Low Income Housing Finance: Low Income Housing Finance: Brazilian ExperienceBrazilian Experience
Júnia Santa RosaInstitutional Development and Technical Cooperation Department
Ministry of Cities
New Delhi, January 27, 2010
Brazil
26 States and Federal District
5.564 municipalities
BRAZILIAN CONTEXTBRAZILIAN CONTEXT: FEDERALISM AND INEQUALITIES
FEATURES:
Diversity and relevant inequalities spatial, social, economic, political and administrative among government spheres
190 million inhabbitants(2008) 30% Metropolitan Regions
This feature interferes direct on the response capacity from local and state governments capacity on responding the needs from the population
Approximately 90% of municipalities with less than 10.000 inhabitants depend almost fully on funds transfers from: FPM ( National level -Fundo de Participação dos Municípios) de ICMS ( states must transfer 25% of taxes on traded goods to municipalities)
BRAZILIAN CONTEXTBRAZILIAN CONTEXT: FEDERALISM AND INEQUALITIES
MUNICÍPIOS COM POP. < 20 HAB.
MUNICÍPIOS COM POP. > 100 MIL
HAB.
MUNICÍPIOS COM POP. ENTRE 20 MIL
E 100 MIL HAB.
Source: SOUZA, 2002 e IBGE, 2008.
MUNICIPAL PROFILE ACCORDING POPULATION:
Public policies until the 80’s Decision making and financial centralization Vertical standard of decisions and management Exclusion of civil society on decision making processes Absence of social control and evaluation
BRAZILIAN CONTEXT:BRAZILIAN CONTEXT: DESCENTRALIZATION OF PUBLIC POLICIES
90’s: strengthening of decentralization process of social policies (ex: health, education, social assistance, housing, sanitation)
Federal constitutional of 1988: complexity on federal arrangements Redefinition of competences and attributions of government spheres Common, complementary and concurrent competences Decentralization of social policies, specially for municipalities Concurrent legislative attributions
NATIONAL HOUSING POLICIES IN BRAZILNATIONAL HOUSING POLICIES IN BRAZIL: SYSTEM E FUNDINGS
1964 National Housing Policy (SFH e BNH)Decision making centralization by a national agency ( National Housing Bank - BNH)
1967 FGTS e SBPE (regulatory savings and loans system)
1986 End of BNH, different Ministries in charge of housing policies until the 90’s
1988 (CF) Housing: concurrent attributions among federal, state and municipal levelsLack o federal policies, spread initiatives by states adn municipalities
1997 SFI (secondary market for mortgages)
2001 Statute of the Cities approval (Law 10.257/01)
2003 Ministry of Cities
2004 National Housing Policy (PNH) and National Cities Council
2005 National Social Housing System and Fund - SNHIS and FNHIS (Law 11.124/05)
2007 Growth Acceleration Program (PAC)
2008 National Housing Plan (PlanHab)
2009 My House My Life Program (PMCMV)
National Housing System and Fund (SNHIS/ FNHIS):
MAIN PROGRESSES MAIN PROGRESSES ON HOUSING POLICY DURING THE PERIOD 2003-2009
Housing Markets (regulated and non regulated):
My House My Life Program (MCMV):
National Housing Plan (PlanHab):
Growth Acceleration Program (PAC):
Integration of funding and actions to face the housing deficit
Measures on legal framework, trust deed, inductions for lower income loans, new
guarantee instruments
Long term planning for housing, strong civil society
Historic benchmark on slum upgrading policies
Incentives for new housing construction, funding for the new subsidies and finance model for low
income housing
Founded in 1861, main implementing agency of national public policies and 4th bank in terms of assets in Brazil
Since 1986 assumed operational functions of the National Housing Bank (BNH) :
Major housing finance agent and relevant role on finance urban development, specially basic sanitation.
Addicionally in 1986, CAIXA took over the role of operational agent of Fundo de Garantia do Tempo de Serviço – FGTS (unemployment provident fund), previously managed by the BNH.
CAIXA ECONÔMICA FEDERAL - CAIXA CAIXA
Rent evolution on housing investmentsRent evolution on housing investments
*RES. 460/04 - a partir de 01jun05SBPE - Fonte: ABECIP – Atualização: Outubro/ 2009
Fonte: Quadro Presi Outubro/2009 (não inclui PMCMV)
Goal: 22,50
3,93 4,44 5,12
7,74
11,49
17,06
24,20
19,31
0,00
5,00
10,00
15,00
20,00
25,00
30,00
2002 2003 2004 2005 2006 2007 2008 2009
- FGTS, FAR, FDS, OGU, CAIXA, FAR, SBPE and FGTS (subsidy) -
US$ bilions
Funding Sources: FGTS, FAR, FDS,OGU, FATSource: MCIDADES and CAIXA – Update: 30/10/2009
INVESTMENTS ON HOUSINGINVESTMENTS ON HOUSING
- Focus on low income brackets -
3226
44 46
65
77
64 63
25 41
26 25
21
14
19 2143
33 30 29
149
17 16
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009
up to 3 mw over 3 up to 5 mw over 5 mw
OPERATIONS PER INCOME BRACKET (%)
1 minimum wage (mw.) = US$ 300
NEW CYCLY OF GROWTH NEW CYCLY OF GROWTH IN THE HOUSING SECTOR
Source: Elaborated by CAIXA, based on Ministry of Finance data.
HOUSING UNITS FINANCE IN BRAZIL (1974-2008)(average per period)
363.540
436.139
155.468173.879
327.054
494.562
1974-78 1979-84 1985-89 1990-94 1995-02 2003-08
Source: Elaborated by CAIXA (SUPLA/Cenários), with data from: Global Property Guide, Central Banks, Ministry of Finance, jun/2009
HO
LAN
DA
EUA
ING
LATE
RR
A
IRLA
ND
A
ESPA
NH
A
ÁFR
ICA
DO
SU
L
CH
ILE
HU
NG
RIA
MÉX
ICO
REP
. TC
HEC
A
POLÔ
NIA
ÍND
IA
BR
ASI
L
HOUSING LOANS %PIB
TOTAL LOANS %PIB
HOUSING FINANCE x PIBHOUSING FINANCE x PIB
Housing Deficit (2007) 6,3
Future Housing Needs (2008-2023) 25,0
TOTAL HOUSING NEEDS 31,3
Milhões de domicílios
Source: Elaborated fromFJP/CEI (2008) based on IBGE/Censo 2000 and MCidades/CEDEPLAR (2007).
DEFICIT FOR SLUM UPGRADING 3,2
DIMENSIONDIMENSION OF HOUSING PROBLEM
Source: Elaborated fromFJP/CEI (2008) based on IBGE/Censo 2000 and MCidades/CEDEPLAR (2007).
INCOME BRACKETS: 6 a 10 sm
2% 3 a 6 sm 7%
Até 3 sm 91%
HOUSING DEFICIT: FUTURE DEMOGRAPHIC NEEDS:Families with access to credit need for
complementary subsidies
Families who couldn’t afford long term loans,
need for subsidies and public programs
FOCUS ON SOCIAL FOCUS ON SOCIAL HOUSING:HOUSING:
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1
Families integrated of accumulated housing deficit
11% of domiciles
NATIONAL HOUSING PLAN: PLANHABPLANHAB
Long term planning tool, to face the housing needs
Strategic axes of PlanHab:
1. Housing subsidies and finance model
2. Urban and land policies
3. Institutional arrangements
4. Civil construction chain
1) Menu of housing alternatives for different types of municipalities2) Classification of families (deficit and future housing needs) under
income groups3) Recognition of different costs for housing alternatives on different
states4) Finance and subsidies model according to income brackets and
type of municipalities5) Scenarios of funding sources and possibilities6) Government must be prepared to attend accumulated deficit and
part of future housing needs
PREMISES – FINANCE AND SUBSIDIESFINANCE AND SUBSIDIES
INCOME GROUPS:
NEEDS BY NEEDS BY INCOME BRACKETSINCOME BRACKETS
considering family income per capita, housing alternatives menu and types of municipalities
relates income brackets with adequate funding sources and programs, based on credit affordability
INCOME GROUPS AND INCOME GROUPS AND FUNDINGSFUNDINGS
Free housing finance markets
Need for special conditions and regulated market (SFH)
Need for partial subsidies to leverage finance
Need for subsidies
CONDIÇÕES DE ACESSO À MORADIA
DEFICIT AND FUTURE NEEDSINCOME GROUPS - families
FONTES DE RECURSOS
1 No access to credit Government budget
2Limited affordability for long term credit
National Gov budget/ FGTS
3Affordability under special credit conditions FGTS/ SBPE (regulated
savings and loans system)
4Market based access to housing
Housing finance unregulated markets, finance by
construction companies and family own resources
In order to expand access to housing for low income families, the My House, My Life Program, assumes that each income bracket
needs a different strategy.
Up to US$ 900
Up to US$1.800
US$ 3.000
STRATEGIESINCOME GROUPS
Emphasis on subsidies +RET +FGHAB
+Reduction/ insurance exemption + lower interest
rates
Subsidy (↑ income ↓ subsidy) +RET
+FGHAB+Lower cost insurance+Lower interest rates
FGHAB + low cost insurance
STRATEGIES BASED ON INCOME
Program of subsidies and finance with federal government funding: families with monthly income until US$ 900
FGTS finance+ subsidy mix : families with monthly income between US$ 900 and US$ 1.800
Guarantee Fund: refinance for income loss periods and lower insurance costs
PNHR – National Rural Program: family agricultures and rural workers with annual income until US$ 39.000
Community Based and Non Governmental Organizations Program: social movements and organizations, families with monthly income until US$ 900
Registry costs: lower costs and more agile process
Environmental licenses: faster and agile procedures
Finance for infrastructure: investments on infrastructure
Finance for industry construction chain: BNDES
PROGRAMS AND TOOLS OF PMCMVPMCMV
TYPOLOGY OF MUNICIPALITIESTYPOLOGY OF MUNICIPALITIES
REGIONAL DIVERSITY as a principle
The municipalities typology consider the specificities of micro regions where cities are located, urban and socioeconomic indicators
DIVERSITY OF HOUSING ALTERNATIVESHOUSING ALTERNATIVES
New units: private and public sector, social movements and community based organizations
Requalification of buildings located in consolidated areas
Sites and services supply
Construction material kit + technical assistance
Social rental housing
Slum upgrading strategies
STRATEGIESSTRATEGIES
Eliminate the housing deficit and face partially the future needs for housing
Expand housing finance for low income families, through:→ proportional subsidies according to income→ lower finance costs→ diversification of housing alternatives
OBJECTIVES OBJECTIVES
METAS METAS
FEDERAL, STATE AND MUNICIPAL BUDGETS:2,63% of federal budget for housing and target of 1% of State and Municipal budgets (PEC – constitutional ammendment currently in the Congress)
FUNDO DE GARANTIA DO TEMPO DE SERVIÇO (FGTS):Funding for finance+ increase of available funding for subsidies
NEEDED INVESTMENTS ON HOUSING
SISTEMA BRASILEIRO DE POUPANÇA E EMPRÉSTIMO (SBPE):Regulated savings and loans system, towards expansion of loans to low income brackets
SUBSIDIESSUBSIDIES
It will be needed to attend the needs of 1 MILLION FAMILIES PER YEAR
(income until US$ 1.800) from 2012
TO REACH THE TO REACH THE OBJECTIVESOBJECTIVES
NEEDED INVESTMENTS ON HOUSING
Federal Budget: US$ 100 bilhões até 2023 (for 2010 estimated budget of ca US$ 5,5 bi)
States and Municipal Budgets: US$ 50 billion until 2023
FGTS: US$ 43 billion until 2023 (average US$ 2,8 billion/ year)
FINANCEFINANCE
FGTS: US$ 265 billion until 2023 (average US$ 18 billion/ year: loans to individuals + public
SBPE: US$ 43 billion until 2023 (average R$ 13 billion/ year: individual and corporate loans)
STAGES OF IMPLEMENTATION OF THE NEW SUBSIDIES MODELSTAGES OF IMPLEMENTATION OF THE NEW SUBSIDIES MODEL
1st Stage (2009-11) Transition and implementation
2nd Stage (2012-15) Consolidation
3rd Stage (2016-23) Achievements and results
Implement a large scale housing program
Promote slum upgrading
Expand federal investments on housing
Increase limits and funding for subsidies
Implement a broader menu of housing alternatives
Housing loans guarantee fund – set up
Expand available FGTS funding for subsidies
(2009-2011) (2012-2015) (2016-2019) (2019-2023)
SUBSIDIES PROGRAMSUBSIDIES PROGRAM
Reduce funding costs for middle income brackets
ACTIONS, PROGRAMS AND PROJECTS
√√
√√
√√
√√
√√
√√
√√
√√
(2009-2011) (2012-2015) (2016-2019) (2019-2023)
FINANCE AND SUBSIDIESFINANCE AND SUBSIDIES
Improve legal and institutional framework for the housing loans guarantee fund
Implement measures to develop a mortgage insurance market
Expand down market regulated savings and loans system (SBPE)
√√
√√
√√Evaluate alternatives and programs already implemented
Design a social rental housing program
Design a program of sites and services emphasizing medium and smaller cities
ACTIONS, PROGRAMS AND PROJECTS
√√
√√
Expand private sector housing loans to low income groups √√
CHALENGES
•Strengthening the guarantee fund – legal and regulatory framework
• Include the private banks in the subsidies system
• Improve data base of beneficiaries and demand
• Improve financial services and products for low income brackets
• Expand financial participation at municipal and state levels
• Introduce savings as criteria and financial counterpart of
beneficiaries
• Improve available products for low income within real estate
markets
• Expand housing markets to fit deficit and housing needs
GLOSSARYGLOSSARY
• BNH – National Housing Bank• FGTS – Guarantee Fund for time of employment• FNHIS – National Housing Fund for Social Housing• IBGE – Brazilian Institute for Geography and Statistics• OGU – Federal Budget• PAC – Acceleration Growth Program• PEC – Constitution Amendment Proposal• PIB – GDP• PLANHAB – National Housing Plan• PLHIS – Local Government Plan for Social Housing• PMCMV – My House, My Life Program• PNH – National Housing Policy• PPA – Five years Budget• RM – Metropolitan Region• SBPE – Brazilian Savings and Loans System (regulated)• SFH – Housing Finance System• SM – Minimum Wage• SNH – National Secretary of Housing, Ministry of Cities• SNHIS – National System for Social Housing• SNHM – National System for Housing Markets
Júnia Santa RosaInstitutional Development and Technical Cooperation Department
Ministry of Cities
New Delhi, January 27, 2010