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Low Income Housing Finance: Brazilian Experience Júnia Santa Rosa Institutional Development and Technical Cooperation Department Ministry of Cities New.

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Presentation on theme: "Low Income Housing Finance: Brazilian Experience Júnia Santa Rosa Institutional Development and Technical Cooperation Department Ministry of Cities New."— Presentation transcript:

1 Low Income Housing Finance: Brazilian Experience Júnia Santa Rosa Institutional Development and Technical Cooperation Department Ministry of Cities New Delhi, January 27, 2010

2 Brazil 26 States and Federal District 5.564 municipalities BRAZILIAN CONTEXT BRAZILIAN CONTEXT : FEDERALISM AND INEQUALITIES FEATURES: Diversity and relevant inequalities spatial, social, economic, political and administrative among government spheres 190 million inhabbitants(2008) 30% Metropolitan Regions

3 This feature interferes direct on the response capacity from local and state governments capacity on responding the needs from the population Approximately 90% of municipalities with less than 10.000 inhabitants depend almost fully on funds transfers from: FPM ( National level -Fundo de Participação dos Municípios) de ICMS ( states must transfer 25% of taxes on traded goods to municipalities) BRAZILIAN CONTEXT BRAZILIAN CONTEXT : FEDERALISM AND INEQUALITIES Source: SOUZA, 2002 e IBGE, 2008. MUNICIPAL PROFILE ACCORDING POPULATION:

4 Public policies until the 80s Decision making and financial centralization Vertical standard of decisions and management Exclusion of civil society on decision making processes Absence of social control and evaluation BRAZILIAN CONTEXT: BRAZILIAN CONTEXT: DESCENTRALIZATION OF PUBLIC POLICIES 90s: strengthening of decentralization process of social policies (ex: health, education, social assistance, housing, sanitation) Federal constitutional of 1988: complexity on federal arrangements Redefinition of competences and attributions of government spheres Common, complementary and concurrent competences Decentralization of social policies, specially for municipalities Concurrent legislative attributions

5 NATIONAL HOUSING POLICIES IN BRAZIL NATIONAL HOUSING POLICIES IN BRAZIL : SYSTEM E FUNDINGS 1964 National Housing Policy (SFH e BNH) Decision making centralization by a national agency ( National Housing Bank - BNH) 1967 FGTS e SBPE (regulatory savings and loans system) 1986 End of BNH, different Ministries in charge of housing policies until the 90s 1988 (CF) Housing: concurrent attributions among federal, state and municipal levels Lack o federal policies, spread initiatives by states adn municipalities 1997 SFI (secondary market for mortgages) 2001 Statute of the Cities approval (Law 10.257/01) 2003 Ministry of Cities 2004 National Housing Policy (PNH) and National Cities Council 2005 National Social Housing System and Fund - SNHIS and FNHIS (Law 11.124/05) 2007 Growth Acceleration Program (PAC) 2008 National Housing Plan (PlanHab) 2009 My House My Life Program (PMCMV)

6 National Housing System and Fund (SNHIS/ FNHIS): MAIN PROGRESSES MAIN PROGRESSES ON HOUSING POLICY DURING THE PERIOD 2003-2009 Housing Markets (regulated and non regulated): My House My Life Program (MCMV): National Housing Plan (PlanHab): Growth Acceleration Program (PAC): Integration of funding and actions to face the housing deficit Measures on legal framework, trust deed, inductions for lower income loans, new guarantee instruments Long term planning for housing, strong civil society Historic benchmark on slum upgrading policies Incentives for new housing construction, funding for the new subsidies and finance model for low income housing

7 Founded in 1861, main implementing agency of national public policies and 4th bank in terms of assets in Brazil Since 1986 assumed operational functions of the National Housing Bank (BNH) : Major housing finance agent and relevant role on finance urban development, specially basic sanitation. Addicionally in 1986, CAIXA took over the role of operational agent of Fundo de Garantia do Tempo de Serviço – FGTS (unemployment provident fund), previously managed by the BNH. CAIXA CAIXA ECONÔMICA FEDERAL - CAIXA

8 Rent evolution on housing investments *RES. 460/04 - a partir de 01jun05 SBPE - Fonte: ABECIP – Atualização: Outubro/ 2009 Fonte: Quadro Presi Outubro/2009 (não inclui PMCMV)

9 Funding Sources: FGTS, FAR, FDS,OGU, FAT Source: MCIDADES and CAIXA – Update: 30/10/2009 INVESTMENTS ON HOUSING - Focus on low income brackets - OPERATIONS PER INCOME BRACKET ( %) 1 minimum wage (mw.) = US$ 300

10 NEW CYCLY OF GROWTH NEW CYCLY OF GROWTH IN THE HOUSING SECTOR Source: Elaborated by CAIXA, based on Ministry of Finance data. HOUSING UNITS FINANCE IN BRAZIL (1974-2008) (average per period) 363.540 436.139 155.468 173.879 327.054 494.562 1974-78 1979-841985-891990-941995-022003-08


12 Housing Deficit (2007) 6,3 Future Housing Needs (2008-2023) 25,0 TOTAL HOUSING NEEDS31,3 Milhões de domicílios Source: Elaborated fromFJP/CEI (2008) based on IBGE/Censo 2000 and MCidades/CEDEPLAR (2007). DEFICIT FOR SLUM UPGRADING3,2 DIMENSION DIMENSION OF HOUSING PROBLEM Source: Elaborated fromFJP/CEI (2008) based on IBGE/Censo 2000 and MCidades/CEDEPLAR (2007). INCOME BRACKETS: HOUSING DEFICIT: FUTURE DEMOGRAPHIC NEEDS: Families with access to credit need for complementary subsidies Families who couldnt afford long term loans, need for subsidies and public programs FOCUS ON SOCIAL HOUSING: Families integrated of accumulated housing deficit 11% of domiciles

13 PLANHAB NATIONAL HOUSING PLAN: PLANHAB Long term planning tool, to face the housing needs Strategic axes of PlanHab: 1.Housing subsidies and finance model 2.Urban and land policies 3.Institutional arrangements 4.Civil construction chain

14 1)Menu of housing alternatives for different types of municipalities 2)Classification of families (deficit and future housing needs) under income groups 3)Recognition of different costs for housing alternatives on different states 4)Finance and subsidies model according to income brackets and type of municipalities 5)Scenarios of funding sources and possibilities 6)Government must be prepared to attend accumulated deficit and part of future housing needs FINANCE AND SUBSIDIES PREMISES – FINANCE AND SUBSIDIES

15 INCOME GROUPS: NEEDS BY INCOME BRACKETS considering family income per capita, housing alternatives menu and types of municipalities relates income brackets with adequate funding sources and programs, based on credit affordability

16 INCOME GROUPS AND FUNDINGS Free housing finance markets Need for special conditions and regulated market (SFH) Need for partial subsidies to leverage finance Need for subsidies CONDIÇÕES DE ACESSO À MORADIA DEFICIT AND FUTURE NEEDS INCOME GROUPS - families FONTES DE RECURSOS 1 No access to credit Government budget 2 Limited affordability for long term credit National Gov budget/ FGTS 3 Affordability under special credit conditions FGTS/ SBPE (regulated savings and loans system) 4 Market based access to housing Housing finance unregulated markets, finance by construction companies and family own resources

17 In order to expand access to housing for low income families, the My House, My Life Program, assumes that each income bracket needs a different strategy. Up to US$ 900 Up to US$1.800 US$ 3.000 STRATEGIES INCOME GROUPS Emphasis on subsidies +RET +FGHAB +Reduction/ insurance exemption + lower interest rates Subsidy ( income subsidy) +RET +FGHAB +Lower cost insurance +Lower interest rates FGHAB + low cost insurance STRATEGIES BASED ON INCOME

18 Program of subsidies and finance with federal government funding : families with monthly income until US$ 900 FGTS finance+ subsidy mix : families with monthly income between US$ 900 and US$ 1.800 Guarantee Fund: refinance for income loss periods and lower insurance costs PNHR – National Rural Program : family agricultures and rural workers with annual income until US$ 39.000 Community Based and Non Governmental Organizations Program: social movements and organizations, families with monthly income until US$ 900 Registry costs: lower costs and more agile process Environmental licenses: faster and agile procedures Finance for infrastructure: investments on infrastructure Finance for industry construction chain: BNDES PMCMV PROGRAMS AND TOOLS OF PMCMV

19 TYPOLOGY OF MUNICIPALITIES REGIONAL DIVERSITY as a principle The municipalities typology consider the specificities of micro regions where cities are located, urban and socioeconomic indicators

20 HOUSING ALTERNATIVES DIVERSITY OF HOUSING ALTERNATIVES New units: private and public sector, social movements and community based organizations Requalification of buildings located in consolidated areas Sites and services supply Construction material kit + technical assistance Social rental housing Slum upgrading strategies

21 STRATEGIES Eliminate the housing deficit and face partially the future needs for housing Expand housing finance for low income families, through: proportional subsidies according to income lower finance costs diversification of housing alternatives OBJECTIVES METAS

22 FEDERAL, STATE AND MUNICIPAL BUDGETS: 2,63% of federal budget for housing and target of 1% of State and Municipal budgets (PEC – constitutional ammendment currently in the Congress) FUNDO DE GARANTIA DO TEMPO DE SERVIÇO (FGTS): Funding for finance+ increase of available funding for subsidies NEEDED INVESTMENTS ON HOUSING SISTEMA BRASILEIRO DE POUPANÇA E EMPRÉSTIMO (SBPE): Regulated savings and loans system, towards expansion of loans to low income brackets

23 SUBSIDIES It will be needed to attend the needs of 1 MILLION FAMILIES PER YEAR (income until US$ 1.800) from 2012 TO REACH THE OBJECTIVES NEEDED INVESTMENTS ON HOUSING Federal Budget: US$ 100 bilhões até 2023 (for 2010 estimated budget of ca US$ 5,5 bi) States and Municipal Budgets: US$ 50 billion until 2023 FGTS: US$ 43 billion until 2023 (average US$ 2,8 billion/ year) FINANCE FGTS: US$ 265 billion until 2023 (average US$ 18 billion/ year: loans to individuals + public SBPE: US$ 43 billion until 2023 (average R$ 13 billion/ year: individual and corporate loans)

24 STAGES OF IMPLEMENTATION OF THE NEW SUBSIDIES MODEL 1st Stage (2009-11) Transition and implementation 2nd Stage (2012-15) Consolidation 3rd Stage (2016-23) Achievements and results

25 Implement a large scale housing program Promote slum upgrading Expand federal investments on housing Increase limits and funding for subsidies Implement a broader menu of housing alternatives Housing loans guarantee fund – set up Expand available FGTS funding for subsidies (2009-2011) (2012-2015)(2016-2019)(2019-2023) SUBSIDIES PROGRAM Reduce funding costs for middle income brackets ACTIONS, PROGRAMS AND PROJECTS

26 (2009-2011) (2012-2015)(2016-2019)(2019-2023) FINANCE AND SUBSIDIES Improve legal and institutional framework for the housing loans guarantee fund Implement measures to develop a mortgage insurance market Expand down market regulated savings and loans system (SBPE) Evaluate alternatives and programs already implemented Design a social rental housing program Design a program of sites and services emphasizing medium and smaller cities ACTIONS, PROGRAMS AND PROJECTS Expand private sector housing loans to low income groups

27 CHALENGES Strengthening the guarantee fund – legal and regulatory framework Include the private banks in the subsidies system Improve data base of beneficiaries and demand Improve financial services and products for low income brackets Expand financial participation at municipal and state levels Introduce savings as criteria and financial counterpart of beneficiaries Improve available products for low income within real estate markets Expand housing markets to fit deficit and housing needs

28 GLOSSARY BNH – National Housing Bank FGTS – Guarantee Fund for time of employment FNHIS – National Housing Fund for Social Housing IBGE – Brazilian Institute for Geography and Statistics OGU – Federal Budget PAC – Acceleration Growth Program PEC – Constitution Amendment Proposal PIB – GDP PLANHAB – National Housing Plan PLHIS – Local Government Plan for Social Housing PMCMV – My House, My Life Program PNH – National Housing Policy PPA – Five years Budget RM – Metropolitan Region SBPE – Brazilian Savings and Loans System (regulated) SFH – Housing Finance System SM – Minimum Wage SNH – National Secretary of Housing, Ministry of Cities SNHIS – National System for Social Housing SNHM – National System for Housing Markets

29 Júnia Santa Rosa Institutional Development and Technical Cooperation Department Ministry of Cities New Delhi, January 27, 2010

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