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SCHOOL OF URBAN AND REGIONAL PLANNING • VOL. XVIII, No. 2, April 1987

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- PHILIPPINE PLANNING JOURNALVOL. XVIII, No. 2, April 1987

Board of EditorsDolores A. EndrigaTito C. Firmalino

Managing Editor Production ManagerCarmelita R. E. U. Liwag Delia R. Alcalde

Circulation ManagerEmily M. Mateo

The Philippine Planning Journal is published in October and April by the School of Urbanand Regional Planning, University of the Philippines. Views and opinions expressed in signedarticles are those of the authors and do not necessarily reflect those of the School of Urban andRegional Planning. All communications should be addressed to the Business Manager, PhilippinePlanning Journal, School of Urban & Regional Planning, University of the Philippines, Diliman,Quezon City, Philippines 1101.

Annual Subscription Rate:-Domestic, P40.00; Foreign, $12.00.Single copies: Domestic, P20.00; Foreign, $6.00.Back issues: Domestic, P10.00/issue; Foreign, $6.00/issue.

TABLE OF CONTENTS

The Housing Sector: A Review- Armand Fabella

25 Philippine Subdivision Development Lawsand Standards: An Assessment

- Linda L. Malenab-HornhIIB

49 Shelter and Services for the Poor:A Case Study of San Martin de Porres

- Asteya M. Santiago

66 About the Contributors

THE HOUSING SECTOR: A Review

Armand Fabe/la

INTRODUCTION

The responsibility of the government toensure the provision of a decent home forevery Filipino is a provision in the Constitu-tion which mandates the State "to establish,maintain, and ensure adequate social servicesin the field of housing.....to guarantee enjoy-ment by the people of a decent standard ofliving." Attempts at executing this mandateconsisted of a long list of programs and poli-cies on housing dating way back in the 1930sup to the present decade. This included thecreation of a number of housing agenciesfor the purposes of planning, implementingor participating in government housing projects.

The purpose of this paper is to reviewthe government's role in housing in its entiretyincluding regulations, physical construction,and financing, and to suggest proposals forfurther improvements of the government'srole in the housing sector with emphasis onits institutional aspects.

A HISTORY OF GOVERNMENTPARTICIPATION IN HOUSING

Initial government concern for housingwas characterized by sanitation drives andcampaign for public health and safety. Relo-cation programs for squatter were basically in-tended to prevent the proliferation of squatterareas which were widely believed to be breed-ing grounds for crime. A more concrete mani-festation of the government's concern forhousing was the passage of the Philippine Actin 1935 appropriating P250,000 for the pur-

chase of a housing project for workers calledthe laborer's tenement houses in Barrio Vitas,Tondo involving 163 dwelling units. However,most of the unit awardees of the housing pro-ject turned out to be employees and notlaborers, the intended beneficiaries. They didnot meet the basic requirement of having astable job.

In 1938, the People's Homesite Corpora-tion was created to undertake the planning,construction and administration of low-costhousing. This agency was responsible forbuilding 439 housing units between 1940 and1941 in Kamuning, Quezon City.

In 1941, the National Housing Commissionwas created through Commonwealth Act (CA)No. 468. Its operation was, however, deferreduntil 1945 when CA No. 709 was passedgranting an appropriation of P5 million to theCommission. The Commission built the Philip-pine War Damage Commission Housing Projectduring the period 1946-1947. It was the firstgovernment housing project after the war.

In 1947, the People's Homesite and HousingCorporation (PHHC) was created from the mer-ger of the People's Homesite Corporation andthe National Housing Commission, by virtueof Executive Order No. 93. Its principal func-tion was to promote physical, social, and eco-nomic betterment of the populous areas of thePhilippines through low-cost housing projectsand community and institutional housing.It was authorized to acquire land, build houses,manage housing projects, clear slums, relocatesquatters and do research on housing and slumrehabilitation. PHHC was responsible forbuilding 13,000 dwelling units during its25 years of existence, most notable among

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which were the several housing projects inQuezon City.

In 1950, furthermore, Republic Act (RA)No. 580 created the Home Financing Com-mission which was in response to the increasingneed for more houses and the correspondinglack of mortgage fund. This was later amendedby RA No. 5488 in 1969 and later ExecutiveOrder No. 535 which transformed the HomeFinancing Commission into the Home Financ-ing Corporation (HFC). Aside from implement-ing the mortgage insurance program, HFCwas in charge of encouraging, aiding or ini-tiating the organization of building and loanassociations and of promoting home buildingand land ownership. This started the govern-ment's effort to attract private sector parti-cipation in housing activities.

The Development Bank of the Philippines(DBP), formerly the Philippine RehabilitationFinance Corporation (PRFC) extended liberalcredit facilities to home builders after the war.The extension of inter-agency project loansto finance PHHC projects through the Govern-ment Service Insurance System (GSIS) wasstarted in the 1950s. By 1955, GSIS startedgranting housing loans to its members. Twoyears later the Social Security System (SSS)also began to extend similarly housing loansto its members. Most of these housing programsseemed to favor only the middle incomegroups and even the upper income familiesas gleaned from the rules in application andeligibility. A very small proportion of thelow-income group was able to avail of theloans from these institutions.

Housing activities in the 1960s includedthe building of five tenement buildings forabout 2,300 families through the passageof the Tenement Law (RA No. 3469) in 1962;the passage of the National Social Housing Law(RA No. 6026); and the National Building Code(RA No. 6542). The National Social HousingLaw sought to benefit the low income fami-lies resettled into government housing areas.The National Building Code, on the other hand,prescribed standards governing the physicalconstruction of residences, commercial build-ing, and all types of structures in the countryfor maximum safety, comfort and economy.

In 1964, the Presidential Assistance onHousing and Resettlements Agency (PAHRA)was created through Executive Order No. 67to formulate and implement uniform housingstandards for mass housing construction and

to prepare and recommend to the Presidentappropriate legislation on housing matters.PAHRA had been mainly concerned with therelocation and resettlement of squatter fami-lies, typhoon and flood victims or displacedfamilies.

In 1967, another agency, the Central Insti-tute for Tiaining and Relocation of UrbanSquatters (CITRUS) was created to study anddevise solutions to the problem of urbansquatting and development human resourcesthrough cooperation so as to raise the incomeof families in the resettlement areas.

In 1968, under Executive Order No. 135the Presidential Coordinating Committee onHousing and Urban Development (PRESCHUD)was created, which was later named as thePresidential Committee on Housing and UrbanSettlement. The task of the Committee wasto study, formulate and recommend guide-lines for the proper implementation of some ofthe programs and projects of housing agenciesand other bodies.

During the same year, the National HousingCorporation, or NHC, was organized throughthe Securities and Exchange Commission(SEC) by four government financing institu-tions, namely, the Government Service In-surance System (GSIS), Social Security System(SSS), Development Bank of the Philippines(DBP), and National Investment and Develop-ment Corporation (NIDC) for the purposeof carrying out a "coordinated massive housingprogram of the government." NHC was in-tended to supply the construction materialrequirements of these four government financ-ing institutions which implement their res-pective housing programs.

Until the 1960s, no studies, surveys, andresearches were conducted by which thegovernment could have a thorough graspof all the aspects of the housing problem.It was only in the 1960s that the governmentinitiated efforts to systematically gather datato identify housing needs, housing demand,housing backlogs, housing costs and otherbaseline data necessary for planning purposesin order to identify resources needed, bothfinancial and organizational for the govern-ment to cope with the housing problems.Furthermore, the government did not activelyinvolve the private sector not only in termsof financing but in actual construction parti-cularly for low-cost housing.

By and large, the approach to housing by

PHILIPPINE PLANNING JOURNAL

the government during this period was generallyviewed to be piece-meal, uncoordinated andlacking in direction. There was also the lackof commitment on the part of the governmentto solve the housing problem as evidencedty the scantiness of resources alloted to theimprovement of the housing sector. Moreover,there was the lack of a national housing policyto unify or give direction to various housingactivities undertaken by the government.The measures adopted by the governmentwere inadequate and the results were, at best,

minimal.In 1975, the creation of the National Hous-

ing Authority under Presidential Decree (PD)No. 757 provided for the dissolution of existinghousing agencies and committees includingthe PHHC, PAHRA, TFDA, CITRUS,PRECHUR, Sapang Palay Development Com-mittee and alt other inter-agency task forcesand ad hoc committees created for housingand resettlement purposes. The Authorityabsorbed the functions of these agenciesand committees which included, among others,the formulation and implementation of anationwide housing program, coordinationand integration of various housing develop-ment programs and projects, land acquisition,construction and management of low-costhousing projects, slum rehabilitation, relo-cation and resettlement of squatter familiesand the formulation of uniform housingstandards to govern mass housing construction.

In 1976, the Human Settlements Regulatory

Commission (HSRC) was created to carry outthe regulation of buying and selling activitiesrelative to real estate development. Its ob-jective was to protect prospective buyers ofhousing units from uncscrupulous developersand sellers.

In 1977, the National Home MortgageFinance Corporation (NHMFC) was createdthrough PD 1267 to establish a secondarymortgage market system for housing as ameans of tapping funds from the private

sector.In 1978, with the establishment of the

Ministry of Human Settlements (MHS) under

PD 1936, housing was singled out as one of thebasic needs of man, and hence, it became anational priority program. The same decreecreated the Human Settlements Development

Corporation (HSDC) under the umbrella ofthe MHS to carry out housing constructionprojects and livelihood components. Since

then, the government has pursued an activerote in the housing sector. A national housingpolicy encompassifl various aspects of housingwas formulated. During the same year, theHome Development Mutual Fund (HDMF)was created through PD 530 which institu-tionalized a system of voluntary contributionfor housing purposes at its initial year.

In 1978, the National Shelter Program was

established. The objectives of the Programwere to deliver more housing services to agreater number of people and consolidatethe efforts of the different housing agencies.Under the National Shelter Program, all thehousing activities of the government as wellas the private sector were integrated andsynchronized to follow a total systems ap-proach to the minimization, if not the elimi-nation of the housing problems in the areasof regulations, production and finance. Withthe adoption of the National Shelter Program,the concept of housing in the Philippineshad undergone remarkable change. Initiallyconsidered simply as a public problem in-volving slum dwellers and squatters, housingevolved into a program considered in thecontext of a "human settlement's approach"where the provision of shelter was comple-mented by other dimensions of human settle-ments. Self-reliance was emphasized so thatprogram really became a "partnership" betweenthe government and the beneficiaries. TheNational Shelter Program was initially carriedout with the creation of new agencies and thestrengthening of existing ones that wouldimplement the housing policy. In other words,the National Shelter Program involved theestablishment of thenetwOrk of shelter agen-cies. In addition, planning for housing wasmade an integral part of the national develop-ment plans, starting with the Four-Year Philip-pine Development Plan, 1974-1977 up toexisting Updated Five-Year Philippine Develop-ment Plan, 1984.1987.

PRESENT INVOLVEMENT OF GOVERN-MENT IN THE HOUSING SECTOR

The housing delivery system involved acomprehensive shelter program directed mainlyat increasing private sector participation inthe housing sector. The system combinedthe elements of government credits, guarantees,and capital with the private sector's savings

and investments.

Figure 1THE EXISTING NATIONAL HOUSING SYSTEM

Regulatory Production Finance

Standardized!Prefabricated

Materials

Developmental Construction Bulk Purchase!Finance of Houses Stockpiling

I I ProgramMortgage

Guarantee andInsurance

0.

Trading of

SavingMortgages Program

N H M F C

H D M F

HSRC

PRIVATE SECTORSHSDC Banks, Landowners,

NHA (BDC Developers,& Manufacturers

NHC)

Housing Borrowers/Beneficiaries

N F C

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The government participation in the housingsector is undertaken through the followingagencies and corporations which are underthe supervision or coordination of the Ministryof Human Settlements (MHS). These are thefollowing: Human Settlement Regulatory Com-mission (HSRC), National Housing Authority(NHA), National Housing Corporation (NHC),Home Development Mutual Fund (HDMF),National Home Mortgage Finance Corporation(NHMFC), Home Financing Corporation(HFC), and Human Settlements DevelopmentCorporation (HSDC) and its subsidiaries.Figure 1 shows the interrelationships of thesehousing agencies.

Housing Regulation.

The regulatory aspect in the housing sectoris vested under the HSRC. As a regulatoryarm of MHS, HSRC is tasked with the imple-mentation and enforcement of the regulatoryaspect of the urban land reform program,town planning and zoning, protective decreeand land value and building regulations.

Housing Production.

The production function is carried out bythe National Housing Authority (N HA), HumanSettlements Development Corporation (HSDC),Bliss Development Corporation (BDC) andNational Development Corporation (NDC).The production aspect involves the actualhousing construction and manufacturing ofhousing components.

NHA develops land, constructs and marketshouses. The major activities of NHA are slumupgrading and sites and services developmentwhich a're exclusively geared toward socialhousing. It also undertakes economic housingprojects through its joint venture with theprivate sector as well as apartment and dor-mitory building programs. It provides forboth developmental and end-user financing.

HSDC develops new communities with theprovision of housing units as well as livelihoodfor the beneficiaries. It carries out this functionmainly through its subsidiary, the BDC. BDCundertakes housing construction through itsUrban and Rural BLISS program. The UrbanBLISS Program is an economic housingprogram designed for Filipino income-earnersin the urban areas while the Rural BLISS

Program is a socialized housing program forlow-income groups in the rural areas.

The National Housing Corporation (N HC),another HSDC subsidiary, fabricates standard-ized housing components. NHC is a fullyintegrated manufacturing plant rehabilitatedby HSDC. Housing component fabricationis likewise being undertaken by other HSDCshelter subsidiaries, namely: Woodwaste Utili-zation and Development Corporation(WUDCO ) and Builder's Bricks, Inc. (BB I).

Housing Finance.

The financing aspect, the most crucialcomponent of the shelter delivery system, isundertaken jointly by three government hous-ing entities, namely: Home Financing Cor-poration (H FC), National Home Mortgage& Finance Corporation (NHFMC) & HDMFor Pag-IBIG.

Sourcing of funds for housing. Recognizingsavings as an untapped source of housingfinance, the government instituted a systemof nationwide savings for private and publicemployees and the self-employed which entitlesits members to avail of housing loans. Membersof HDMF or Pag-IBIG Fund, as the systemis called, contribute an amount equivalentto three percent of their basic salary withequal counterpart from their employers.

The basic concept behind the Pag-IBIGFund is to generate long-term savings whichwill work both as a provident fund and as ameans of acquiring a house for the member.As a provident fund, the member earns aminimum of 110 percent (100 percent due tothe equivalent contribution of his employerand 10 percent due to the annual dividend hismoney earns while entrusted with the Pag-IBIG Fund). Pag-IBIG contributions, there-fore, though they may work like an implicitor payroll tax, are actually deferred incomeor forced savings since in the long run, bene-fits are actually accruing to the member.

The provision of financing for housing.NHMFC operations increase the availabilityof residential mortgage credit for Filipinohomebuyers by developing and maintaininga dynamic secondary market for residentialmortgage loans. The major function of NHMFC,therefore, is to operate the secondary mort-gage market system which intends to solvethe problem of insufficient funding for hous-ing. In effect, it acts as a central bank for

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housing, integrating the collection and dis-tribution system for funds emanating fromthe government, the private financial insti-tutions, and the money savers.

In the buying phase of the system, NHMFCindirectly finances home acquisition by pur-chasing the primary mortgages representinghome loans lent by accredited banks andfinancial institutions. The money NHMFCuses are the proceeds from the sale of BahayanMortgage Participation Certifications (BMPCs).These primary mortgages are then pooled orwarehoused in a trustee bank, the DBP, wherethey earn interest and provide the solid backingfor the housing securities issued by NHMFC,the Bahayan Mortgage Participation Certifi-cates (BMPCs).

It is in the purchase of mortgages that therisk, liquidity and profit requirements offinancing institutions are to a great extentsatisfied and through which they are en-couraged to engage in home lending withoutoverly taxing their own limited resources.For, as soon as documents and all legal require-ments for a valid mortgage, (i.e., the comple-tion of the collateral consisting of the samehouse and lot that are subject of the loan),are in order, NHMFC accepts the transferof the loan from the lending institution with-in 14 days. By paying the equivalent amountlent by the bank from its own funds, NHMFCassumes the risks of the loan and immediatelyrestores the bank's investment in the loan.Profitability is likewise assured as the banksearn a fee of five percent of the loan amountfor "originating" the mortgage, and anothertwo percent of each monthly payment of theloan.

HFC acts as the guarantor of individualloans for home building through the provisionof mortgage credit insurance. An HFC gua-rantee carries with it the unconditional gua-rantee of the government of the Philippines.HFC encourages financial institutions suchas banks, insurance companies, investmentand development corporations and buildingand loan associations to avail themselvesof the HFC guarantee scheme and invest moreof their loan portfolios in the constructionof homes and community development pro-jects. HFC's guarantee features reduce thecost of home financing enabling subdivisionowners/developers to sell their housing andlots for a much lower price.

ASSESSMENT OF GOVERNMENTPERFORMANCE IN HOUSING

Housing Production

The increased attention given by the govern-ment to the development of the housingsector has resulted in a significant increasein overall housing production in the country(including those of the private sector). Froma level of 6.1 million dwelling units in 1970,total housing production expanded with anannual growth rate of 37 percent to 8.8million in 1980. Comparing this with theannual growth in the number of householdsfor the same period (34 percent), this meansthat housing production has been catchingup with the increase in household formation.

The exceptional growth of the housingindustry can largely be attributed to the Na-tional Shelter Program. Since its implement-ation, there has been an increasing numberof subdivisions, townhouses and condomi-niums projects. The increased activities inthe housing sector was not only confinedto the Metro Manila area but also occurredin other major cities and municipalities.

This progress is reflected in the growthof private construction about 60 percent ofwhich is residential construction. It was thehighest growing sub-sector since 1980 in termsof gross value with growth rates of 13.2 percentin 1980, 8.6 percent in 1981, 53 percentin 1982 and 57 percent in 1983 (Table 1).The private construction sub-sector's per-formance declined in 1984, although reflect-ing the lowest decline among the other sectors.During these years, housing emerged as thegrowth sector of the economy as it managedto grow significantly despite the notabledeceleration in growth of the total gross do-mestic product. The housing industry hasprovided a countercyclical effect in the eco-nomy by taking up the slacks in economicactivities and labor absorption from the othersectors particularly during the recessionaryperiod of 1982 to 1984.

The construction industry, in general, ac-counted for an average of 3.3 percent of totalemployment during 1976-79 period. Its shareto total employment further increased to3.5 percent in 1980-84, reaching a peak of3.8 percent in 1984. It generates jobs to awhole variety of workers, from the skilledto the semi-skilled and the non-skilled.

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Table 1 - EXPENDITURE ON GROSS NATIONAL PRODUCT AT CONSTANT 1972 PRICES(REVISED): GROWTH RATES (PERCENT)

1977 1978 1979 1980 1981 1982 1983 1984

CONSUMPTION 4.7 4.9 47 4.4 3•9 35 2.0Personal 5.3 5.2 4.8 4.5 4.0 3.1 2.9 1.1

General Government .9 3.0 3.7 3.7 3.7 6.4 -3.9 -9.1

GROSS DOM CAPFORMATION -.1

Fixed Cap Formation 1.9Construction 6.2

Government 5.9Private 6.5

Durable Ecjuip-ment -2.4

Increase in Stocks -8.9

EXPORTS OF GOODSAND NONFACTORSERVICES 16.5

8.6 11.2 4.4

2.3 -3.5 -4.7 -37.8

8.4 11.7 6.9

3.5 .6 -2.8 -28.12.5 11.8 5.5

8.3 4.0 -4.6 -20.9

29 13.8 -3.0

7.9 2.2 -184 -31.82.1 10.0 13.2

8.6 5.3 5.7 -14.7

15.0 11.7 8.3 -1.0 -2.9 -.9 -35.99.1 8.5 -8.3 -5.0 -29.9 -21.8

38 6.8 134 1.2 -15 57 9.3

IMPORTS OF GOODSAND NONFACTORSERVICES

6.4 12.9 16.4 3.3 -2.7 3.5 -1.6 -19.0

EXPENDITURE ONGROSS DOMESTICPRODUCT

6.1 5.5 6.3 5.3 3.9 2.9 11 -4.6

EXPENDITURE ONGROSS NATIONALPRODUCT 6.3 5.8 6.9 5.0 3.4 19 1.3 -5.3

SOURCE: NEDA National Accounts Staff

Construction of a typical house, for example,requires the services of workers such as car-penters, plumbers, masons, electricians,painters, tinsmiths, with the support of semi-skilled and non-skilled called "peon".

Housing construction's and land develop-ment's contribution to total employmentis further reflected in the proportion of totalcost going to labor alone The direct andindirect labor cost in the construction of atypical house takes about 20 percent of totalconstruction cost. In land development, about30 percent of total cost goes to labor. Forthe last three years, the real estate and cons-truction industry which built, on the average,25,000 houses annually generated some P740

million annually in the form of wages andsalaries, for the working population.

Total housing units financed or adminis-tered by the government under the new sheltersystem reached 208,261 during the period1975-1984, with an average of 20,826 unitsper year (Table 2). This was a big headwayas compared with the 1970-1974 annualaverage of only 8,624 units.

Purely government financed housing projectsare mostly intended for social housing suchas the slum upgrading and sites and servicesdevelopment projects of NHA. Slum upgradingand development of sites and services projectsreached 48,108 upgraded plots and 47,431serviced lots, respectively, during the period

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Table 2 - NATIONAL HOUSING PROGRAM, 1975-1984 (In Dwelling Units)

1975 1980

9859 20469

- 9667

- 3499

1984 TOTAL(1975-84)

41406 208261

4783 48108

9156 47,431

I. HOUSING CONSTRUCTION(Government-Assisted orFinance)

II. SLUM UPGRADING(No. of Plots)

Ill. DEVELOPMENT OF SITESAND SERVICES(No. of Lots)

1976-1984, representing annual average ofP5,345 upgraded plots and 5,270 servicedlots, respectively. Slum upgrading activitiesgrew by an annual compound growth of 71.6percent and sites and services developmentby 20.9 percent.

Other notable government housing pro-jects are the BLISS Housing and FlexihomeModel Programs. However, these types ofhousing are mainly for economic housing.There are also types of housing where thegovernment attempts to demonstrate the possi-bility of low-cost mass housing production,with, the use of standardized, prefabricatedparts. The BLISS and Flexihome Model.Pro-grams are intended to show the private sectorthat mass housing projects can be financiallyviable and even profitable.

Housing Finance

Loans to the Housing Sector

(a) Domestic Loans. To approximate theamount of financial resources which enterinto the primary housing finance market(defined as the supply of and demand forfunds to finance the construction and acqui-sition of owner-occupied housing), data fromthe Central Bank Statistical Bulletin wereculled. The real estate and construction sectorswere chosen to represent the housing sector,though the magnitudes of the resources (i.e.,loan outstanding) may be overstated sincepublic infrastructure systems are includedunder the construction sector. The over-statement, however, is minimized since corn-

mercial and savings banks would not be likelyto lend for public infrastructure purposes.

Outstanding loans for the real estate andconstruction sector was at P20,839 millionin 1984, after steadily growing at an averageof 25 percent from 1975 to 1984 (Table 3).The biggest contributor came from commer-cial banks with P11,612 million (55.7 percent),followed by government non-bank financialinstitutions with P5,267 million (25.3 per-cent) and savings banks with P3,799 million(18.2 percent) (Table 4).

In terms of the share of outstanding loansto the real estate and construction sector tothe total loans portfolio, savings banks showedthe biggest share with 87.6 percent, followedby government non-bank financial institutionswith 24.0 percent and development bankswith 12.9 percent. Commercial banks main-tained only 10.1 percent of its outstandingloan portfolio in the real and constructionsector, though this is already an increase overits 1977 and 1980 figures when the sharehovered from 6.5 to 6.8 percent of the total.This investment behavior shows the relativereluctance of commercial banks to invest inthe real estate and construction sector dueto the lower yield which can be expectedfrom it. Also, commercial banks would shyaway from long-term loans which is veryprevalent in housing credit since this mightjeopardize the bank's liquidity. On the otherhand, savings banks favor real estate andconstruction loans which are more than halfof its total investments. This is due to thenature of their clientele who primarily savejust to acquire or build a house.

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Table 3- LOANS OUTSTANDING BY BANKING & NONBANK INSTITUTIONS(In Million Pesos, 1975-1984)

1975 1980

COMMERCIAL BANKTotal Loans 0.0 77198.1 115199.8

Real Estate 0.0 2297.9 4569.9

Construction 0.0 2722.7 7042.3

Total Housing 0.0 5020.6 11612.2

% Housing/Total 0.0 6.5 10.1

SAVINGS BANKTotal Loans 0.0 4253.6 4338.7

Real Estate 0.0 1607.0 3217.1

Construction 0.0 569.0 581.7

Total Housing 0.0 2176.0 3798.8

% Housing/Total 0.0 51.2 87.6

PRIVATE NON-BANKTotal Loans 908.4 1687.7

Real Eastate 40.7 85.2 132.6

% R.E./Total 4.5 5.0 4.5

GOVERNMENT NON-BANKTotal Loans 5264.5 11457.9

Real Estate 2538.8 38.2 24.0

DEVELOPMENT BANKSTotal Loans 5825.5 17406.9

2240d

Real Estate 685.5 3294.7 28.8

%R.E./Total 11.8 18.9 12.9

ALL FINANCIAL INSTITUTIONSTotal Loans 11998.4 112004.2 144651.3

Real Estate 3265.0 11666.3 13215.6

Construction 0.0 3291.7 7624.0

Total Housing 3265.0 14958.0 20839.6

% Housing/Total 27.2 13.4 14.4

apreliminarybAs of August 1984.cAs of October 1984.dAs of November 1984 (pertaining to loans granted).

SOURCE: Central Bank Statistical Bulletin

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Table 4- DISTRIBUTION OF LOANS OUTSTANDING FOR THE HOUSINGSECTOR AMONG FINANCIAL INSTITUTIONS(In Percent)

1975 1980 1984 AVERAGE(1977-84)

Commercial Banks N.A. 33.6 55.7 40.9

Savings Banks N.S. 14.5 18.2 13.0

Private Non-Banks 1.2 0.6 0.6 0.6

Government Non-Banks 77.8 29.3 25.3 28.9

Development Banks 21.0 22.0 0.1 16.5

TOTAL 100.0 100.0 100.0

TOTAL INMILLION PESOS 3,265 14,958 10,840

Table 5 - FOREIGN LOANS FOR THE HOUSING SECTOR, BY PROGRAM, 1980-1984(In Million US Dollars)

1980 1981 1982 1983

1984 TOTAL

IBRD-ASSISTED PROJECTSManila Urban I - 8.96 6.50 3.31

1.06 19.83

Manila Urban It

2.74 5.17 4.80 10.40

2.37 25.48Manila Urban III

1.04 7.36 9.20 10.90

6.30 34.80

TOTAL

3.78 21.49 20.50 24.61

9.73 80.11

KFW-ASSISTED PROJECTSTondo Dagat-Dagatan .84(a)

.91(b)

1.75

Dasmarinas Resettlement

1.20

2.32

3.52

lmelda Resettlement .14 .34 .48

TOTAL

2.18

3.57

5.75

GRAND TOTAL 3.78 21.49 20.50 26.79 13.30 85.86

aConverted from Deutschemark using DM2.64 to US$1.Converted from Deutschemark using DM2.90 to US$1.

In spite of its relatively small share, realestate and construction loans of commercialbanks increased faster at 24.2 percent perannum from 1975 to 1984 while its totalloans outstanding increased annually by 16.6percent over the same period. This is consistentwith the real estate and construction loanstaking a bigger proportion of total loans in therecent years. But considering all the financial

institutions, the proportion of real estateand construction loans is declining, from ahigh of 30.3 percent in 1976 to 14.4 per-,cent in 1984.

(b) Foreign Loans. Foreign loans whichwere channelled directly to the housing sectortotalled US$85.86 million from 1980 to1984 (Table 5). The loans were extendedby the International Bank for Reconstruction

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PHILIPPINE PLANNING JOURNAL

and Development (IBRD) and the KreditanstaltFuer-Wilderufban (KFW), with the formeraccounting for 93.3 percent of the total.IBRD funds of US$80.11 million were chan-nelled into Manila Urban I, II, and Ill pro-jects, all of which have housing as a majorcomponent. KFW loans, on the other hand,were actually used in 1983 and 1984 only.Reaching US$5.75 million, the loans werechannelled into the Tondo Dagat-DagatanResettlements, Dasmarinas Resettlement andthe lmetda Resettlement Projects. Annualutilization of loans proceeds started out withUS$3.78 million in 1980 and later peakedto US$26.79 million in 1983, for an averageannual loan utilization of US$17.16 millionover the 5-year period.

Government Expenditures onHousing

About one-fifth of the national budgetwas spent for social development of whichhousing is one of its sub-sectors in the last10 years (197584). Among the differentsub-sectors of the social development sector,the bulk of the expenditures went to educationand manpower development which averaged57.8 percent of the total. This was followedby health with 19.4 percent, and social wel-fare with 10.6 percent share. Housing usedto receive the smallest share (12.0 percent)

among the social development sub-sectors.However, in the recent years, however, theshare of the housing sector increased from6.6 percent in 1975 to 18.2 percent in 1983,higher than the expenditures that went tosocial welfare (Table 6).

Relative to total government expenditures,the share of the housing sector increasedfrom an average of 0.31 percent during the1975-79 period to 0.45 percent during the1980-84 period. This was mostly broughtabout by the infusion of government equityin corporations engaged in housing activitiessuch as NHMFC, HFC and HSDC which wereorganized around 1979 and 1980. In 1984,however, the housing sector's share of totalgovernment expenditures fell drastically toonly 0.19 percent due to the reduced govern-ment equity infusion.

Pag-IBIG

The Pag-IBIG Fund had around 2.1 mil-lion members at the close of 1984, up fromthe pioneering 93,000 voluntary membersin 1980, and 1.53 million members in 1981.Of this, the total membership in 1984, about57 percent are from the private sector whilethe rest are from the government sector.Of the total membership of the Fund, 60percent belong to salary scale of P1,500 and

Table 6- ALLOCATION OF NATIONAL GOVERNMENT EXPENDITURES(OBLIGATION BASIS) TO THE HOUSING SECTOR(In Million Pesos)

A. Total Govt Expenditures

on Social Services of which:

B. Housing

C. Social Services/TotalGovernment Expenditures(In Percent)

D. Housing Expenditure/Total Social ServicesExpenditure(In Percent)

1975 1980

19049 38383

243.4 1333.5

18.6 19.7

6.6 17.6

1984 ANNUAL

AVERAGE

1975-84

58830 37691

136.1 952.69

25.5 20.84

6.9 12.17

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PHILIPPINE PLANNING JOURNAL

below while 16 percent of total membershipbelong to salary scale of P3,000 and aboveper month (Table 7).

Total collections reached P3,194.0 mil-lion in 1984, consisting of 53.4 percent(P1,705.80), from the private sector and46.6 percent (P1,488.30 million) from thegovernment sector (Table 8). For 1984 alone,P1,320.30 million was collected, representing38.5 percent of total collections over thefour year period. This increase was mainlybrought about by the change in the Fund'scontribution rate from 2 percent to 3 percentof the employee's basic montly salaries. Theintroduction of new collection schemes suchas the roving teller system to facilitate pay-ments of employer-payors in the Metro ManilaArea was also a factor in the increase. Basedon HDMF's sample data base as of June 1984,the bulk or 60 percent of the members havefund salaries at the minimum wage (aroundP1,500 a month) level and below.

Pag-IBIG Housing Loans and Beneficiaries.As of March 1985, Pag-IBIG housing loanbeneficiaries total 61,861 members whoseloan mortgages amount to P4.1 billion. In1984 alone, Pag-IBIG housing loan benefi-ciaries totalled 29,449, an increase of 23percent over the previous year. This was in-spite of the tight credit situation which con-fronted the entire financial community. Pro-hibitive increases in construction costs havesomewhat depressed members' affordabilitylevels but this was temperred by the build-up in inventories by both borrowers and lender

even prior to 1984 and which were presentedfor end-users financing in 1984.

The pace of granting housing loans rapidlyexpanded over the past 4 years. Starting outwith an initial grant of P123 million in 1981,housing loans increased fivefold to a cumu-lative total of. P617 million in 1982 and byanother threefold in 1983 to bring the cumu-lative total up to P2.2 billion. The numberof loan beneficiaries increased at an evenfaster rate over the same period. Contributingto this increase was the policy change imple-mented in 1983 of allowing members whoare not related to each other to tack undera single collateral.

Potential of Pag-IBIG Members to BecomeBorrowers of Housing Loans.

Based on a sample survey conducted by theHDMF in June 1984 on the fund salaries ofmembers, the largest cluster (43 percent) arethose with monthly basic salaries ranging fromP1,001 to P1,500. (Fund salary is the employ-ee's monthly basic salary or that declared byhis employer but not to exceed P3,000.).The second (17 percent) and the third (16percent) largest clusters are those with month-ly earnings less than P1,000 and P3,000 andup, respectively. Incidentally, the same re-sults were obtained by considering just thesample of Pag-IBIG members from MetroManila.

Similar ranking is reflected by the sam-ple of members from areas outside Metro

Table 7 - FUND SALARY PROFILE*

Philippines Metro Manila Outside Metro Manila'FUND SALARY

Number Percent Number Percent Number Percent

Below P1,000

P1,001 -P1,500

P1,501 - P2,000

P2,001 - P2,500

P2,501 - P2,999

P3,000

TOTAL

37,552 17 ' 34,877 17

95,029 43 89,129 43

23,775 11 22,786 11

19,919 9 19,301 9

9,319 4 9,116 4

34,364 16 33,566 16

219,958 100 208,775 100

2,675

24

5,900

53

989

9

618

5

203

2

798

7

11,183

*From a sample data base as of June 1984.

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Table 8- PAG-IBIG COLLECTIONS AND HOUSING LOANS/BENEFICIARIES1981-1984(In Million Pesos)

ANNUAL1981 1982 1983 1984 AVERAGEGROWTH

CUMULATIVE COLLECTIONSPrivate

Government

CUMULATIVE MEMBERSHIPPrivateGovernment

HOUSING LOANSLoan ValueNo. of LoansNo. of Beneficiaries

CUMULATIVE HOUSING LOANLoan ValueNo. of LoansNo. of Beneficiaries

.124

.061

.063

1.530.840.69

.1231.4161.602

.1231.4161.602

.768 1.874

.386 .980

.382 .894

2.00 2.101.12 1.200.88 0.90

.494 1.5784.380 13.8696.889 23.921

.617 2.1955.796 19.6658.491 32.412

3.194 .2451.706 .2541488 .236

2.1 11.911.20 13.490.90 9.94

1.936 .18115.995 .14729.449 .200

4.131 .24835.660 .21061.861 .268

a lncludes self-funded and overseas contractual workers.

Manila. However, larger proportions areobserved - 53 percent are within the

P1,001 - 131,500 income bracket and 24

percent, below P1,000.A restructuring of interest rates for Pag-

IBIG housing loans was implemented in 1984.Presently applied to borrowers is the here-under schedule depicting graduated ratesaccording to amount of loan.

Amount of Loan Interest Rate

P100,000 and below 9%

P101,000 - p 150,000 12%

P151,000 - P200,000 15%P201,000 - P300,000 18%

To gauge the facility of Pag-IBIG membersto become borrowers, the loans of P100,000,which yields the following monthly amorti-zation, is considered.

Repayment Period Monthly Amortization

25 years P 839

20 years 899

15 years 1,014

10 years 1,267

5 years 2,076

Applying the 1980 percentage share ofhousing expenditures to total personal con-sumption expenditures (186 percent), onlyfamilies with monthly income of P4,511or higher could afford the Pag-IBIG loanamounting to P100,000. If the tacking ofthree members is imputed, the minimumacceptable fund salary is P1,504. Treatingthis as the cut-off point for identifying po-tential borrowers among Pag-IBIG members,only 40 percent of total membership standto be advantaged by the present housing

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financial set-up which revolved around thePag-IBIG Fund.

This finding disregards the upward biasinherent in the HDMF estimated fund salariesand the indicators that house and lot packages,particularly in the metropolis costs much morethan P100,000.

Issuance of Housing Securities

To support its mortgage purchase ope-rations, NHMFC must generate funds, andthis is done primarily through the issuanceof housing securities. Since NHMFC operatesonly on P195 million government equity,NHMFC must be able to effectively sourcefunds to purchase home mortgages and therebyfinance home acquisition.

The Bahayan Mortgage Participation Cer-tificate (BMPC) was the primary financialinstrument for raising funds. Authorizedat the volume of P1 billion, the BMPC carriedan 8.5 percent interest for its Series A and14 percent interest for its Series B, both fora term of 6 years.

With the initial sale of P152.8 million ofBMPCs in 1980, sales increased rapidly inthe following years such that by the end ofthe first quarter of 1983, NHMFC had fullysold its authorized issue volume of P1 billion.This was brought about mainly by the shiftingof the banking sector to more conventionaland "safer" investment areas such as govern-ment securities in 1981 because of the pre-ceeding year's financial crisis. Left with highliquidity positions owing to self-imposedrestraints on lending and funds exposure,private and public financial institutions filledup their investment portfolios with govern-ment issues, among which were NHMFC'sBMPCs.

Of the completed P1 billion direct andnegotiated (with investors) sales of BMPCs,the private financial sector accounted forP337.1 million (33.7 percent) while govern-ment financial institutions bought P662.9million (66.3 percent). Among the privatesector, insurance companies were the biggestcontributors, followed by savings and loanassociations/banks and commercial banks. Allin all, 49 financial institutions placed invest-ments with NHMFC's BMPCs.

In April 1983, new features were addedto the housing securities through the shiftfrom BMPCs to Bahayan Certificates (BCs).

The term was reduced from 6 to 2 years and auniform interest rate of 9 percent was adopted.Sale was done through Central Bank auctioninstead of through negotiations with investors.As of e9d-1984, P889 million worth of BCshave been sold. To be able to compete withthe high yield of Treasury Bills, the P279.9million worth of BCs sold in 1984 had to beoffered at an average of 30 percent interest.

The financial and economic crisis duringthe second half of 1983, however, weakenedthe government securities market and thereby,disrupted NHMFS's funds generation activi-ties. Thus, in 1983, despite a new MonetaryBoard authority for a P2 billion volume ofissue of the BCs. NHMFC's pace in the saleof its housing securities declined. HDMFtrust funds had to be utilized to supportthe Secondary Mortgage Market System.

NHMFC Secondary Mortgage Ope-rations

This program started with 8 originatingbanks in 1980 which then grew to 43 by theend of 1982. By the end of 1983, there were99 accredited financial institutions.

The bulk of the loans purchased by NHMFC(take-out) amounting to P1,032 million (as ofSeptember 1983) was actually originated byonly two government banks - the PhilippineNational Bank (PNB) and the DevelopmentBank of the Philippines (DBP). As a proportionof the total volume purchase, this amountconstituted 516 percent. This was followedby savings and mortgage banks with 18.7percent, and private development banks with11.5 percent. Savings and loans associationsalso contributed some 11.4 percent (Table9).

As of end-1984, the cumulative total mort-gage purchases by NHMFC reached P5,173.5million. Of this amount, about 79.8 percentor (P4,131.3 million) consisted of Pag-IBIGloans bearing the 9 percent-interest-rate and16.6 percent of P861.1 million was open-housing loans at 16 percent interest rate.The purchase of existing mortgages took some3.4 percent (P181.1 million). The growthof mortgage purchases which was substantialin 1982 (300.5 percent) and in 1983 (217.4percent) decelerated in 1984 (23.4 percent)(Table 10). Though this increase is smallerthan the previous years, this still maintained

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Table 9- CUMULATIVE SUMMARY OF MORTGAGE PURCHASES BY NHMFC(As of September 18, 1983)(In Thousand Pesos)

Originating Number of Number

Financial Percent Beneficiaries of

Institution Amount Share Number Units

Government Banks 1,032,486.87 51.6 2 14,085 9,142

Commercial Banks 88,102.00 4.4 9 990 666

Private DevelopmentBanks 229,166.23 11.5 16 3,312 1,709

Savings and MortgageBanks 374,594.71 18.7 6 3,746 2,281

Savings and LoansAssociations 228,324.31 11.4 24 3,107 1,844

Buildings and LoansAssociations 16,415.00 0.8 1 219 141

Insurance Companies 30,061.96 1.5 2 634 379

Savings and ThriftBanks - - - - -

Investment Houses - - - - -

TOTAL 1,999,551.08 100.0 60 26,093 16,162

SOURCE: NHMFC

Table 10- NHMFC MORTGAGE PURCHASE BY TYPE OF LOAN(In Million Pesos)

1980 1981 1982 1983 1984 1980-84 %DISTN

TYPE OF LOANPag-IBIGOpen-HousingExstg MortgagesTOTALGrowth Rate (%)

NO. OF BENEFICIARIESPag-IBIGOpen-HousingExstg MortgagesTOTALGrowth Rate(%)

NO. OF UNITSPag-IBIGOpen-HousingExstg MortgagesTOTALGrowth Rate (%)

325.0 1,277.0

138.0

265.0

528.0

126.0991.0 1,668.0

68.3

307.0 1,109.0

138.0 219.0

528.0 126.0973.0 1,454.0

49.4

6,889.0 23,921.0 29,449.0

1,016.0 3,584.0 4,026.0

0.0 0.0 23.07,905.0 27,505.0 33,498.0

373.9 27.5

4,380.0 13,869.0 15,989.0

794.0 1,361.0 1,222.0

0.0 0.0 23.0

5,174.0 15,230.0 17,234.0

255.8 7.6 209.5

61,861.0 86.49,029.0 12.6

677.0 1.071,567.0 100.0

35,654.0 89.2

3,734.0 9.3

677.0 1.740,065.0 100.0

130.6

2.9

95.7

494.2 1,577.9 1,936.6 4,131.3 79.2

16.4

25.5

103.0 318.5 397.7 861.1 16.6

148.1

28.0

0.0 0.0 5.0 181.1 3.5

191.4

149.1

597.2 1,896.4 2,339.3 5,173.5 100.0

-22.1

300.5 217.4 23.4 129.8

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the pace of increase in the purchase of seconda-ry mortgages at 129.8 percent from 1980-84.

In terms of beneficiaries, a total of 71,567borrowers were benefitted from 1980-84,corresponding to the construction or acqui-sition of 40,065 housing units. In 1984 alone33,498 borrowers or 46.8 percent of thecumulative total, benefitted with theconstruction or acquisition of 17,234 housingunits. Contributing to this large volume ofpurchases were the liberal guidelines whichwere introduced in 1983. Among these werethe elimination of the relationship require-ment for tacking; the capitalization of the7 percent origination fee; the introductionof the Graduated Amortization Plan; and theinclusion of purchase of lots and acquisitionof presently occupied apartment units aspurposes for loan availment.

In 1984, however, the constriction ofthe financial market trimmed down the regularflow of funds into the secondary mortgagemarket. This constriction adversely affectedboth home borrowers and developers by theadditional financing costs for the former andthe tying of funds in unliquified mortgagesfor the latter. NHMFC has so far been ableto maintain its monthly average take-outof P200 million in 1984 as it did in 1983.

With the substantial reduction in equitycontributions to government housing agencies,vis-a-vis the growing demand for Pag-IBIGhousing loans (in view of its favorable interestrates and liberalized terms of payment) amidstthe expected diminishing rate of Pag-IBIGmembership registration, however, the sus-tenance of the shelter finance program may beendangered. Should public confidence in theFund's ability to deliver its commitmentsgradually erode, even the survival of the entireNational Shelter Program may be put to atest.

Financial Status of Housing Corporations

Housing Production Agencies

The combined assets of the four majorgovernment agencies engaged in housing pro-duction - NHA, HSDC, BDC and NHC -amounted to P8,705.7 million as of 1984.Among the four, HSDC is the biggest, account-ing for 51.1 percent of the total assets, fol-lowed by NHA with its 42.4 percent share.NHA used to be the primary government

agency in the housing sector as evidenced byits total assets of P4,156 million in 1979.Relative to other housing production agenciesexisting at that time, NHA's assets took 75.7percent of the total. The same pattern is seenin the total assets of NHC which stood atP1,557 million in 1975 but declined to onlyP267 million in 1984. On the other hand,HSDC, which was organized in 1978 ex-perienced a rapid growth in its total assetsfrom P1,073 million in 1979 to P4,451 mil-lion in 1983.

It can be surmised that HSDC's rapid growthis mainly due to its overlapping functionswith NHA, in the areas of operating/managinghousing estates, implementing project plansfor Bagong Lipunan sites, and the constructionof infrastructure facilities and housing unitsnecessary in the development of pilot commu-nities, which the former eventually assumedthe more dominant role.

The housing production agencies as a groupexhibit very poor financial profitability, asmeasured by return-on-assets (ROA) per-formance, with a group average of -6.4 per-cent. Among the four, BDC has the highestROA with an average of 0.14 percent overits three years of existence. HSDC also achieveda similar, though lower, level of 0.10 percentfrom 1979 to 1983. On the other hand, NHAshowed the lowest ROA with an average of-1.69 percent from 1970 to 1984 (Table 10).NHA actually incurred losses in only two ofits nine years of operation, and in absoluteterms, the cumulative net income of P23.9million can offset the P11.5 million deficit.In averaging out the annual ROAs, however,the relatively larger negative ROAs cancelledout the small positive ROAs.

Finally, the NHC, though displaying asmaller negative ROA of 1.1 percent, incurredlargest total losses of P28.2 million from1975 to 1984. The basic concept of NHCoperation, which is the standardization ofhousing materials and the modules designsystem in order to avoid waste in survey,materials and building products, still has togain accpetance from housing developers.This explains the huge inventory pile-up in-curred by NHC, and thereby, its inability toearn enough to cover up its operating expenses.

The picture worsens when the economicROA is used as the measure of performance.As a group, the housing production agenciesincurred an average economic FICA of -8.95

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percent. Most of this can be attributed to theNHA whose economic ROA stood at -33.18percent. This enormous deficit scores the hugerole which subsidies play in supporting NHAoperations. The national government infuseda total of P1,121 million in subsidies, from1976 to 1984. Because of the very nature ofits activities, that of providing slum upgrading

services or "socialized" housing as it is morecommonly known, NHA is simply curtailedas far as implementing cost recovery schemesis concerned. HSDC, NHC and BDC has ne-gative economic ROAs of 1.54, 0.83 and0.26 percent, respectively.

Compared with the performance of thegroup of area development corporations, thehousing production agencies did slightly betterin terms of both financial and economic ROAs.Compared with public utilities and infra-structure corporations, the housing productionagencies fared worse (Table 11).

Table 11 - COMPARISON OF ECONOMICAND FINANCIALPROFITABILITY AMONGDIFFERENT GROUPS OFGOVERNMENT AGENCIES

Financial EconomicROA ROA(%) (%)

NHA (1.69) (33.18)HSDC 0.10 ( 1.54)BDC 0.14 ( 0.26)NHC (1.11) ( 0.83)Average of HousingProduction Corporations (0.64) ( 8.95)Average of AreaDevelopment Corporations (3.47) ( 9.90)Average of InfrastructureCorporations (0.03) ( 7.89)Average of Public UtilitiesCorporations (1.84) ( 7.02)

Viability of the Housing FinanceSystem

In 1983, a World Bank Study on the Philip-pine Housing Situation, with emphasis onhousing finance, cited that the continuedviability of the HDMF-NHMFC-HFC financialsystem is seriously threatened by the negative

yield of its operations. The average borrowingcost of NHMFC funds (from HDMF andhousing securities) at 13 percent plus approxi-mately 4 percent operating cost for a totalof 17 percent cost, exceeds the average port-folio earning of NHMFC of 10 percent. TheWorld Bank Study predicted that this 7 per-cent negative yield would result to NHMFC.sincurring of sizable operating losses by mid-84 and would force it to call upon HFC in-surance or utilize HDMF.s trust funds. Whenthis does happen, the integrity of the entiresystem may break down.

NHMFC's response to the study, however,recognized the World Bank's general assess-ment of the problem but felt that there wasa "gross misrepresentation" of the gravityof NHMFC's financial problem. With theaddition of commitment fees, commissionson insurance premiums and the housing con-tributory fund, the yield of a Pag-IBIG loanto NHMFC becomes effectively 10.10 percent.With the present mortgage portfolio mix of15 percent open housing loans which earnat 17.56 percent and 85 percent Pag-IBIGloans, NHMFC's yield on its mortgage port-folio is 11.22 percent. This leaves a negativespread of 5.78 percent instead of 7 percent.This means that the government has to coverthis negative spread with P57.0 million perbillion pesos worth of mortgage financed.NHMFC claims, however, that every peso ofhousing loan the secondary mortgage marketsystem is able to create results on activitieswhich yield the government anywhere from6 to 7 centavos. On a per billion peso basis,this translates to P60 to P70 million whichcovers P57 million deficit. All these assumesthat NHMFC is not maintaining an investmentportfolio to cover the negative spread.

The sale of more than P250 million worthof Bahayan Certificates in 1984 at an averageof 30 percent interest due to competion fromTreasury Bills, however may spell more difficulttime for the housing finance system since thisdrives up to the cost of NHMFC's operations.In fact by late 1983, the NHMFC Annual Reportadmitted that HDMF trust funds had to beutilized because of the weakening governmentsecurities market. The same inflationary pres-sures which pushed up the cost of funds arealso driving up the cost of construction ma-terials while reducing the effective purchasingpower of Pag-IBIG members. NHMFC is nowfaced with the twin dilemma of increasing

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cost of funds while the affordability levelsof its target clientele for decent housing dwin-dle. NHMFC has currently resorted to capital-izing the heavy interest payments into thefuture in order to maintain its liquidity. Thisinterim measure would only work, however,if interest rates fall, or if the yield of its invest-ment portfolio increases, in the near future.

ISSUES AND RECOMMENDATIONS

The foregoing review brings to the foresome issues which have some bearing on theefficient operation of the housing agencies/corporations as well as on the long-term viabi-lity of the system. It is evident that the presentlimited resources of the government can notcontinue to support the current level of housingactivities. Due to financial constraints alone,the government has to institute cutbacks inits housing programs and set priorities.

Government involvement in the housingsector

Government involvement in the housingsector encompasses regulatory, production,marketing, and financing aspects in botheconomic and social housing projects. Thereis need for the government to determinehow it will utilize its limited resources in thefuture with respect to (a) S its perception andsupport of the housing sector, and (b) thenature of its direct and indirect participationin the sector. In addition, a closer look ismerited on the coordination of both thesetting of housing policies and priorities andtheir implementation.

The often used argument about the dis-tinction between economic and social housingis not necessarily so; in fact they can easilyblend into one another. It is not impossibleto develop low-cost housing which can stillminimize the loss per housing unit, or evenbetter, show a positive spread under marketconditions of financing. Perhaps what requiresgreater emphasis in looking at the extentof government participation is (a) the targetclientele for government activity, and (b)the geographical areas within which to givepriority attention.

The discussions which follow are premisedon certain priorities and constraints:

(a) The provision of adequate housing,especially for the lower-income groups

in the major urbanized areas of the country,remains of greatest priority. For this reason,it would appear to be necessary to con-tinue to provide a continuing source ofdependable funding for low-income grouphousing.

(b) The economic difficulties whichthe country is experiencing at the presenttime is likely to continue for a numberof years, although not necessarily of thesame magnitude. However, the situationwill continue to make it difficult for thegovernment agencies involved in the housingsector to be assured of a steady and con-tinuing stream of funding from the Ge-neral Fund over the next several years.

(c) Given these conditons, it appearsdesirable to continue the present integratedsystem of housing development under asingle overall umbrealla, in this case, theMinistry of Human Settlements, with acontinuing assured source of funding fromother than the General Fund.

Housing Regulation

On the plus side, the regulation of over-all housing activity has been pretty muchconcentrated on the Human SettlementsRegulatory Commission, unlike the otherareas of government participation in housing.

Nevertheless, it will still be desirable toreview the scope and coverage, as well as theobjectives, of the regulatory framework forthe housing sector. While the protection andsafety of the general public and homeownersare of great importance, the incrementalcost of more stringent building and construct-ion restrictions must be taken into account,especially with respect to low-cost housing,especially socialized housing.

Insofar as government involvement ineconomic housing is concerned, it shouldbe limited to the requisite regulations and theestablishment of appropriate standards. Inthis connection, as above-mentioned theremay be a need to reduce standards to whatis affordable by the lower income groups,and to strike a balance between meeting thehousing standards and housing requirements.

Housing Finance.

The participation of government in pro-viding financing for housing can be viewed

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from the sequential standpoints of (a) sourcesof housing finance, (b) types of housing fi-nance, and (c) mechanisms for the deliveryof housing finance.

Sources of housing finance.

In the financing aspect, in terms of equitycontribution to government corporations in-volved in housing, the government gives moresupport to production finance than marketfinance which goes directly to the consumers.This is reflected in the equity infusion toNHA and HSDC which has been substantiallyhigher than that extended to NHMFC. Thegovernment is also involved in "take-out"or liquidity provision through the secondarymortgage function and in guaranteeing ope-

rations.

Types of housing finance.

The forms of housing finance discussedhere focus on the area of primary mortgages,secondary mortgages, and guarantees.

Primary mortgage function. In view oflong-term and high-risk nature of housinginvestment, the provision of shelter financingcould continue to be provided by the govern-ment. Furthermore, to ensure that the con-sumers benefit directly from the governmenthousing services, more support should beextended for consumer financing than to thetraditional industry financing. The conti-nuation of the construction loan insurancefunction, however, fades somewhat in im-portance for sourcing funds by the privatesector, since the banks would continue toprovide loans to financially viable constructionventures.

Secondary mortgage function. Both thetake our of liquidity provision function and theguaranteeing operation are equally important insustaining housing provision. Secondary mort-gage operations could be undertaken by theprivate sector once the mechanism has beenfirmly put in place.

The guarantee function for mortage. Housingguarantee function is an important governmentconcern. However, there is some overlap andredundancy between HFC and NHMFC withregards the guaranteein g function (housingguarantee) of the former. Private lendersrely upon HFC to sustain cash flow duringdelinquency rather than to make good the

collateral value of a defaulted mortgage loan.Since the banks remit the monthly paymentsto NHMFC for those mortgages taken outby the latter, this amounts to HFC guarantee-ing NHMFC. One government corporationguaranteeing the cash flow for another govern-ment corporation may not be an appropriatefunction. Furthermore, a view of the presentdepressed condition of the capital marketin the country, and there are no private par-ties who are likely to buy the mortgage takenout by NHMFC, the need to provide guaranteeloses its urgency. In addition, guarantee funç-tion is not actually needed in the sense thatthe take-out option would be preferable ratherthan the guarantee option, by the participatingbanks.

Because after reasons cited above, it isrecommended that HFC be absorbed by theNHMFC, particularly with regard to its gua-rantee function. The fact that it is an importantfunction, however, does not make it neces-sary for a separate institution to undertake it.Both the take-out and the guaranteeing func-tions could be done by a single institution.The guarantee operations can be handled bya unit within NHMFC which must hold ade-quate reserves against bad debts. The presentinactivity in the capital market however, willnecessarily deactivate this particular function.Once the market revives, the guarantee functionwill regain significance. However, controlmust have to be set with respect to limitsof the guarantees to avoid build up of con-tingent liabilities.

Delivery mechanisms for housingfinance.

The Use and Management of Pag-1 BIG Fund-HDMF-NHFC Linkage

Pag-IBIG Fund (HDMF) is basically apayroll tax and is a Provident Fund. TheNHMFC is the manager of the HDMF invest-ment portfolio. The NHMFC uses the savings/contributions by Pag-IBIG members togetherwith the proceeds of the sale of BMPCs forthe purchase of the housing loans originatedby accredited financial institutions.

Thus, the Fund is a vehicle to raise low-cost funding for the development of asecondary mortgage market. The currentarrangement is not very efficient. For one,NHMFC can cover its cost of funds (at least

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13 percent) and cost of operations only if itholds a portfolio of no less than 75 percentopen housing loans and 25 percent HDMFmortgages. This imposes a sort of a ceiling onthe number of those who can avail of housingloans under the Pag-IBIG. (Finding is thatunder current mortgage market arrangements,the formal housing finance system is con-centrated on only a thin slice (upper 20 per-cent of the income ladder of the population).

Furthermore, there is no significant anddirect private sector involvement on eitherthe purchase side or the sale side of the se-condary mortgage process. The NHMFC, byrelying on BMPCs and HDMF funds, restrictsitself to the government sector of the market.

In addition, the joint operations of NHMFCand HDMF ensure NHMFC's commitmentto support HDMF. To sustain this support,NHMFC must necessarily rely on low costsources of funds (such as BMPCs). However,BMPCs face a limited market. They do notcarry competitive market rates and are ofsomewhat longer maturity than would bepreferred by financial institutions. They arepurchased for tax and regulatory considerations(they are eligible for reserve assets require-ments of insurance companies). Thus, BMPCswill not provide a long-term stable sourceof funds to NHMFC unless they are able tocompete with other securities on a rate ofreturn basis.

On the other hand, if BMPCs carry interestrates that are competitive with other secu-rities, NHMFC will need to hold a portfolioof market rate mortgages or be faced with anegative spread. This will strenghten the deve-lopment of the secondary mortgage market,but will weaken the connection betweenNHMFC and HDMF since it cannot borrowthrough BMPCs at higher interest rates toinvest in HDMFC mortgages which yield9 percent. Finally, there is an important policyimplication which raises the question as towhether the government's borrowing authorityshould be used to subsidize housing for a thinslice of the population who belong to theupper income group.

A continuing flow of funds is a criticalprerequisite to the low-cost housing program.However, significant budget support is notlikely to be forthcoming during the next fewyears. Thus, the HDMF is likely to remainthe major source of funds for the housingsector, at least for the time being. However,

since the HDMF is a public trust of retirement(provident) funds, the tied up operationsbetween NHMFC and HDMF should notlead to conflicts of interest and potential,more so the possible inadvertent subordinationof public trust in a desire to stimulate orexpand mortgage takeouts. Thus, the HDMFresources should be accessed by NHMFCat competitive rates, after netting out pro-visions for provident purposes. From NHMFCend, it should be able to provide take out atdifferentiated rates both for private developersand for NHA for the latter's socialized housingprojects. There must be an assurance of acertain percentage of funds available toNHMFC going to NHA in terms of take-outfacility. This will ensure access by the low-income people. The rate or the cost of moneyto NHMFC could be actuarially determinedafter considering the possible tax-free returnwhich should go to beneficiaries who willnot avail of housing benefits.

Thus, there are several possibilities forHDMF, aside from continuing the presentinstitution:

(1) It could continue with the pro-vident fund concept but this will have tobe handled by GSIS or its successor. Theremaybe no need for a separate organizationto handle separate funds. There must,however, be an assurance, that maximumallocation possible should be earmarkedfor housing by the institution which willeventually handle the fund, after adequateprovision for provident reserves.

(2) Keep the fund as a mutual fund.Since it is not possible for the people tomake the investment decisions, these willhave to be done by the government.

(3) HDMF could be integrated asa distinct funding program of an overallretirement management fund, which in-cludes the other retirement funds such asGSIS and SSS. Earmark a portion of thisintegrated fund for housing at actuarially-determined level, not market-determinedlevel. Alternatively, or in addition, add apercentage to the GSIS contributions togo to Pag-IBIG as long-term loans for thesecondary mortgage market operations orto private banks to lure private moneyinto mortgages.NHMFC should operate as a separate me-

chanism for the purchase of market rate mort-

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gages. These purchases could be financed byissuing bonds that are competitive as othersecurities. This would facilitate the directrelationship of NHMFC with the private sectoron both sides of its portfolio servicing bothPag-lBlG members and the self-employed.This is a pre-requisite for real secondary marketdevelopment. This will also promote thedevelopment. This will also promote the pri-vate sector involvement in long-term financingmarket. Furthermore, the long-term viabilityof the system should be carefully assessed.The present negative yield must be eliminated.Toward this end, various alternatives couldbe considered, e.g., moving to a floating rateor a higher average fixed rate.

Housing Construction.

At present, the production activities ofgovernment include (a) direct governmentconstruction of housing units, (b) upgradingof sites and services, including slum upgrading,and (c) the production and supply of standard/prefabricated housing components.

It is recommended that government in-volvement in housing production shouldbe targetted primarily towards lower incomegroups, say, those below the top quarterof households, by concentrating on (a) sitesand services improvement, (b) slum upgrading,and (c) the encouragement of housing startsfor lower income groups, such as throughcore housing-type of operations. In viewof the limited funds for housing in the fore-seeable future, direct government participationin housing construction itself should be con-centrated in selected areas; moreover, withthe end in view that "socialized" housingneed not necessarily be a losing proposition.The loss could be minimized while still enter-ing to the target clientele by putting a ceilingon total cost of houses and not in amountslent to homebuilders.

At present, approximately 30 percent ofthe urban population is self-employed. Appro-ximately 40 percent of the lower three-fourthsof the urban population, on whose publicand quasi-public funds like Pag-IBIG shouldfocus, is self-employed, and thus excludedfrom NHMFC.

Thus, the government should withdrawfrom direct housing construction, and con-centrate on the stimulation of truly low-cost

housing, by making sites and housing lotsavailable, and encouraging private developersinto the construction of lower cost unitsranging from say P20,000 to P70,000 (atcurrent prices), which are affordable to lowerincome groups. The private sector should beleft to servicing the top 25 percnt.

Integration of the government housingconstruction function. The institutionalstructure in the housing construction sectoris characterized by the existence of someoverlapping functions. The creation of theMinistry of Human Settlements in 1978,tasked with the function of shelter systemdevelopment and environmental managementas well as land use and town planning, in away, is a repetition of the process which sur-rounded the creation of the National HousingAuthority in 1975. Redundancy becameevident with the creation of HSDC, and lateron, with BDC. These corporations undertakehousing construction and town/communitydevelopment and upgrading under variousnames. Duplication of function also existsin housing/shelter fabrication. Several HSDCsubsidiaries, such as National Housing Corpo-ration, Woodwaste Utilization and Develop-ment Corporation, and Builder's Bricks, areengaged in the fabrication of shelter com-ponents.

In order to eliminate redundancy amongthe government corporations and simplifyoperations, the following steps nay be taken:

First, the government should withdrawfrom the construction of completely builtresidential units. NHA and BDC should bemerged, and the merged corporation shoulddeliberately avoid the construction of com-pleted, contractor-built houses, an activitywhich tends to cater to the upper incomegroups. The NHA/BDC merger should in-tegrate the housing construction and com-munity development functions of HSDC.Also, the NHA/BDC merger should concentrateon the construction of core units, sites andservices preparation, and the upgrading ofslum and squatters settlements, since theprivate sector is hardly likely to undertakethese functions.

Second, HSDC should begin to withdrawfrom its other activities in housing con-struction. At present, HSDC appears to operatesomewhat like a holding company, with asignificant shift of much of its activities intolivelihood and agro-business aspects. It can thus

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concentrate on non-housing activities, suchas those which pertain to the livelihood com-ponent. It should be emphasized that norecommendation is being made here withrespect to the other areas of operations ofHSDC, the discussion being limited to itshousing activities.

Third, the government should withdrawfrom the manufacturing and fabrication ofhousing components. The fabrication of stan-dardized shelter components was envisionedas a pioneering venture by NHC, with thepurpose of reducing construction costs throughstandardized components. Nevertheless, themanufacture of housing components doesnot appear to be a high priority area for govern-ment corporate operations, and appears to bean area which the private sector could verywell take over. Thus, the divestment andprivatization of NHC should be pursued.

Fourth, government housing constructionagencies should not be involved in the ex-tension of credit for housing and non-housingpurposes, such as for livelihood loans, whichcan be undertaken by the appropriate financialinstitutions.

The Coordination of Housing Policies

A paradox appears to exist with respectto the corporate entities engaged in the variousaspects of government participation in thehousing sector. Although they are all attachedto the same ministry, there appears to be alack of effective coordination, especiallybetween NHA and its sister corporations.Although the same corporations, even withthe proposed reorganizations and mergersabove-given, will continue to remain underattachment with the Ministry of Human Settle-ments, still some improvement in coordinationappears to be called for. This coordinativemachinery is especially critical, given theexpanded role that is envisioned for the mergedNHA/BHC entity, keeping in mind the uniquestructure with MHS, in which all operationalwork is undertaken through its corporateentities.

One possibility is perhaps the creation ofa Housing Policy Group or Committee withinthe Ministry, under the leadership of eitherthe Minister or one of the Deputy Ministers.Under this approach, the participation ofthe Human Settlements Regulatory Com-mission would be desirable.

Another possibility is to improve uponthe commonality among the board mem-bers for all the housing sector corporations(with the possible exception of the housingcorporation generating the financing, con-sidering its provident fund function). Theboards of NHA/BDC could include one ano-ther's chief executive officers, plus that of theprovident fund corporation. Unlike the firstsuggestion, however, it is not envisioned thata representative for HSRC would also sitas a common member.

In any case, it is of the greatest importancethat a unified housing sector program for theinvolved government corporations be deve-loped, under the Ministry of Human Settle-ments and with the participation of the Govern-ment Corporations Monitoring Committee orits successor.

A schematic presentation of the proposednational housing system is shown in Figure 2.

Summary of Issues and Recommendations

It should be clear from the discussionabove that there is a pressing need for re-examination and rationalization of govern-ment involvement and the institutional frame-work in the housing sector. The concernfor a more efficient allocation of govern-ment's limited resources points to the needto focus government's involvement in thehousing sector to the areas or functions whichare not lucrative enough for the profit-orientedprivate sector to venture into to sustain theprovision of decent housing for the population.

In particular, these are in the sites andservices improvement, slum upgrading andcore-housing-type of operations. In addition,the government's guaranteeing function of thecash flow to the housing sector is equallyimportant but loses its significance in viewof the present depressed condition of thecapital market. Although the liquidity functionor the take-out function is as important,it could later on be allowed to be transformedto the private sector, once the mechanismis firmly put in place.

The rationalization of the institutionalframework is also of vital importance to bringabout more efficient utilization of resourcesand streamlined operations. Towards this end,merger of government corporations whichare basically performing similar operationsshould be considered. In particular, housing

22

c)

F-

Fl,

N

0

Figure 2PROPOSED NATIONAL HOUSING SYSTEM

PHILIPPINE PLANNING JOURNAL

production corporations such as NHA andBDC could be merged. They are functionallyin the same area of operations.

The structural relationship betweenNHMFC and HDMF also requires furtherexamination. The current arrangement betweenthe two corporations is not very efficientin terms of financing (matching of the fi-nancing cost and the yield) and in terms offocusing the benefits to the HDMF mem-bers. Thus, it is recommended that theNHMFC should access HDMF fund at com-petitive rates. At the same time, NHMFCshould be able to provide take out both forprivate developers and for the NHA for so-cialized housing, which need not be unpro-fitable.

Another issue that needs to be addressedis the guaranteeing functions of the HFCwhich in effect is to assure the cash flowof NHMFC. Guaranteeing cash flow of anothergovernment corporation seems to be an in-appropriate function of a government cor-poration. It makes more sense for the govern-ment to guarantee the private sector operationsto ensure continous provision of housing.Nevertheless, since the guaranteeing functionis a vital function of the government, it couldbe retained, but it is not necessary for a sepa-rate institution to undertake it. Thus, HFC andNHMFC could be merged and the guaranteeingfunction could be handled by a unit withinthe surviving institution..

24

PHILIPPINE SUBDIVISION DEVELOPMENT LAWS ANDSTANDARDS: AN ASSESSMENT

Linda L. Ma!enab-Horni/la

Purpose/Aim of Paper

The housing problem in the Philippines hasgrown tremendously over the past years thattoday, the backlog has been 646,000 houses.The government has tried to meet the problemhead-on with the establishment of differenthousing agencies as well as the creation of taskforces and ad-hoc committees. Numerous stra-tegies have been employed from outright pro-vision of subsidized plots and house delivery toresettlement to sites and services. Afteranalyzing the problems, it was thought thatmaybe the backlog did not really lie in thelowest-income sector but in the lower-middleand the low-income sector; i.e., those who havethe ability to pay over a period of time. Simul-taneously, it was found out that the deliveryof sites and services to the populace by theprivate sector was not regulated. The sites havebeen transformed to blighted areas. Newsubdivision laws were enacted but the mini-mum design standards were set so high thatonly high income and upper-middle incomegroups could benefit. This also brought nume-rous cases of fraudulent transactions and non-development that the government wasconstrained to meet with the private deve-lopers and housing agencies to find out howbest to decrease house and lot prices and todraft effective regulatory measures. After a yearof deliberation, design standards were cate-gorized into Models A, B and C for OpenMarket, Economic and Socialized or Low-Cost respectively. But just the same, the targetgroups were not reached as the private deve-lopers continued to use Model A contending

that the use of lower standards would reducethe profitability of projects inasmuch as themarket was the high income sector. Again, afterdeliberations, a new law was passed loweringnot only the subdivision design standards butalso some provisions of the building code andopen space requirements. However, this hasnot been fully utilized by private sectordevelopers. To add to this, the World Bank hasset its own standards for agencies benefittingfrom its loan. It is agains this background thatthis paper aims to

show that the standards of BP 220, thelatest law, not only can best meet theproblem of housing low-income but alsothat it is profitable, with some modifi-cations.recommend 3mendments to the law andits rules and regulations.recommend the adoption of only one lawand design standards for subdivision regu-lation.

The paper will make an analysis of the twomajor laws on subdivision developmentfocusing on the design standards embodied inPD 957 and BP 220 as well as the World BankStandards as inputed in the Private Sites andServices projects. The study is limited to thePhilippine situation.

Laws on Subdivision Development

Currently, there are four major laws regu-lating the subdivision and housing industry.Presidential Decrees 957 and 1216 focuses on

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the site development standards and the admi-nistrative aspects of regulation while Presi-dential Decree 1096 pertains to building stand-ards and its enforcement mechanisms. Thefourth and most recent law, Batas Pambansa220, deals with both the site development andbuilding standards and amended some provi-sions of the three former laws.

A. Presidential Decree 957

The main policy of this decree is the pro-tection of residential subdivision and condomi-nium buyers through promulgations of stand-ards to be followed in subdivision development,registration and licensing of projects and regis-tration of dealers, brokers, and salesmen, andmonitoring of compliance to the standards aspromulgated and of the transactions enteredinto between the buyers and the developers ordealers and brokers. The decree was broughtabout by reports of alarming magnitude ofswindling and fraudulent manipulations per-petrated by unscrupulous subdivision and con-dominium sellers and operators, such as failureto deliver titles to the buyers or failure todeliver titles which are free from liens and en-cumbrances, failure to pay real estate taxesaccruing before the sales, and fraudulent salesof the same subdivision lots to differentinnocent purchasers for value. Likewise, of theinability to provide and maintain 11roperly,subdivision roads, drainage and sewerage, watersystems and other similar requirements whichthey have promised to the buyers.

Under this law, a subdivision project meansa tract or a parcel of land registered under ActNo. 496' which is partitioned primarily forresidential purposes into individual lots with orwithout improvements thereon, and offered tothe public for sale, in cash or in installmentterms. It shall include all residential, commer-cial, industrial and recreational areas as well asopen spaces and other community and publicareas in the project.

The subdivision projects are categorizeddepending on the (a) density of the project, the(b) site development standards and (c) intro-duction of a road network.

a.1. Low cost or socialized housing66 to 100 lots/ha

1 Land Registration Act as amended by RepublicAct No. 440.

a.2. Economic housing 26 to 65 lots/ha.a.3. Open Market housing 20 lots and

below per hectare

b.1. Model C for rural areas (3rd class muni-cipalities and below)

b.2. Model B for pen-urban and urbanizableareas (2nd class municipalities andbelow)

b.3. Model A (may be located in all citiesand municipalities regardless of class

c.1. Simple subdivision is characterizec. bypartitioned lots with no road network.

c.2. Complex subdivision plan is a registeredland wherein a street, passageway oropen space is delineated on the plan.

Under the first category, the number of lotsper hectare is net of the allowable density. Thismeans that only 70% of the hectare is saleablelots and the rest are reserved for roads andparks and playgrounds and other amenities.

Under the third category, the number of lotsper hectare is net of the allowable density. Thismeans that only 70% of the hectare is saleablelots and the rest are reserved for roads andparks and playgrounds and other amenities.

Under the third category, for so long asthere is not introduction of a road or street i.e.no new roads, then the project is a simplesubdivision plan. It is under the category ofcomplex subdivision that most of the projectsare submitted. It is also here that the sub-category of models of subdivision come intoplay.

The decree talks of four phases of regula-tion: approval of development plans, registra-tion of projects, licensing of projects and ofbrokers, dealers and salesmen, and compliancemonitoring.

Approval of development plans is the initialstep in subdivision project approval. The subdi-vision scheme is checked for its conformanceto the d.esign standards, the zoning laws and forthe authenticity of the documents submitted.A development permit is given after processingand this authorizes the holder to pursue thedevelopment of his project.

Registration of the project is done by pub-lication of a notice on the project once a weekfor two consecutive weeks, one in English andone in Pilipino informing all and sundry of theintention to develop a project.

Licensing comes after registration. This isgiven after the applicant posts an adequate per-

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formance bond which is 20% of the total deve-lopment costs to guarantee the constructionand maintenance of the roads, gutters, drain-age, sewerage, water systems, lighting systems,and the full development of the subdivisionproject and the Commission is convinced thatthe owner or dealer is of good repute, hisbusiness is financially stable and the proposedsales would not be fraudulent. The bond isexecuted in favor of the Republic of thePhilippines and shall authorize the Commissionto use the proceeds thereof for the purposes ofits undertaking in case of forfeiture. TheLicense mandates that subdivision lots in theproject can be sold and that completion of theproject must be done within one year from thedate of issuance of the license or at such otherperiod as authorized by the Commission.

The Commission is also mandated to moni-tor the development of the project as well asthe business affairs, administration and condi-tion of the ntity, juridical or natural, engagedin the business of selling subdivision lots. Itmay take over or cause the development, com-pletion of the subdivision at the expense of theowner or developer where there is failure to

do the same.The decree likewise promulgates the penal-

ties and sanctions for the violation of thedecree which ranges from fines to imprison-ment or both and/or revocation or suspensionof the license to sell and registration of theproject, the broker, dealer or salesman.

The Rules implementing the decree providesfor the minimum design standards for the sub-division project.

B. Batas Pambansa 220

The law that directly addresses itself to low-income and middle-income subdivision deve-lopment to meet the needs of the low-incomesector is the aforecited made effective sinceSeptember 25, 1982 and amends certain pro-visions of Presidential Decrees 957, 1216, 1096and 1188.

The declared policy of the law was to pro-mote the development of economic andsocialized housing projects primarily by theprivate sector in order to make available ade-quate economic and socialized housing unitsfor average and low-income earners in urbanand rural areas. Economic and socializedhousing refers to housing units costed at 30%of the gross family income as determined by

the National Economic and DevelopmentAuthority (NEDA) and to government initiatedsites and services development and construct-ion of economic and socialized projects in

depressed areas.The standards and technical requirements to

be established shall provide for environmentalecology, hygience and cleanliness, physical andcultural and spiritual development and publicsafety and may vary in each region, province orcity depending on the availability of indigenousmaterials for building construc