Clearing the Housing Backlog: an Updated Supply and Demand Study on the Owner-Driven Construction Segment
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Clearing the Housing Backlog: An Updated Supply and Demand Study on Unserved Owner-Driven Construction Segment in the Philippines Center for Research and Communication Foundation, Inc. September 2020 Authors: Winston Conrad B. Padojinog, DBA and Erica Myra P. Yap, MSIE About Habitat for Humanity’s Terwilliger Center for Innovation in Shelter The Terwilliger Center for Innovation in Shelter, a unit of Habitat for Humanity, works with housing market systems by supporting local firms and expanding innovative and client-responsive services, products, and financing so that households can improve their shelter more effectively and efficiently. The ultimate goal of the Terwilliger Center’s market systems program is to make housing markets work more effectively for people in need of decent, affordable shelter, thereby improving the quality of life for low-income households. To learn more, visit habitat.org/tcis. About the Center for Research and Communication Foundation, Inc. The Center for Research and Communication Foundation, Inc. (CRC) is the research and consultancy partner of the University of Asia and the Pacific (UA&P). It undertakes continuing research on policy issues that are invested in public interest and the common good and conducts studies that focus on issues that bear on the dignity of the human person, the unity of the family, civic responsibility, human solidarity, the promotion of subsidiarity, and the spirit of expertise. CRC also brings to public focus the results of its research and other studies through seminars, public forums, and publications. For more information, visit crc.uap.asia. Disclaimer: The views expressed in this paper are those of the authors and do not necessarily reflect the point of view of the Center for Research and Communication (CRC) or the University of Asia and the Pacific (UA&P). This report was developed by Habitat for Humanity’s Terwilliger Center for Innovation in Shelter staff: Jessan Catre, Jerick Axalan, Reggie Marie Barrientos, Al Francis Razon, Monica Rashkin, Malaika Cheney-Coker, Jitendra Balani, Naeem Razwani and Julia Ferraz; and, Habitat for Humanity Philippines staff: Lili Fuentes, Marilyn Estrellado, Ariane Aliggayu, and Lala Baldelovar. Layout and graphic design by Brian Milante. The team thanks Olivia Nielsen of Miyamoto International, Inc. for her input. The report was produced with support from the Hilti Foundation. Cover image: "Boys play in a makeshift boat in the Taytay River in Pasig, Philippines" by Dominic Chavez/World Bank, licensed under CC BY-NC-ND 2.0. Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 1 Table of Contents Executive Summary 7 1. Introduction 10 1.1 Study Objectives 12 1.2 Methodology of Estimating the Market for ODC 13 1.3 Scope 14 1.4 Definition of Terms 14 2. The Owner-Driven Construction Segment 15 2.1 Latest Housing Policy Environment 16 2.2 Government Performance and Private Sector Response 19 2.3 Housing Demand and Supply Outlook: Special Focus on the Unserved Segment 24 2.4 Discussion on the 2015 Housing Tenure Profile 29 2.5 Estimated and Projected Size of the ODC segment 32 2.6 General Income Profile of the Unserved Market & the ODCs 36 2.7 Estimating the market value of the ODC segment 37 3. Conclusions 41 Annexes 44 Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 2 List of Tables Table 1. Annual Budget Allocation for Housing from 1983-2019 21 Table 2. Estimated Average Annual Housing Demand and Supply 25 (2010-2018) Table 3. Housing Backlog Per Segment (in Units) from 2001-2018 26 and Projected Housing Needs (in Units) from 2019 to 2022 Table 4. Percentage Share Distribution of Housing Tenure Status in 30 the Philippines based on the 2015 Census Table 5. Percentage Share of Owner or Owner-like Housing Tenure 31 Status in the Philippines per Region, Province, and City based on the 2015 Census Table 6. Average Percentage Share Distribution of the Unserved 33 Segment per Region (2015-2022) Table 7. Estimated Regional Percentage Share Distribution of the 34 Owner-Driven Construction Segment per Annum from 2015- 2022 Table 8. Percentage Share Distribution of ODCs per Province and 35 City in Their Respective Total Regional and Provincial ODCs from 2015-2022 Table 9. Income Profile of Households Belonging to the Two Lowest 37 Income Deciles Table 10. Expenditure Profile of Households with Annual Income 39 Below Php 100,000 Table 11. Housing Backlog Across Housing Segments Per Region 44 (2001-2018) Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 3 Table 12. Percentage Share Distribution of Housing Tenure Status per 45 Region based on the 2015 Census Table 13. Total Households Belonging to the Unserved Segment per 46 Region (2015-2022) Table 14. Estimated Unserved Segment per NCR City (2015-2022) 47 Table 15. Estimated Number of Households Belonging to the Owner- 48 Driven Construction Segment per Region (2015-2022) Table 16. Total Households Belonging to the Owner-Driven 49 Construction Segment for Select Provinces (2015-2022) Table 17. Total Households Belonging to the Owner-Driven 49 Construction Segment for Select Cities (2015-2022) Table 18. Estimated Percentage Share of ODC Households and ODC 50 Ratio per NCR City (2015-2022) Table 19. Estimated ODC Segment per NCR City (2015-2022) 51 Table 20. Income Source Profile (First and Second Decile) 52 Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 4 List of Figures Figure 1. Annual Percentage Share of Socialized and Economic 22 Housing Segments in Total Housing Supply from 2001-2018 Figure 2. Annual Housing Production of Lots and Units from 2001-2018 23 Figure 3. Annual Total Housing Supply (in Units) from 2001-2018 and 27 Average Yearly Production (For the Past Five Years) Figure 4. Annual Percentage Share of Each Housing Segment in Total 28 Housing Supply from 2001-2018 Figure 5. Historical Trend of Each Housing Segment’s Percentage 29 Share in Total Housing Production from 2001-2018 Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 5 List of Abbreviations and Acronyms BALAI Building Adequate, Livable, Affordable, and Inclusive Filipino Communities program CMP Community Mortgage Program CRC Center for Research and Communication DHSUD Department of Human Settlements and Urban Development FIES Family Income and Expenditure Survey GSIS Government Service Insurance System HDMF Home Development Mutual Fund HLURB Housing and Land Use Regulatory Board HUDCC Housing and Urban Development Coordinating Council ISF Informal Settler Families NCR National Capital Region NHA National Housing Authority NHMFC National Home Mortgage Finance Corporation ODC Owner-Driven Construction PSA Philippine Statistics Authority RA Republic Act SHDA Subdivision and Housing Developers Association SHFC Social Housing Finance Corporation SSS Social Security System Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 6 Executive Summary The owner-driven construction or incremental building housing segment is a major demographic of the Philippine housing market that has received little attention from the government and from private housing programs. The segment is described to have the following characteristics: (1) security of land tenure; (2) maximum annual income of Php 90,000 to Php 270,000; (3) ownership of a residence that may start as a “temporary” housing unit but which they are willing to invest in and upgrade; and (4) rural or peri-urban location. Those who belong to this segment tend to be workers in the informal economy with irregular and unpredictable income which makes them vulnerable to disasters, disease, and emergencies. Thus, Habitat for Humanity’s Terwilliger Center for Innovation in Shelter sees this as an opportunity to serve the ODC segment by helping them gain access to quality building materials in a financially sustainable manner with the help of microfinance institutions, and by helping the construction industry to expand into this large yet untapped market segment. In the Center for Research and Communication’s previous studies on housing demand and economic impact, the ODC segment conforms to a segment described as “those who cannot afford” because they lack the purchasing power needed to qualify for and access existing financing programs offered by both government and private finance institutions. In this study, the “cannot afford” segment which remains to be untapped is referred to as the unserved segment. To situate the opportunities and positive impact of tapping the unserved, particularly the ODC segment, the Terwilliger Center together with CRC undertook this study to estimate the market size of the ODC housing segment in the Philippines, specifically in Habitat’s priority areas: National Capital Region, the provinces of Negros Occidental, Leyte, Cavite, Laguna, Davao del Sur, and the city of Cebu. Knowing the size and the potential value of the segment will be an important factor in future investments and policy decisions of stakeholders such as public, private, and non-government organizations who come to address the needs of the ODC. Clearing the Housing Backlog: An Updated Supply and Demand Study on ODC Segment | 7 To arrive at the estimates, the study used the latest available data from secondary sources (online database and government publications) and also referenced previous housing studies of CRC, whose 2017 projections on the unserved housing segment size have been updated for this study. Since the study was undertaken while the COVID-19 pandemic is ongoing, the impact of the pandemic is not fully reflected in the results of the study. CS Pro software was used to process the data from secondary sources and derive the different segments at the national and regional level. Based on the results of the study, 55% of the unserved segment, equivalent to 3.1 million households, are estimated to belong to the ODC segment in 2018.