MODULE 5: PHILIPPINE PERSPECTIVE OF HOUSING

Duration: May 2021

Session: Week 7
Number of Hours: 3 hours
Objective: To learn the current housing need, demands and supply in the
Philippines.

5.1 Current Housing Needs, Demand and Supply

HOUSING NEED AND EFFECTIVE DEMAND

Housing need includes the total requirements for shelter without
consideration for whether or not families can pay for it. It may require
structures of minimum quality and maximum rate of occupancy. It includes a
minimum of privacy and security, but relatively affordable access to work
opportunities.

Effective housing demand is derived from each household’s willingness to

pay for housing in relation to other items in the household budget.

To determine the demand schedules, it would be necessary to:

1. Define the range of housing choices or packages of components
available.
2. Establish the economic cost or rental value of each choice.
3. Determine the quality of each type of housing demanded in the
prevailing cost.

Choices would then be specified according to the location with respect

particularly to employment opportunities and other services and amenities
offered by a city.

THE NATURE OF THE HOUSING MARKET

The urban housing market can be defined in a framework of supply and
demand.
1. The effective demand for housing is the function of income levels,
and price of housing and other goods. Most households, regardless of
income level, prefer housing services over other consumer purchases. The
choice of housing depends upon quality and location, and the price they
dictate.
2. The supply of housing services depends on the amount of productive
resources – land, labor, capital and management – made available for
expansion and maintenance of urban housing stock. The size of
housing stock changes slowly because housing is a durable good. Annual
increases in dwelling units (new construction + renovation of existing units)
constitute only about 1% to 3% of the existing stock.
3. Low income households are able to purchase only what higher
income households do not want. The constant increase in the number of
urban households and the differences in income levels make housing more
readily available to the highest bidder.
4. As a result of all these factors, many households are forced to lower
their expectations and settle for lower quality accommodations.

Statistics for Housing

Policy
Referencehttp://www.psa.gov.ph/sites/default/files/6.6.3%20Statistics%20for
%20Housing%20Policy.pdf

Housing statistics are critical for the creation of policies which are in line with
the country’s development goals.

Under AmBisyon Natin 2040, Filipino families are envisioned to live in

comfortable homes with secure tenure and the necessary amenities.

This paper aims to present the data gaps in the generation of statistics which
are used for the estimation of housing demand and supply and how it impacts
housing policy and overall industry growth.

I. INTRODUCTION
In 2011, then Board of Investments (BOI) Managing Head Adrian Cristobal
challenged the Subdivision and Housing Developers Association, Inc. (SHDA)
to produce a roadmap for the housing industry, which will serve as a tool for
public and private sector collaboration, planning and coordination by providing
the following:
1. A clear status of the housing need of the country
2. The current production capacity of the housing industry
3. The economic impact of housing
4. Factors that affect housing supply: affordability, policy, and regulatory
environment

SHDA partnered with the Center for Research and Communication

Foundation, Inc. (CRC) in formulating the said roadmap. This roadmap was
further enhanced in 2014 through the assistance of the United States Agency
for International Development (USAID) Advancing Philippine Competitiveness
(COMPETE) Project as requested by the Department of Trade and Industry
(DTI).

In 2016, this roadmap was updated to focus on the impact of housing activities

on the economy. Below are the key SHDA Roadmap Objectives:

1. Increase housing production
a. 1 million houses by 2016
b. 2 million houses by 2022
c. 7 million houses by 2030
2. Implement a comprehensive housing subsidy program for target
segments to enhance affordability
 3. Generate and mobilize funds for end-user financing
4. Improve the housing regulatory environment.

Since the realization of the roadmap target of 1 million homes in 2016, the
industry is confronted with the following new challenges:
1. Changes in BOI’s Annual Investment Priorities Plan for 2017 to 2020
a. Removal of income tax holiday incentives for residential projects
in Metro Manila;
b. Decrease of price ceiling from PHP 3,000,000 to PHP 2,000,000;
2. Implementation of RA 10884 (Balanced Housing Development Program
Amendments)
a. Requirement of proof of compliance with socialized housing
compliance prior to issuance of License to Sell (5% of total
project area or cost for vertical projects, 15% of total project
area or cost for horizontal projects);
b. Centralized approval of accreditation of socialized housing
compliance projects to the Office of the Housing and Land Use
Regulatory Board (HLURB) Chief Executive Officer;
3. Increase in the required minimum floor areas and lot areas that
accompanied the adjustment in the price ceiling for socialized housing;
4. Approval of Tax Reform for Acceleration and Inclusion Act (TRAIN),
which lowers the Value-Added Tax exemption for housing projects
from PHP 3,199,200 to PHP 2,000,000 by 2021
5. Surge in zonal values of land and cost of construction materials
6. Continuous decline of share of housing in the national budget
7. On-and-Off Threats of Moratorium on Land Use Conversion with the
Department of Agrarian Reform

These challenges manifested in 2018 into a 25% drop in residential units

based on issued Licenses to Sell compared to its all-time highest production
of 244,823 units in 2017.

There is a need to update and improve on the existing housing demand and
supply estimates, which will guide public and private sector stakeholders in
reformulating the strategies needed to sustain the growth of the housing
industry.

This paper outlines the data gaps in the generation of statistics which are used
for the creation of frameworks used for the estimation of housing demand and
supply and how it impacts housing policy.

II. Estimation of Housing Demand

The Statistical Research and Training Center (SRTC), in collaboration with the
Housing and Urban Development Coordinating Council (HUDCC), created a
national framework which was used to estimate the housing backlog and
housing needs of the country.1

Under this framework, accumulated housing needs are estimated using

information on occupied housing units, construction materials of walls and
roofs, type of housing structures and tenure status. Future needs, on the other
hand, are projected based on population growth. These are taken from
Population and Housing Statistics generated by the Philippine Statistics
Authority.

This framework, however, lacks segmentation based on Housing Classification

set by the Housing and Land Use Regulatory Board (HLURB) as shown in the
table below:

1
See Marquez, N. R. et al. (2010). Improvised National Framework on Housing Needs and
Housing Needs Estimation, 11th National Convention on Statistics, Mandaluyong City,
October 4-5, 2010.
2
HLURB Board Resolution No. 973 and 974 Series Current Price Ceiling
of 2018 set minimum technical standards for
specific price ceilings for all socialized housing unit
types .HLURB Classification per BP 220 and
PD 957
Socialized Housing2
Horizontal Development PHP 480,000 to PHP 580,000
Vertical Development PHP 600,000 to PHP 750,000
Economic Housing Above PHP 450,000 to PHP 1,700,000
Medium Cost Housing Above PHP 1,700,000 to PHP 4,000,000
Open Market Above PHP 4,000,000
There is a need to project housing demand based on the existing market
segments as this takes into account the capacity to pay of households. This
will also allow the industry to match housing supply and determine at which
segments housing supply is at a surplus or a deficit. This will better guide
government in crafting strategies that will not only cater to the needs of the
bottom 10% of the population. If policies will focus on income deciles, the
middle-class, which is often grouped with the top five percent of the population,
will be indirectly penalized and will suffer the most as it pays the most taxes
but enjoys the least of government assistance.

In order to project housing demand based on existing market segments, CRC

used the Family Income Expenditure Survey (FIES) to match the capacity to
pay of households with the required annual household income needed to avail
of housing loans per segment. As set by the government, the annual
amortization should not be greater than 30% of the annual income of a
household.
Below is the 2016-2030 estimated regional breakdown of housing demand in units:
Region Cannot Afford Soc Eco Low Mid High Total
NCR 21,782 73,836 470,814 179,244 28,861 3,730 778,266
CAR 17,151 22,321 46,401 12,642 1,292 257 100,064
 1 - Ilocos Region 54,991 83,671 131,355 21,634 2,860 231 294,743
2 - Cagayan Valley 37,011 64,241 87,500 15,416 1,546 - 205,715
3 - Central Luzon 64,649 126,653 363,368 73,380 6,546 1,930 636,526
4 - A - CALARBARZON 86,748 156,615 453,059 107,947 14,841 3,164 822,374
4 - B - MIMAROPA 47,739 50,982 59,247 10,704 1,338 222 170,231
5 - Bicol Region 91,715 105,858 98,096 13,401 1,498 270 310,839
6 - Western Visayas 116,655 121,249 146,545 38,929 3,828 799 428,006
7 - Central Visayas 112,184 93,038 170,820 40,185 4,260 322 420,810
8 - Eastern Visayas 90,948 72,278 58,139 16,965 2,049 237 240,617
9 - Zamboanga Peninsula 72,049 63,135 56,600 12,573 1,385 132 205,873
10 - Northern Mindanao 85,698 68,401 83,305 19,419 3,472 145 260,441
11 - Davao 66,959 79,534 117,378 21,162 2,365 135 287,533
12 - SOCCSKSARGEN 91,906 75,012 79,708 15,506 1,328 118 263,577
13 - CARAGA 39,895 68,547 37,280 2,834 91 - 148,646
ARMM 36,906 43,809 50,104 9,875 1,145 74 141,913
TOTAL 1,134,986 1,369,181 2,509,718 611,815 78,705 11,767 5,716,17
2

Based on this table, the demand for economic housing is almost equivalent to
the demand for socialized housing and the cannot afford segment combined.

Excluding the demand for the cannot-afford segment, the housing industry
needs to produce an average of 305,412 units per year in order to address the
housing demand up to 2030.

The estimation above can be further improved by taking into consideration the
following:
1. Estimation of housing need at the provincial level, and if possible,
at the municipal level
While the census on population covers data at the provincial level, the FIES,
which is the basis of SHDA and CRC in projecting housing demand, is only at
the regional level. The recent passage of RA 11315 or the Community-Based
Monitoring System Act will enable government to generate and validate
household data at the municipal level. This will allow government to generate
updated and disaggregated data necessary in targeting beneficiaries, conduct
more comprehensive poverty analysis and needs prioritization, design
appropriate policies and interventions, and monitor impact over time.

2. Changes in price ceiling per segment

Section 15 (b) of RA 8763 or the Home Guaranty Corporation Act of 2000,
states that the respective ceilings for socialized, low-cost, medium-cost, and
open housing shall be jointly determined by the HUDCC and the National
Economic Development Authority (NEDA); provided that at any time, but not
more often than once every two years, such ceilings may be reviewed or
revised to conform to prevailing economic conditions.

The long term projection of housing demand should also assume changes in
price ceilings across segments. This can be projected using growth rates of
the Consumer Price Index (CPI) and the Construction Materials Wholesale
Price Index (CMWPI).

3. Comparison of projected new households vis-à-vis actual households

 based on PSA Census and projected mean annual family income per
decile vis-à-vis actual PSA FIES updates
In order to further refine the existing framework for projecting household need,
previous projections of new households should be compared to actual
households based on the PSA census.

There is a challenge for statisticians to come up with models that can link other
variables to income growth and household growth across deciles and regions
in order to further improve our growth forecasts.

Estimation of Housing Supply

HLURB License to Sell Statistics provide the total number of residential units
for the socialized and economic housing segments and groups housing units
under the low-cost, mid-end and high- end markets together. It does not include
information on floor areas and values. Ideally, residential construction statistics
generated by the PSA can supply this. Residential construction statistics,
however, are grouped according to construction type and not by market
segment product.

It should also be noted that the PSA reported number of apartments and
residential condominiums is not based on actual number of residential units but
the number of issued building permits.

With the aggressive increase in the values of the components of housing

production (land and construction materials), there is now a need to analyze
yearly construction values adjusted for inflation. Existing reported value of
reported residential construction is based on current prices only.

In the absence of market segmentation of residential construction statistics

and License to Sell Statistics (for the low-cost to high-end segments), the
reported residential units under PD 957 are allocated as follows: 30% for low-
cost housing, 30% for high-end housing and 40% for mid-end housing. This
assumption was based on the number of registered residential units with the
BOI from 2003 to 2010 which was at 34%.

While PSA data is generated at the provincial level, HLURB statistics are at
the regional level, with select regions grouped together (e.g. Rizal with ENCR
and Western and Eastern Visayas with Central Visayas).

Unit Production Per Segment (2011 to 2015)

2011 2012 2013 2014 2015 Total

Socialized 6,044 12,122 15,143 16,876 30,786 80,971

Economic 74,845 98,553 94,166 90,709 82,074 440,347

Low-Cost 26,846 76,621 57,849 54,459 50,305 266,080

Mid-Cost 35,799 63,149 47,480 44,656 41,250 232,335

High-End 26,846 13,792 10,413 9,803 9,055 69,908

Total 170,379 264,237 225,051 216,503 213,470 1,089,640