- ureform in urban areas and governments have a number datory contributions from public sector and formal sec- of tools to actively assist prospective homeowners. Home- tor workers to fund mortgages, often at subsidized rates, ownership is believed to carry a number of ancillary ben- for these groups. efits to owners and to impart positive neighborhood spill- overs. First, for owners, the home is a valuable asset that There is also a wide array of supply-side interventions to can be used as collateral and a source of intergenerational increase the availability and diversity of tenureforms. Pub- wealth transfer. Additionally, it is possible that title pos- lic rental housing and support for informal settlement session and homeownership encourages local investment upgrading is also prevalent in the region; although, apart that raises property values (Jimenez 1983; de Soto 1989) from Singapore and Hong Kong SAR, China, public rent- and encourages more involvement in neighborhood af- als comprise a comparatively small part of most housing fairs relative to renting (Rohe and Basolo 1997). stocks (Doling 1999). In Fiji and the Solomon Islands for example, public rental housing is primarily reserved for Government support for homeownership is widespread middle-income and public sector employees, while in throughout EAR Subsidies for mortgages or down pay- China, it is provided to qualified, middle-income work- ments constitute the most common means of providing 17 Table 4.1: Summary of Key Affordable Housing Policies and Programs in EAP Countries Assisted Compulsory Settlement Country homeownership savings Public rental Cross-subsidy, upgrading Advanced and industrialized countries Korea, Rep. of X X X Malaysia X X X Thailand X X X IBRD countries China X X Philippines X X X IDA or IDA-blend countries Cambodia Mongolia X X Myanmar Small island countries Fiji X X Solomon Islands X X X Vanuatu X Source: World Bank team analysis. Note: a. Cross-subsidy refers to legislation allowing governments to impose mandates for inclusive zoning or mandatory set-asides for affordable housing in new developments. IBRD = International bank for Reconstruction and Development; IDA = International Development Agency. homeownership assistance. These measures comport well tional-level housing finance institutions and major pro- with relatively high household savings rates across the grams in addition to more site and project-specific inter- region (Horioka and Terada-Hagiwara 2011). Following ventions that promote affordable homeownership. Singapore's lead, China and Indonesia have introduced compulsory savings programs for public and formal sec- Compulsory savings schemes are the most common de- tor workers, called housing provident funds. Table 4.2 mand-side intervention throughout the region, though in- summarizes major homeownership assistance initiatives ternational experience demonstrates that their success is in the region. This section will briefly discuss these na- uneven. Compulsory savings programs, also known as 18 I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Table 4.2: Homeownership Assistance Programs in Selected EAP Economies Country Type of program Nature of program * Housing Provident Fund (1994) * Housing provident fund China * Comfortable Housing Project (1995), changed to "Economic * Subsidized home purchase * Housing Authority's Home Ownership Scheme * Subsidized home purchase * The Middle Income Housing Scheme * Subsidized home purchase Hog ChKng * The Housing Society's Flat for Sale Scheme * Subsidized home purchase * The Sandwich Class Housing Scheme * Subsidized home purchase * The Private Sector Participation Scheme * Subsidized home purchase Indonesia * National House Savings Fund * Housing provident fund Malaysia * Public Low Cost Housing (PLCH) program * Subsidized home purchase * Employees Provident Fund * Housing provident fund Mongolia * 40,000 housing units programn (2003) * Subsidized home purdhase * 100,000 apartments project (2008) Philippines * Community Mortgage Program (1988) * Subsidized mortgage rates (lower amortization and longer repayment period Singapore * Central Provident Fund (CPF) * Housing provident fund *Subsidized Mortgages for Public Homnes * Subsidized mortgage rates CPF Housing Grant Scheme for first time homebuyers * Subsidized home purchase Thailand * National Housing Authority, which sells units to low-income * Subsidized home purchase/ Subsidized buyers on five-year hire-purchase contracts with Government mortgage rates Housing Bank providing financing Vietnam *Subsidized homeownership for public tenants * Subsidized home purchase Source: World Bank team analysis. housing provident funds (HPFs), use contributions from Publicly built, subsidized homes have also had limited suc- employees and employers to finance long-term home cess. Programs in Hong Kong SAR, China and Singapore mortgage loans for eligible recipients. These instruments, are the models for publicly subsidized, targeted, low-in- however, present several risks that could undermine come housing. In Singapore, some 84 percent of residents the housing finance sector and reduce access to mort- own and live in housing built by the government Hous- gage-based finance. For example, compulsory savings ing and Development Board (HDB) (Yuen et al. 2006). programs typically also pay out pension or retirement Housing finance is tied to the country's subsidized prov- contributions in addition to issuing mortgages. Also, in- ident fund (discussed below). In contrast, Hong Kong terest rates on mortgages issued by these facilities may be SAR, China's private banking sector is the main supply subsidized at below market rates, which puts commercial of consumer finance for housing, though the city's hous- lenders at a disadvantage and reduces private investment ing authority and a partner nonprofit organization build in the sector; this has occurred in Mexico and Brazil (Taf- and manage these homes. This achievement is due in part fin et al. 2011). because the supply of land is small and mostly owned by CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 19 public authorities, allowing the government to subsidize golia, Indonesia, and Thailand, have recently begun to its housing development through the sale of other urban develop mortgage-backed securities for capital markets. land at market values. Both cities also benefit from com- These allow housing finance institutions to accumulate petent and effective housing authority administration additional finance capital to back new mortgages and of these developments (Yeung and Wong 2003). Similar other loans. The success of these instruments has so far efforts have had less success. Ambitious programs such been limited, and there remain issues with the capaci- as Indonesia's 1,000 Towers, Thailand's 1 Million Homes, ty of markets and regulatory institutions to adequately and Mongolia's 100,000 Apartments have experiment- assess the value and risks of component mortgages (dis- ed with publicly built units targeted for purchase by cussed below). low-income groups with subsidized loans. Each of these programs have run into a variety of problems. These in- clude costly delays, offering units that are too expensive Mortgage Subsidies for low-income groups, or supplying so much housing that the public program limits private investment in the sector Mortgag su me oeownershme atrie (Kamata et. al 2010; UN ESCAP 2010; World Bank 2012). byre cosmer boro in co Thes sbized or plot-acquisition subsidies. However, there are several Government Housing Finance risks inherent in these programs. First, they tend to be GoverutinetHosn expensive for governments because loans with subsidized Institutions interest rates present costs that are likely to accrue over Housing finance institutions are the principal actor in set- the life of the mortgage due to inflation. Most mort- ting policy direction for financing housing construction and gage products in the region have adjustable rather than consumer mortgage lending. These national institutions fixed rates in order to help reduce the threat of inflation vary in their authority and involvement in the housing to lenders. However, this also makes the true cost of the sector. At one extreme, nearly all of Singapore's housing is subsidies difficult to estimate because the realized value government-built and approximately one third of mort- of the subsidy each year is contingent on varying inflation gages are originated through a compulsory savings fund rates. It is also possible, though not clearly established, (Phang 2010). Similarly, Mongolia's housing finance cor- that subsidized mortgages could increase speculative poration has devoted considerable resources to building property consumption and drive up home prices, which social housing for private purchase among target benefi- would effectively cancel the effect of the subsidy. ciaries, such as veterans, but risks crowding out private sector housing finance sources (World Bank 2012). By Subsidized mortgages are not the best way to extend ac- contrast, Thailand has a specialized set of public hous- cess to affordable housing to those who need it. Subsidized ing agencies that provide support for a broad segment mortgage interest rates typically benefit middle- and up- of the housing sector and has supported the develop- per-income households that already have access to for- ment of private financial institutions. The government mal banking institutions. Households without credit or still originates approximately half of all mortgages; and banking history or that earn income through the infor- the Community Development Organization Institute mal sector will not be eligible for a mortgage in the first (CODI), discussed below, provides support for com- place. This distorts the distribution of the subsidy and di- munity-based lending to low-income populations. The minishes its effect on providing access to quality housing government also supports private developers (who are for those who otherwise cannot afford it. responsible for nearly all housing construction) in pro- viding rental housing through its National Housing Au- Rather than subsidizing mortgage interest rates, there are thority (Llanto 2007). Several countries, including Mon- alternative tools to support housing consumption. One 20 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC less-distortionary alternative to mortgage interest rate Housing Provident Funds subsidies is through loan "buy downs." Under these schemes, the government extends a temporary (five- to hing provin funds t mrgeooin g in ten-year) subsidy to all commercial lenders that lowers Chin Inds, alasa The ins,in , he the effective market-rate interest on mortgage products smola and Van These on wich they offer. The subsidy tapers off during the mortgage rem te or peson pl selyo deucios term until the beneficiary undertakes the full, mar- fo th e pay of fls c or or wokers ket-rate interest burden, by which point a portion of the tos arstabepl fnan tge eing. principal has already been paid. This encourages lenders sigpes prvdent fn as been t re most to expand the size and number of loans disbursed with- sussl, d inaris onta lar publi out presenting the same exposure to the inflation risks. housingoknand ea es forlstorswo In fact, lenders are able to recover the actual market in- fo Teovenment emp fund cotrbuios fro terest rate through both consumer payments and subsidy transfers. Other subsidies include subsidies that reduce guarantees mortgages. China introduced a similar pro- the upfront cost to purchase or finance a home. Examples gram in 1994, but expansion of the fund since then has include down payment assistance grants, and grants to been limited outside of government workers and has cover closing costs and title. Upfront subsidies are espe- largely failed to reach a majority of low-income house- cially realistic when eligibility to such programs is tied to holds (UN-Habitat 2011a). Similarly, provident funds in a savings requirement (Hoek-Smit 2009). the Solomon Islands and Vanuatu have directed housing finance principally toward middle-income households. Publicly subsidized mortgages can make support and ad- ministration of loans and payment collection politically theear aonumbrofcengs to E deve etofn- contentious. This has been the case in the Philippines, t o hosin po ent eAcl Frs the requir where loans are disbursed and administered through mntrufor s e n exlude the ran poo a government agency, which can make resources and from c ortion a egibilt form rtggs.Te support for the mortgage program politically conten- fundsbcan a re gress aler-income tious. By extension, the unpopularity of foreclosure on contar lealler amounts and beneficiaries coincides with low overall repayments, which has severely reduced the long-term solvency of case of the Philippines' provident fund, poor contribu- the lending agency. Finally, there are difficulties tar- tion collection procedures and low mortgage repayment geting low-income populations that would benefit the rates have harmed the stability and solvency of the fund most from the subsidy. Eligibility often requires for- (Alonzo 1997). Finally, various stakeholder priorities mal, salaried employment and some form of credit his- present some risk to the long-term stability of the funds. tory, which low-income groups do not have (Wu 2002). e portion of the funds is invested toward maximiz- Even with the subsidy, monthly mortgage payments ing returns for pensioners, whereas the portion directed would remain too high for poor borrowers to purchase toward originating mortgages seeks to minimize interest even the least-expensive homes. It is also not clear how rates for borrowers. well-subsidized mortgages reach populations that would otherwise not be able to own a home. Households that could otherwise afford a market rate mortgage may sim- Privatization of Social Housing ply opt for a lower, subsidized rate and purchase a home Countries with a history of direct affordable housing pro- for investment or to rent, as has occurred in Indonesia vision under socialist regimes have also moved toward pri- (Tisnabudi 20f10). vate market reforms of the housing sector. Under socialist CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 21 regimes in China, Mongolia, and Vietnam, housing was Cross-Subsidies and Set-Asides promoted as a public good to be provided by the state for workers. In each country, these units were later privat-cross-subsidies on new co- ized, representing a substantial public asset transfer at no cost to private citizens. In China, for example, much of merca hosing deveopmen. n this pra gern- the housing stock had been heavily subsidized by the gov- tial development as affordable housing. The units are ernment, though investment was uneven and typically directed toward workers in favored economic sectors. Ingroups. Korea intro- 1988, the government began to sell to these rental units duced mandatory set-asides for new developments in danwei, a kind of worker housing community, to tenants 1989 but this, combined with the economic downturn at a low cost. The vast majority of China's housing stock, of 1997, severely reduced private investment in housing 80 percent, is privately owned homes, many of which (Koh 2004). Set-asides are not usually so heavy-handed. were rental units that were sold below cost to renting ten- More commonly, developers are allowed to increase den- ants; this accounts for China's very high overall home- sity may obtain access to public land, or may be eligible ownership rate of 87 percent (Gan 2013). In cities, the for certain tax or construction finance breaks in exchange private development and sale of new housing was prohib- for setting aside units for low-income groups. The devel- ited and existing rental properties were effectively nation- alized (Jing 2011). Once nationalized, unit rents did not order to cover the lower price of the set-aside units. In cover building maintenance costs. Vietnam's government Malaysia, commercial residential developers are required has also continued to promote social housing, which has to provide a proportion of units at prices affordable to been directed toward soldiers, factory workers, and pub- lower-income groups. Following protests from develop- lic servants since the 1950s. Under doi moi liberalization ers, more flexible mandates for new developments were reforms in the 1990s, the country has also begun to sup- introduced, which allow developers more latitude in the port a small but growing private housing finance market number and price of targeted units (Shuid 2004). These and private development and construction industry. types of developments also feature a socially diverse mix- ture of residents, which may help to deter the emergence It is unclear, however, how well converted housing stock of pockets of concentrated urban poverty. serves the needs of low-income households. Recently con- verted public or worker housing can require significant Despite the appeal of cross-subsidies, there are severalfac- investment to improve the quality and resale value of tors that limit their adequacy as a large-scale affordable units. This investment can be reflected in higher prices housing strategy in developing country contexts. First, to purchase the remodeled units. Further, speculative cross-subsidies depend on particular conditions in an markets can emerge in the absence of down payment and urban real estate market: that is, the potential use val- ownership requirements. China's privatization of state- ue of a given plot of land is far higher than the existing owned worker housing and more general move toward use. At the project level, both developers and regulators supporting homeownership also coincided with rapid must clearly understand local land and property market economic growth, which fueled a speculative investment prices and trends. Then they can correctly assess costs, market of former rental units. The government has tak- determine affordable prices, and estimate the likely ab- en steps to reduce price inflation of commodity houses sorption capacity of market-rate units. Furthermore, be- from speculation. These include increased minimum re- cause these types of projects represent a greater risk to quired down payments for new purchase, increased sales developers, local officials must offer incentives that will transaction fees, limits on financing or owning multiple allow developers to secure finance. Incentives can include homes, and restricted foreign ownership of property. density bonus allotments, flexible parking requirements, 22 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC expedited permitting and planning reviews, land assem- come groups and informally employed workers do not bly assistance, property tax subsidies, or favorable finance enjoy access to this form of public subsidy. terms. If requirements are too costly, infeasible, or poorly regulated, then developers will avoid or ignore them, as Governments also actively encourage affordable homeown- has occurred in the Philippines (Ballesteros 2010). Even ership through housingfinance structures that lend at be- with such incentives, cross-subsidy schemes are infeasi- low-market rates, often in the absence ofwell-developedsec- ble in areas where land values are known to be low. ondary or wholesalefinance markets. Compulsory savings programs require that beneficiaries save a given amount Although these programs reduce public sector involvement before being eligible to receive a mortgage. Similarly, na- in affordable housing production, they require sophisticat- tional provident funds in various countries leverage con- ed public planning and regulatory controls. Local govern- tributions from formal or public sector workers to allow ments and planning authorities must develop specific them to obtain secure mortgages on favorable terms. In criteria for designating low-income units and must de- Korea, Malaysia, and the Philippines, governments have velop protocols to ensure that these units reach eligible partnered with developers to introduce cross-subsidized households. In Malaysia, for example, units targeted to affordable housing. Under this approach, governments low-income groups can be sold to wealthier residents acquire and extend infrastructure to land while a devel- who may then sell or sublet the unit at a market price. The oper builds housing. Some units are for purchase or rent- nature of property rights allotted to low-income benefi- al at market rates and some are set aside for consumption ciaries (individual ownership versus collective or coop- at below market prices. Private sector involvement in erative ownership) also influences the decision of low-in- mortgage provision, however, is limited to upper-income come residents to relocate to these projects (Mukhija consumers with banking and credit history. 2002). Additionally, regulations must be clearly defined and uniformly administered. Uneven and uncertainly There are also constraints to the institutional architecture applied regulation will discourage private developers, or that underpins mortgage markets in several countries. Gov- direct development toward areas where local officials give ement involvement in mortgage finance has limited the the greatest concessions, not necessarily where there is growth of private lenders in Mongolia, the Philippines, demand for affordable units. Vietnam, and to a lesser extent Thailand (Kahn 2010; Vina 2006; World Bank 2012). Additionally, systems of 4.2property surveying, recording, registration, appraisals, 4.2 STRENTHSWNDE AKNESSE and rights protection are weak. Credit bureaus that track OF HOMEOWNERSHIP g~ ASSISTANCEconsumer borrowing history and creditworthiness are in- ASSITANC SCH MEScomplete or have loopholes. Mortgage contracts also lack Despite the prevalence of and government policy support enforcement authority; resolving foreclosure disputes can for homeownership, urban housing and land markets are be costly and slow, especially in the Philippines where subject to a number of barriers. Commercial mortgag- many housing loans are disbursed by public agencies. es are available to only a small portion of consumers. A These weaknesses are also present in countries that have measure of mortgage debt, the mortgage-debt-to-GDP recently experimented with developing mortgage secu- ratio, totals just 1.9 percent in EAP, less than Africa, Latin rity instruments, placing additional risks on rating and America, and South Asia (Buckley and Kallergis 2012). tracking the value of these products. National-level housing provident funds increase the sup- ply of affordable mortgages, but these subsidized loans Property ownership may not be suitable for all urban res- compete directly with commercial lenders and are only idents. Despite its positive impact, there is limited sup- available to middle- and upper-income groups. Low-in- port for full property titles on housing and infrastructure CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 23 investment in informal settlements (Payne et al. 2009). ly pursue education or job opportunities in new places. It Others contend that the benefits of granting freehold title does not require a long-term financial commitment and and ownership rights maybe be overstated relative to the aids flexibility with household budgets, especially when costs and time these procedures impose on governments earnings may fluctuate or a portion of income is remitted (Ferguson and Navarrete 2003). Others say that informal to other family members. Renting involves a lease con- settlements can improve over time independent of title or tract between a tenant and an owner (landlord), through ownership prevalence (Gilbert 1990; Ward 1982), and that which they agree on a price for the tenant to hold cer- collateral-based mortgage finance actually discourages tam occupancy rights for a given time. A landlord may be household investment in productive enterprises (Bracke et an owner-occupant, absentee owner, or a company that al. 2012). Even residents' simple perception of tenure secu- designates agents to manage and maintain the property rity can positively influence housing investment decisions on their behalf. Occupancy terms may vary from days and demands for infrastructure coverage (Gilbert 2002). to months to years; rental payments can be formalized in a written contract or through a verbal agreement be- As governments explore options to increase affordable tween the tenant and landlord. In EAP, renting compris- homeownership, they should also carefully consider the es a minority of urban tenure forms, though data on the possibility ofproperty speculation and resultant price infla- dimensions of rental markets are uniformly scarce across tion. This is especially resonant in countries such as Chi- the region. This section briefly reviews characteristics of na, Mongolia, and Vietnam, which have begun to privat- urban renter populations, different forms of rentals, and ize vast stocks of social and work housing by selling them the landscape of rental housing programs. to tenants at low cost. There are several strategies to re- duce the incidence of property speculation. On the con- Rental housing is an important tenure option for groups in sumer side, these include requirements for higher down particular life events or circumstances. Demand increas- payments and restrictions on the number of residential es during economic or employment uncertainty, divorce, properties individuals may own. Increasing stamp du- and retirement Homeownership becomes more attractive ties on property deeds increases the costs of speculative as people age, incomes rise, and households grow. Rent- property transactions and retooling mortgage interest al housing is therefore a complement to homeownership deductions or credits on investment properties can also and provides an important component of a diverse, dy- slow speculation by reducing tax windfalls (World Bank namic, and responsive housing market. Informal renting 2012). Finally, nearly every EAP country also has explicit and subletting also provide important income sources restrictions on foreign ownership of property. These bar- and ease rental prices in low-income areas. Local regula- riers reduce the direct influence of foreign speculators, tions should allow for small-scale, petty landlordships of but also eliminate a source of investment with domestic owner-occupied rentals, provided they meet construc- economic spillovers. Governments can also direct banks tion and safety standards. However, tenant protections to require higher loan-to-value ratios for new mortgages in EAP remain weak. Residents can be subject to ethnic, and limit the total share of bank assets that can be allocat- religious, migrant, or gender discrimination as a basis ed to property lending. These policies, however, require for denial of housing or eviction, especially in informal careful monitoring of housing market conditions, reliable markets. Disputes with landlords can be long and costly price data, and improved registries of property and con- to adjudicate. sumer credit liabilities. Social housing, targeted at specific beneficiary groups, is 4.3 PUBLIC RENTAL HOUSING a collective term for the most common rental housing ar- rangements in EAR Social housing may include rental Rental housing is an important and often underappreciated housing administered by public agencies or nonprofits housing strategy It allows residents the mobility to quick- and offer units for low-income groups or public sector 24 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC workers. Public rental housing is found across the region, rentals) and price controls (public rentals), or may be although it is a comparatively small share of the formal affordably set for targeted populations (social housing, rental market (except in Hong Kong SAR, China). Table company housing). Informal rentals occur where rented 4.3 outlines different types of rental tenure. Rents may property is not titled or registered and may be occupied be determined through market mechanisms (private or subleased illegally. Table 4.3: A Typology of Rental Tenure Forms Rental type Characteristics Owners Tenants Public rental Land or housing owned by Central or local government r dAidang of sold inome public agencies for allocation to agenaes. ognztns groups withividuwithouthoutehollssuhsidye Infomal and r hosingrentd ou for Privte, on-rgistred ropety iPedmiategresy ne, bu oxlsivel los para rteorasnaemeiumor lng- o s ilow income or employment as civil a substantially subsidized rent. servants. Found in: China, Fiji, the Republic of Korea, Malaysia, Mongolia, Singapore, Solomon Islands, Taiwan, China, Thailand, and Vietnam. Social housing Housing provided on a Public agencies, nonprofit, or A wide range of social and income noncommercial basis for rent, not-for-profit organizations. groups. with or without external subsidy. May require legal recognition. Formal private Formally registerendith or Individuals or commercial A wide range of groups, including all rental housing rented out for profit entities. A high proportion may income categories, the young, and the or as a medium or long term be absentee landlords. elderlyo investment without subsidy. Informal Land or housing rented out for private rental profit or as a medium- or long- b wn eria and noncomerca andlorsno e bas the sofnhi term investment without subsidy. or unregistered subdivisions of and lrds t les n legally acquired land. A high Thmain isurresients is proportion may be living on the thanlating (Chides 24 ) same property. Rental income hOUsN INTERVEtionS is a valuable supplement to andeol loerinomogopsetesoug Company Housing provided as part of Private companies or Tenants are normally restricted to housing employment contracts, usually corporations. Benefits include current employees. Can provide with a subsidy. Provision may influence over employees and affordable housing at cost of cease at the end of employment. investment potential. independence/security. Shared Housing provided without Individuals or households. Members of an extended family housing payment of rent or formal network, kin, or close friends of the contract. Costs may be shared. property owners. Shared equity Property owned partly by the entity Public agencies or parastatals A wide range, but commonly younger that purchased or constructed it such as housing associations. households with aspirations to become and partly by the occupants. The home owners. share can be adjusted over time. Not yet a common option in developing countries. Source: World Bank team analysis. Note: a. UN-Habitat (2003a: 7) makes a distinction between commercial and noncommercial landlords on the basis of the size of their operations. Commercial landlords comprise those who let to 10 or more tenant households, noncommercial landlords to less than 10. b. In many informal urban settlements, occupied areas are titled to absentee landowners. The main issue for residents is to de- termine modes of purchasing, leasing, or sharing the absentee landowner's property, rather than land titling (Childress 2004: 12). CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS I 25 Prevalence of Renting in EAP geted toward lower-income civil servants such as police Public rental units are presently a small portion of the rent- affor homes an ares. al housing stocks of many EAP countries. Table 4.4 shows public rentals as a share of total housing stock. Hong Kong The Indonesian government has also heavily invested in SAR, China has the largest supply of public rental hous- large public rental housing projects, though these have ing because of a long-term government commitment to largelyfailed to meet demandfor low-cost housing. Fund- rental housing, and because there is a wealthy population ing public rentals is one of the largest expenditures in that can support subsidy transfers. Korea has set a goal the Ministry of Housing's budget. Nevertheless, it pro- to construct one million new 30-year lease rental units vides access to fewer affordable units than homeowner- targeted to workers who earn 70 percent of the average ship assistance or upgrading schemes because of the high urban salary. Yet, as is the typical problem with public per-unit construction and maintenance costs (Ministry rental housing, these units suffer from poorer construc- of Housing 2011). Additional costs are passed on to the tion quality than comparable for-sale units and they are tenant because once completed, housing management is sited far from urban jobs and amenities (Kim and Han transferred to local entities. They have fewer resources to 2012: 146; Takashima 2005). administer and maintain units and often raise rents above affordable levels to cover the difference. China has also moved toward massive public investment in affordable rental housing. The Cheap Rental Housing These state-led direct provision programs have several Guarantee Plan aims to construct 7.5 million subsidized shortcomings. Public investment in rental housing stock rental units with funding from the central government, should be considered against demand-side alternatives offset in part by contributions of local governments to such as rental vouchers or tax breaks for landlords (01- the housing provident fund (Deng et al. 2011). Housing sen 2000). Across the region, recent state-led initiatives provident funds, however, are not necessarily the appro- to build affordable rental housing only meet a fraction priate instrument to finance and maintain public housing of estimated demand. They are also behind schedule or stock, as they are primarily tied to mortgage lending. Fi- charge rents that exceed affordability levels (Kamata et al. nancing rental housing stock, and the liabilities that may 2010). Project locations are sited and beneficiaries are de- incur, reduces the fund's ability to issue mortgages, which termined with limited or no participation from civil so- could contribute to a housing downturn. In 2006, Viet- ciety groups. Furthermore, subsidized rents may discour- nam initiated the production of public rental housing tar- age private developers from providing market-rate rental units (World Bank 2012: 16). Additionally, mechanisms Table 4.4: Prevalence of Public Rental Housing to verify and monitor the eligibility of low-income groups in Selected EAP Countries and are not well developed and subsidized units can be pur- Economies, 2012 chased by wealthier consumers as homes or investment properties. In China for example, there is strong evidence Share of total housing that public housing transfers have benefitted middle- and Country stock (%) higher-income groups, such as professionals, managers, Chin 8.0and public servants. The intended beneficiaries, such as Hong Kong SAR, China 30.0 low-income workers and recent urban immigrants, can Korea Rep.of Ube excluded based on residency status (Wang 2011). Singapore 4.0 TaiwanOther barriers can constrain the growth and diversity of Source: ACHR 2009; Hong Kong Housing Authority 2014; Man public or private rental housing options. Unit size, loca- 2011: 84; Peppercorn and Tafgin 2013; Chen 2011: 30-7. tion, and building material quality are the most import- 26 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC ant determinants of rent cost. Additional factors include has moved to address a shortage of affordable housing the security of the land tenure claim and the proximity through its Cheap Rental Housing Program. The program to urban amenities, transportation networks, and em- began in 1998 and in 2009 supplied about one percent of ployment centers. Mandated rent controls, such as those total housing output or about a 500,000 units (Tan 2009). in the Philippines, tend to influence rents by stifling the Most urban rental housing continues to be provided pri- quality and supply of rental housing stocks (Tipple 1988; vately and informally. UN-Habitat 201 1b). Providers of rental housing face sim- ilar challenges to those who sell units. Construction fi- Other forms of rental tenure can provide options for gov- nance is often scarce or unevenly supported by local gov- ernments and developers. The Korean government has ernment subsidies. Planning and regulatory standards adopted a leasing system called cheonsei to encourage in- on new developments may also make construction or vestment in a form of rental housing. Under this method, renovation time consuming and prohibitively expensive. tenants agree to a long-term lease (10-20 years) and pay Design standards may also purposefully or implicitly dis- a deposit of 40 to 80 percent of the property value upfront courage occupants from running small, home-based en- in exchange for reduced or eliminated rental payments. terprises or subletting additional space to others. Both of Landlords can invest the deposit over the course of the these activities are common supplemental strategies for lease term, but must refund the amount once the lease ex- expanding household income (Tipple 2004). pires and the tenant leaves. Approximately two thirds of the country's housing is managed in this way (Ambrose and Kim 2003). An informal version of this system, called 4.4 STRENGTHS AND WEAKNESSES seng, also exists in Taiwan, China and Thailand, where it OF PUBLIC RENTAL HOUSING has been used to develop low-cost sublets in poor neigh- borhoods (de Wandeler 2006). Across the region, public rental housing represents the most direct government investment in expanding the overall Communal land renting can blur the difference between supply of low-cost housing, though public rentals seldom informal andformal rental markets. Informal settlers can reach the urban poor. Current public sector involvement negotiate lease agreements with property owners to oc- in direct housing provision in EAP is limited. Public rent- cupy land and construct their own homes. Provided that al units comprise an increasingly limited source of hous- land rental agreements negotiated with property owners ing. For example, China has privatized government-built have adequate enforcement and reasonable protections housing, reducing the stock from 70 percent to now be- for tenants, they represent a mutually beneficial hous- low 10 percent (Logan et al. 2011: 84). Korea, Malaysia, ing option for low-income residents. In Bangkok, urban and Thailand have also reduced the involvement of public squatters negotiate land rental contracts with owners of sector housing finance institutions to encourage private vacant, unserviced plots for permission to settle. Con- sector lending and construction. tracts may be renegotiated and renewed, or the occupants may be evicted should the owner decide to sell or develop Public rental units are often poorly targeted and do not the property (Mohit 2002). The rental of customary land reach the urban poor. In a number of countries, these is common in cities of Papua New Guinea and the Solo- units have been available to public employees rather than mon Islands, where informal agreements permit tenants targeted toward low-income groups. However, they form limited development rights in exchange for land rental a small portion of the rental market in EAP cities, apart payments (UN Habitat 2003a: 44). from Hong Kong SAR, China, Korea, and Singapore. This is because of eligibility criteria, a limited supply of units, Owner-occupier landlords are an overlooked source of rent- tenuous funding support, and project locations that do al housingprovision. Where the costs for financing and de- not correspond to local demand. In recent years, China veloping new rental housing are prohibitively high, petty CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 27 or incidental landlords can provide informal rental hous- along with support from governments and civil society ing in spare rooms or on vacant property (UN-Habitat organizations, can improve investment in the quality and 2008). As previously discussed, Chinese urban villagers security of poor urban neighborhoods throughout EAR can provide affordable rental accommodations for recent urban migrants to supplement income from agricultural Over the past 60 years, policies for developing quality af- production (Liu et al. 2010). However, the main weakness fordable housing in developing countries have greatly shift- to informal rentals is the lack of basic legal protections ed. In the 1950s, governments directly provided housing for both tenants and landlords. Furthermore, a lack of units at subsidized rental rates. In the following decades, enforceable standards may mean that rental units are of- governments moved toward providing assistance for self- ten built of inferior materials or may lack access to water, help housing, typically through extending services to unde- electricity, or sanitation. However, small-scale rentals or veloped land and encouraging the urban poor to build their sublets in buildings that are also the owners' residences own homes. Throughout the 1990s, governments promoted may ensure that units are in better condition than those the expansion of private markets to cultivate construction held by absentee landlords (UN-Habitat 2008). and mortgage finance institutions, while at the same time relaxing regulatory and price controls. In recent years, non- Adequate support for rental housing provides an afford- profit and civil society organizations have taken more prom- able alternative to homeownership. Homeownership may inent roles in helping organize demand for land acquisition be not be feasible for those who are unwilling or would and housing development in low-income settlements, espe- otherwise have difficulty financing their own home. Gov- cially in Indonesia, the Philippines, and Thailand (Buck- ernments can articulate support for urban renting as a ley and Kallergis 2013; UN-Habitat 2011 a). complement to homeownership. The direct provision of subsidized public rental housing is not widespread and is prone to investment and maintenance cost problems, Land Pooling and Readjustment along with difficulties in program administration. Small- scale and informal rentals between homeowners and tenants are an alternative to formal rental markets and authorities subsidize future development by temporar- make use of existing housing stock and a resident's pri- ily acquiring and servicingfringe land and reselling it to vate investment decisions. However, legal frameworks to the original holders. Under readjustment, land owners enforce lease contracts and to support quality rental units and leaseholders agree to allow the adjustment entity to are largely absent. Rental markets can be strengthenedback through developing mechanisms for rental contract en- forcement and reasonable protections and dispute reso- sessed values. With pooling, the land is consolidated lutions for tenants and landlords. upon transfer to the entity supervising the improvements and resold in accordance with prior agreements among land holders. These approaches allow rural land holders 4.5 INCREMENTAL APPROACHES TO in locations coming under increasing pressure of urban- AFFORDABLE HOUSING PROVISION ization to transfer certain development rights to local planning authorities (often composed of local residents There are a number of alternatives to direct government in- and delegates). The authorities can then plan and subdi- vestment in housing supply or to housing consumption sub- vide the property and designate infrastructure coverage. sidies. Regional experience has shown that there is ample Some plots are then allocated to the previous occupants opportunity to improve and upgrade informal settlements in return for the value of the land they contributed. The without displacing residents in ways that are socially in- returned plots are less in area but greater in value due clusive and comparably cost-efficient. This section reviews to the provision of services. Additional plots generated different examples of how alternative financing schemes, through the comprehensive development of the com- 28 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC bined areas are sold at a profit to cover the administrative ture for settlement (Booynabancha 2005). Groups also and infrastructure provision costs. These techniques have receive small grants from organizations like ACCA to long been used in Japan, Korea, and Taiwan, China and help them identify and undertake initial upgrading plans. are now being adopted in Malaysia, Mongolia, Indonesia, These groups are also able to mobilize members' savings and Thailand. In Japan, an estimated 30 percent of ur- and complete construction themselves or through hir- ban land has been developed through readjustment (So- ing private contractors. A public agency (Community rensen 2002). In Korea, the government sells a portion of Development Organization Institute-CODI) evaluates the land to offset development costs (UN-Habitat 2011 a). plans, disburses loans, and monitors development prog- ress. Participants also agree to resale restrictions on their property in order to discourage price speculation and to Community Mortgages ensure that low-income groups are not displaced. A sim- In the absence of access to formal banking and credit in- y pgr g a stitutions, nonprofit and community-based savings and introduced in Mongolia (UN-Habitat 201 la). While these lending organizations have provided an important means approaches appear promising, compared to KIP, they are for low-income groups in Indonesia, the Philippines, and much smaller in scale and would benefit from additional Thailand to access finance for acquiring land, developing evaluative research (Buckley and Kallergis 2013). sites, or building homes. These initiatives are the legacy of earlier sites and services upgrading programs, but they The Philippines' Community Mortgage Program rep- seek to cultivate community organization and partici- resents an alternative to traditional, individualized home pation to solicit and control improvements. Indonesia's mortgages. Community organizations pool the savings Kampung Improvement Project (KIP) is an early exam- of members in order to secure subsidized low-interest, ple of a program leveraging community-based organi- long-term mortgages from the state-run Social Housing zations to plan for the improvements of urban informal Finance Corporation, which draws from the country's settlements (Devas 1981). KIP began in 1968 as a sites provident fund. The community organization also holds and services upgrading program and has since benefited the property title and collects loan payments on behalf of some 15 million people. Nearly 90 percent of the funding members. The program also allows community organiza- went to site improvement and infrastructure extension, tions composed of low-income and informal residents to including drainage, water, and electricity connections negotiate with land owners for terms of sale and to secure and improved streets and footpaths (UN-Habitat 2006b). credit from lenders to purchase land for home construc- The program has served as a model for similar schemes tion from public or private finance sources. Since 2001, in Cambodia, Myanmar, the Philippines, and Thailand, the program has provided loans to more than 77,000 with support from Asian Coalition Community Action households (UN-Habitat 2011 a:47) (ACCA), a large nonprofit (Buckley and Kallergis 2013).t The government of Thailand also introduced supportfor a Nongovernmental Organizations and similar community-based upgrading scheme, Baan Man- Support for Homeownership kong. The government provides subsidized funding for community organizations that in turn identify and as- Community groups and nonprofits have created innova- semble plans to purchase land and extend infrastruc- tive partnerships with local governments and the private igtsector to provide affordable housing. Community mort- 1. Brazils Favela-Bairro is an early version of a large-scale slum up- gage programs in the Philippines and Thailand demon- grading program that included the participation of community orga- strate how a partnership between local governments and nizations as partners in identifying local needs, setting agendas, help- ing to prepare and supervise planning, and development efforts. See community organizations can provide access to low-cost Riley et al. (2001) for an overview. finance tools for those living in informal settlements. CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 29 Some microfinance providers have also developed spe- This tendency, combined with lender inexperience with cialized loans for home upgrading, but their expansion technical assistance and marketing, has accounted for the can be limited by lending restrictions or the availability slow uptake of targeted HMF loans in Vietnam. Further- of wholesale financial products to back these loans. Yet in more, microfinance lenders may have difficulty accessing other places such as China, nonprofits are excluded from sources of wholesale finance at interest rates that would providing housing. make low-cost housing microfinance loans an attractive separate product to offer. Civil society and nonprofit groups have developed a prom- inent role in affordable housing development in several There are several steps that can be taken to support the EAP countries, notably Indonesia, the Philippines, and establishment of an HMF market. For example, Indone- Thailand. Much of this work serves residents of slums sia has very limited access to formal finance sources for and informal settlements who do not have title or legal home improvement and existing microfinance lenders claim to the land they occupy. Community groups as well have had difficulty designing loan products for low-in- as larger international organizations such as the Slum/ come groups. The World Bank has recommended that Shack Dwellers International, Habitat for Humanity, and the government encourage lending programs that are the Asian Coalition of Housing Rights have a long history linked to a savings requirement to reduce lending risks of mobilizing informal settlers, who lack proof of income, and enhance reserves. Also, the government can initi- formal identification, or access to credit and banking ser- ate partnerships between lenders, construction materi- vices. Across EAP, among the bottom 40 percent of earn- al supplies, and producers to establish a coherent value ers, just 39 percent had an account at a formal financial chain to better assemble and target loan products. Final- institution (World Bank 2011). These community orga- ly, housing policy can support expansion of microfinance nizations have in turn worked closely with local govern- lending into housing by leveraging Indonesia's existing ments to secure mortgage and construction loans, land Liquidity of Housing Finance Facility (FLPP) to provide titles, and lease agreements. These programs have typi- startup finance. Government insurance or underwriting cally focused on land acquisition and savings for self-help instruments for loans can also provide relief for the risks home improvement. microfinance lenders may initially face upon developing this market. Housing Microfinance lenersin 4.6 STRENGTHS AND WEAKNESSES OF Some nonprofit and commercial microfinance INCREMENTAL AND COMMUNITY- Indonesia, Mongolia, and Vietnam also offer specialized BASED APPROACHES housing microfinance (HMF) loansefor home improvement. These loans complement the strategies of low-income There are constraints to the transferability and success of households to build their homes incrementally using ac- incremental and com munity-based finance and upgrading cumulated savings. HMF loans have ticket sizes and term programs. They require high levels of organization and lengths between those in traditional microfinance loans technical proficiency. In particular, such approaches re- or commercial mortgages. Unlike traditional mortgages, quire extensive collaboration among residents, advoca- homes are not used as collateral for the loan, making them cy organizations, and local governments to identify and suitable for informal settlers and low-income households. develop projects as well as to monitor and repay loans. Ideally, loans should be tied to building materials dis- Communities of ethnically heterogeneous or recently ar- counts and technical assistance to improve their efficacy rived informal settlers may not have shared histories of (Ferguson 1999). Though housing microfinance is an at- organized collective action to form and sustain success- tractive option for home upgrading, many people simply ful community-based organizations. Local governments use traditional microfinance loans for the same purposes. and land owners may also be hostile or indifferent to the 30 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC interests of informal settlers, and may favor eviction or in Indonesia (Archer 1999); or they may free ride by ab- relocation (Mitlin 2011). In the Philippines, mortgage re- staining from involvement but capturing the benefit of payment rates are low (75 percent) in part due to poor higher land values accrued by their neighbors. Due to management and public agencies' hesitancy to repossess these factors, development can take many years and will property or evict low-income residents for political rea- not correspond well with real estate cycles or estimates of sons (UN-Habitat 2011a). Finally, while these programs current demand. Land pooling and readjustment is of- are cost effective because they leverage community say- ten used to assemble land along the edges of cities. In the ings and resources, there is a need for improved coordi- case of Bangkok, for example, these settlements are far nation among donors and administrators to explore how from employment centers (Sheng 2002). Finally, as there to scale up these initiatives. are embedded incentives to maximize property values in order to recover costs, there is limited space for ensuring There are a number of advantages to land pooling and re- the specific provision of affordable housing units in new adjustment programs for residents of informal settlements development. and slums. First, because these approaches eschew the use of eminent domain, they protect owners' property Housing affordability is also strongly dependent on local claims and enhance land values. They also allow local political economy considerations. These can strongly af- governments some influence over growth and land-use fect the capability of civil society groups to partner with decisions along urban fringes and enable them to align or advocate for poor communities. A few well-financed new development with current or future planning goals. private developers have a close and often mutually ben- The expected appreciation of property values also allows eficial proximity to regulatory institutions. Large pri- economies of scale to efficiently finance the extension of vate landowners also have disproportionate access to streets, water, and electricity coverage prior to residen- elected and appointed officials, who in turn may use tial development. Such efficiencies are welcome, because their positions to obtain discretionary approvals or fa- infrastructure improvements are much more expensive vorable rulings in exchange for bribes or favors. Public to introduce retroactively to informal fringe settlements. entities and private landowners are inclined to protect Adjustment also clarifies title and ownership claims and and expand their own development rights to their land, allows occupants to obtain a profit through the sale or rather than encourage property tax reforms or the reg- development of improved land. ularization of informal, low-income settlements. Slums and informal settlements are also the targets of eviction Land pooling and readjustment programs for low-income and clearing efforts, even though displacement simply beneficiaries are difficult to sustain and support. Local gov- moves residents elsewhere within the city and deeper ernments must devote considerable time and resources into poverty. Local political environments and patronage to initiate adjustment discussions with landowners, who networks, along with the often segmented planning and may be hostile or indifferent to proposed changes, and regulatory purviews of public agencies, make long-term to the accurate recording and assessment of their prop- comprehensive planning difficult and slow. Additionally, erties. Furthermore, pooling and adjustment depends on the highly varied interests and capacities of civil society consensus, or at least "consent" As a result, negotiations actors to influence planning and development priorities among property owners and stakeholders can be uncer- have important consequences for land tenure security tain and time consuming, especially when many inter- and affordable housing provision in different EAP coun- ests are involved, as may occur in Japan (Sorensen 2000). tries. Collaborative partnerships between public agencies There is also the possibility that land owners may become and civil society groups are in some ways are a promising speculators and slow or block land transfers to allow ap- channel to securing tenure claims and housing finance. preciation of vacant land for future sale, as has occurred However, they are not easily replicable. CHAPTER 4: OVERVIEW OF CURRENT AFFORDABLE HOUSING INTERVENTIONS 1 31  Chapter 5 Future Directions for Affordable Housing Provision The East Asia and Pacific region (EAP) faces some signifi- Such transfers may also deter local authorities from more cant barriers to the provision of adequate affordable hous- equitably regulating land use and future development, ing. At a basic level, reliable data about the supply of for- because they stand to gain from sales and tax revenues mal and informal housing options, their location, and the (Logan and Molotch 1987). Master land-use plans may demand for these or other formal types of housing is lim- only be partially disclosed to the public, and developers ited. Apart from wealthy and investment consumers, data must acquire permits incrementally with limited knowl- on other income groups or the segmentation of prices in edge of whether the development complies with existing local housing markets are scarce. Further, information on or future master plans. Limited public disclosure of prop- housing stock conditions, occupancy, and resales is also erty acquisitions and development plans also hinders limited. Land use and master planning documents are the ability of existing tenants to contest forced evictions. not widely published and new development may proceed These practices encourage governments to view new de- in a haphazard manner and apart from prescribed plan- velopment in terms of fiscal capture rather than its con- ning goals. Similarly, property registration and recording tribution to public welfare or specific planning goals. practices are uneven and often politically contentious. This limits accurate property value assessment and taxa- On the demand side, scarcity of data about consumers'in- tion as a dependable source of municipal revenues. come levels, demographics, andpreferences can hinder the reach of subsidies or targeted loan products. Despite high On the supply side, inadequate data about location, types of savings rates throughout EAP, conventional mortgage fi- housing units, and price can misdirect public or private sec- nance remains out of reach of many, especially the ur- tor housing investment. In Indonesia, for example, infor- ban poor. Public subsidy programs for affordable rental mation about land use and development plans is not pub- or owner housing suffer from ineffective administrative licly disclosed. In Vietnam, public lands are transferred mechanisms for screening and assessing target popula- directly to private developers at a low cost and local gov- tions. Monitoring and evaluation of program outcomes ernments collect taxes on the sale of improved land. In and goals is also poor. Better data collection can help to more China, public agencies acquire land at a low cost and sell effectively structure and target subsidies, such as vouchers or it at a much higher price to private developers in order to housing units. More information is needed on tenure van- finance public services. This represents a transfer of pub- ety and demand, property value assessments, transportation lic lands to a small number of well-connected developers patterns, density thresholds, and economic and demo- with limited public input, concession, or transparency. graphic characteristics of different urban populations. 33 5.1 URBAN PLANNING AND traffic delays. Reliance on automobiles for long-distance REGULATORY FRAMEWORKS travel also increases air pollution and public health risks Local governments should review permitting and approvalsothers. New and clan- procedures with the goal of reducing burdens of time, cost, on nothat hasenotben a s fr sscetbliyt and uncertainty for developers and residents wishing to in- eath as nslide floo d or dequate dn vest in housing. Costly and inflexible building standards thulies andso e fpop ing in uch develop- raise the marginal price for new development or upgrad- ments a b erin danger. ing of existing buildings. Some forms of occupancy and building design can also preclude residents from home- based enterprises, which enhance household income and 5.2 HOUSING FINANCE AND offset the overall cost of housing for residents. In some INSTITUTIONS SUPPORTING cases, regulations are directly related to colonial land- HOUSING POLICY use regimes with standards that are antiquated, restric- tive, or inappropriate for current building technologies Public andprivate housingfinance institutions both have and demands. Similarly, administrative and entitlement important and increasingly significant roles in improving procedures for property registration can take months, the variety of urban housing options. Currently, there are increasing costs and uncertainty for developers and in- several limitations to housing finance institutions in the viting corruption. Subdividing property in the Philip- region. In countries such as Mongolia, the Philippines, pines for example, requires 41 permits (Ballesteros 2002). and Vietnam, private finance has a comparatively small Finally, public entities, such as state or federal agencies share of mortgage originations. The credit and apprais- and ministries, may own large areas of land within and al institutions that support private finance by assessing surrounding major cities, especially capitals. Municipal borrowers and insuring mortgages are weak; so are le- governments may have limited control over planning and gal protections for mortgage contracts. Institutional and directing growth on or around these areas. legal weaknesses heighten risk in countries that are in- troducing residential mortgage-backed securities. Gov- Local governments should review existing land use plans ement-subsidized mortgages can also suffer from low and development standards for ways to encourage infill de- repayment rates without adequate enforcement and col- velopment, density, and mixed-used development.' Overly lection mechanisms. Subsidized mortgages can crowd restrictive building height and density limits in central city out private lenders in the mortgage market and impose areas raise development costs and may encourage fringe substantial public costs that are frequently not quantified. development. Such restrictions also increase commuting costs and put greater pressure on local governments to Across EAP, only four countries-China, Malaysia, Pap- extend services to outlying areas (Bertaud and Buckley ua New Guinea, and the Solomon Islands-have central 2005; Brueckner 2007). Unplanned urban expansion can housing ministries. Among other countries, housing ii- also carry tremendous implicit future costs. Inadequate tiatives are articulated between levels of government or road infrastructure contributes to long commutes and in partnership with nonprofits. On a smaller scale, non- profit and civil society groups in Cambodia, Indonesia, 1. The IFC's Affordable and socially Sustainable Housing Application inoat e ollotie aproa itpu h osn (ASHA) is a tool that summarizes key lessons drawn from 38 success- ful case studies of privately developed affordable housing projects. The authorities to upgrade informal settlements, acquire land, tool identifies specific siting, design, planning, and community devel- and extend finance to the urban poor. A number of these opment practices to improve social inclusiveness and quality of life for residents. It can also be used by both governments and the private sector to explore the feasibility of affordable housing development rel- face problems in replicating and scaling up their efforts ative to existing regulations and finance sources (tFC 2014). (Buckley and Kallergis 2013). 34 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC 5.3 URBAN LAND ACQUISITION right protections or unit safety standards. Renting has a number of benefits for low-income residents. It allows for Several channels through which land is acquired also sup- mobility and payment flexibility, it does not require very port housing affordability. Land pooling and readjustment much savings or a formal credit history, and households schemes require careful collaboration with property own- can sublet space for additional income. Renting may also ers, local governments, and community organizations. be a With good planning, these schemes can provide the basis roate fo r o n ho a teetelin for infrastructure investment in slum and squatter settle- ments, thereby improving property and resale values in the long run. Nonprofit and community-based organiza- There are several steps policy makers can take to reduce tions also have demonstrated an ability to act as alterna- constraints on rental markets. First, governments and tive savings and lending institutions for the low-income housing authorities can develop policy agendas that sup- communities they serve. In partnership with public agen- cies, they can help informal settlers identify and assemble p Renting an aprori aenati thoe n- land for purchase or resettlement and extend financing for es r ent g n owe s ae Pricla advan- property acquisition and home construction. Despite some initial successes, as in the case of Baan Mankong in Thai- land, regional support for these programs is still limited. barriers to private investment in both informal and for- Land rental arrangements can permit informal settlers cer- of rental housing colmetsdownershipandpincrease tain usufruct rights to occupy and improve private land, divertyi housing marets w nsequen bneset provided lease agreements are adequately enforced. Like allt in need. pooling and readjustment schemes, land rental requires high levels of sophisticated coordination between gov- Local governments can influence rental markets through ernment and civil society groups. In Thailand, squatters subsidies and incentives rather than price controls. The have negotiated with property owners to lease or pur- Philippines is the only country in EAP with rent controls, chase plots planned for development. Through this and its current problems with the policy echo past prob- land-sharing approach, developers can incorporate lems of China, Japan, Malaysia, and Singapore, which these low-income residents in exchange for density bo- have all eliminated rent control. Rental price controls nus agreements or cross-subsidies. Similarly, communal land agreements can use a nongovernmental organization discourage landlords from adequately maintaining or (NGO) to represent occupants and assemble their lease improving their rental units. Rent control also dissuades agreements in order attract funding and subsidies. The NGO can then negotiate with owners to secure long-term i e in nretal usi wih rises the oe lease agreements (such as a leasehold) or to purchase the arie o mr-rate unts. The, subsidies sol be property on behalf of the occupants. the form of vouchers or tax breaks for renters. Or they can consist of construction materials, finance subsidies, 5.4 POLICYshort-term loans, or development incentives to landlords PONL OPTIONS FONRADUINGS that agree to provide or set aside affordable units (Mwan- RENTAL MARKET CONSTRAINTS gi 1997: 157). Weakly developed rental markets in EAP countries could be expanded into an important channel for supplying qual- Affordable rental units are often leased to tenants who are ity, low-cost housing. Most of the region's urban poor live wealthy enough to afford more expensive, market-priced in informal rentals under agreements without tenant units. Demand-side interventions such as vouchers CHAPTER 5: FUTURE DIRECTIONS FOR AFFORDABLE HOUSING PROVISION 35 and subsidies should require that local governments and vulnerable groups. Housing finance institutions have and nonprofits administering these programs develop an important role to play in setting regulatory agendas, and improve systems to identify, screen, and monitor securing and stabilizing housing finance markets, and low-income beneficiary households (UN-Habitat 2008). directing investment to help meet housing policy goals. Subsidies given to developers or landlords can be con- Governments can also encourage developers to provide tingent upon regular verification that affordable units are new rental and cross-subsidized developments through rented to those who need them. Housing authorities and planning and regulatory incentives. In cooperation with community organizations should also develop a frame- local nonprofit organizations, housing agencies can up- work for articulating and protecting tenant rights, which grade or acquire land for informal settlements through can reduce the power of corrupt and abusive landlords pooling and readjustment, and extend mortgages by le- and allow low-income tenants legal restitution and pro- veraging community savings groups. tection from eviction or mistreatment. Finally, tax penal- ties or incentives can be developed to encourage owners The lack of data on aspects of housing demand represents to let vacant properties as rental units (Blanco et al. 2014). a critical opportunityforfuture research. This report pro- vides an overview of the main supply-side interventions Governments, universities, and nonprofit groups should al- and constraints from across the region. However, appro- locate resources to studying supply and demand contours priate policies for affordable housing are hindered by of urban rental markets. There is little information about lack of information on the price and supply of different EAP tenants, such as the proportion of their income housing options, and on the market segmentation of con- spent on rent, household sizes and structures, and unit sumer populations. Across the region, data on rental and turnover or vacancy rates. Nor is it clear what rental op- home sales markets are limited, especially with respect to tions can accommodate traditionally marginalized popu- informal markets. In both formal and informal markets, lations such as children, the elderly, the disabled, or wom- housing stock quality, filtering trends, prices per square en and female-headed households. Policy makers should meter, and price- or rent-to-income ratios are not well also consider existing urban homeowners as potential sup- known. Local and regional housing markets are not well pliers of rental housing, as they may build ancillary units for rental or sublet unused rooms to tenants (Carey 2009). establishment of housing observatories to identify and record key urban housing market indicators, similar to those developed by the United Nations and Habitat for 5.5 CONSIDERATIONS FOR FUTURE Humanity. RESEARCH AND ACTION Demand-side data can improve the investment decisions of Governments, civil society groups, private developers, and both the private sector and public housing agencies. Such financial institutions all have complementary roles in im- data would allow developers and lenders to better gauge proving housing affordability (Angel 2000; Buckley and demand for particular financial and housing products in Kalarickal 2006). Governments should both facilitate segments of the market that may be underserved. These housing markets, which can help expand access to hous- data would also improve the transparency and account- ing finance, and actively support multiple tenure options, ability of public investment in affordable housing in- including rental housing. Governments should develop terventions, as target populations would be more easily technical and regulatory capacities for identifying and identified and subsidies or assistance better directed to correcting housing market distortions, including specu- them. Additionally, greater refinement of the definitions lative price fluctuations. Subsidies for housing consump- of urban areas, such as the inclusion of urban agglomera- tion should be more accurately targeted to low-income tion as a key component, can help local governments bet- 36 1 ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC ter identify urban growth and develop more appropriate tive authorities, and jurisdictions can provide guidance infrastructure and service plans. for developing affordable housing strategies. An audit can help to identify standards and restrictions that are super- There is also limited information on housing demand fluous, redundant, or overly restrictive and can also help among traditionally marginalized or vulnerable popula- to determine the ideal roles for public agencies charged tions in urban areas. There is little understanding of the with planning and land use administration (Payne and housing needs of low-income communities, indigenous Majale 2004). groups, ethnic minorities, single-parent or female-head- ed households, and the elderly. Nor is it clear what types Innovative land assembly and community-based finance of tenure are available to these groups or how well the schemes need more detailed study. Despite growing in- available options meet their needs. Although these pop- terest in the role of community groups as partners in ulations have received little attention, they are especially low-income housing provision, more details are needed likely to benefit from improved affordable housing pro- about best practices, challenges, and lessons for replica- grams, such as rental units or rent protections (Ron- tion and scaling up (Buckley and Kallergis 2013). Sim- ald and Nakano 2012). Similarly, country-specific data, ilarly, donors and policy makers need to have a better whether in the form of market assessments or case-based understanding of various interest groups and stakehold- housing policy research, is especially limited in Pacific is- ers, whose influence can be leveraged to make key policy land countries and Myanmar (Storey 2006). changes or with whom collaborative alliances and part- nerships can be developed (Lipman and Rajack 2011). An Regulatory audits can provide important insight into legal understanding of the local political economy of housing and administrative structures that shape urban housing provision is a key first step to applying existing data and and land markets. Cataloging the regulations, administra- resources to more effectively reach affordability goals. CHAPTER 5: FUTURE DIRECTIONS FOR AFFORDABLE HOUSING PROVISION 1 37  Appendix A Overview of Key Affordable Housing Policies and Programs in EAP Countries Affordable Country housing policy Policy options applied Extent of application Cambodia No Policies restricting land ownership by foreigners * Nationwide China Yes Assisted homeownership policies * Home-ownership saving scheme * Assisted 2.4 million households by 2003 * Regulation aimed to reduce speculation in urban * Nationwide property: increased equity down payment, rules against hoarding housing stock, property tax Public rental housing and social housing * 36 million social housing units within next five years Policies restricting property ownership by foreigners * Nationwide policy Fiji Yes Public rental housing * Nationwide Settlement upgrading and legal regularization * Nationwide Indonesia Yes Assisted homeownership policies * Subsidized housing loans to medium, lower medium, * Nationwide and low-income workers * National housing savings scheme * Nationwide (for civil servants) Settlement upgrading and legal regularization (KIP and * Nationwide since 1979 CoBild schemes) Policies restricting property ownership by foreigners * Nationwide (Continued next page) 39 Affordable Country housing policy Policy options applied Extent of application Korea, Yes Assisted homeownership policies Rep. of * Subsidies in construction loans * Nationwide Cross-subsidized housing * Price ceilings for newly constructed apartments * Nationwide * Mandatory quota of social housing units for new * Seoul Metropolitan area residential redevelopment projects Public rental housing and social housing * Public rental housing * Nationwide (9.7% of the total urban housing stock) * Innovative approach to public rental housing-leasing * 2/3 of housing is managed system known as Cheonsei or Jonsei under this system Land readjustment or land pooling * Nationwide Lao PDR Information not Policies restricting property ownership by foreigners * Nationwide Malaysia Yes Assisted homeownership policies * Home-ownership compulsory saving schemes * Nationwide Cross-subsidized housing * Quota for provision of low and low-medium cost * Nationwide (limited impact) housing by private developers Public rental housing * Nationwide Mongolia Yes Assisted homeownership policies *Housing programs focused on low-income, first-time * 100,000 apartments (very limited buyers success) Public rental housing * Natiornwide Policies restricting property ownership by foreigners * Nationwide Myanmar Information not Policies restricting property ownership by foreigners * Nationwide available Papua No Settlement upgrading and legal regularization New *Regulatory structure that ties provision of tenure rights Guinea (to informal land and housing) to occupancy (Continued next page) 40 I ACCESS To AFFORDABLE AND Low-INCOME HOUSING IN EAST ASIA AND THE PACIFIC Affordable Philippines Yes Assisted homeownership policies * Compulsory homeownership saving schemes * Nationwide * Implementation of community asset ownership concept * Nationwide, US$487 million, 10-year program Cross-subsidized housing * "Balanced Housing" rule * National policy, ignored by most developers Social housing program * Nationwide (Coordinated by National Housing Authority) Settlement upgrading and legal regularization * Nationwide * Recognition of new tenure forms * Community-based financing Policies restricting property ownership by foreigners * National law Other * National law * Legal protection against eviction Solomon No Assisted homeownership policies Islands * Homeownership saving scheme * Nationwide Public rental housing * Alocated to civil servants Settlement upgrading and legal regularization *Distribution of Temporary Occupation Licenses * National, but do facto limited to Part Vila Thailand Yes Assisted homeownership policies * Nationwide Public rental housing Settlement upgrading and legal regularization * Nationwide Policies restricting property ownership by foreigners Vanuatu No Assisted homeownership policies * Homeownership saving scheme * Limited impact Vietnam Yes Assisted homeownership policies * Privatization of state-owned housing * Nationwide, but mostly in Hanoi * Introduction of legal base for private housing market * National policy Public rental housing and social housing * State housing provision and distribution * Nationwide * Public rental housing * Nationwide, significant amount of public housing is kept for public servants APPENDIX A: OVERVIEW OF KEY AFFORDABLE HOUSING POLICIES AND PROGRAMS I 41  References Abrams, C. 1964. 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