The unseen struggles of ensuring every Filipino has a home

For the past 49 years, one organization has been relentless in making its mission of providing a home for every Filipino a reality. The Subdivision and Housing Developers Association, Inc. (SHDA) is celebrating 49 years of actively ensuring the right of Filipinos to own a house that they can call their own. Comprised of members from different property development companies, the organization has been active in vocalizing the advocacy of the housing industry in the country, which includes partnering with the government and other sectors toward undertaking programs and policies that foster a sustained housing industry vis-à-vis the economic growth of our country.

Shda Board Members: (Standing, from left) Ricky Celis, board adviser; Felix Tiu, governor – Visayas; Augusto Leonardo, governor; Arch. Jose de Guzman, board adviser; Willie Uy, board adviser; Kerwin Padua, PRO; Renato Tan, governor. (Seated, from left) Yolanda Akol, governor; Rosie Tsai, FVP; May Rodriguez, SVP; Jeffrey Ng, chairman of the board; Raphael Felix, president; Atty. Marianne Lina-Cruz, governor; Arlene Keh, corporate secretary; Fely Ramos, governor.

The real state of Filipino real estate

Owning a home remains a top priority and aspiration of many Filipinos, however this remains impossible for many as an estimated backlog is reported to have reached 6.7 million as of 2015. A study by the University of Asia and Pacific showed the Philippines would need 12.3 million housing units by 2030. Add to this, the production of houses slowed down in the last two years. Before the decline of the housing production, the housing sector was able to meet its target for 2016 of building one million homes, but because of the numerous problems the industry faced, they are unsure if they will ever meet the target of building two million homes by 2022, as first targeted in SHDA’s Roadmap to 2030.

“It’s quite unfortunate that we have a six-million housing backlog in the country and our advocacy is to reduce if not totally eliminate this housing backlog. This housing backlog has been steadily increasing in the past few years, so we feel that there is even more urgency to decrease and eliminate this housing backlog,” says Jeffrey Ng, SHDA chairman.

According to Ng, one of the reasons for the backlog “is the cost of the house vis-a-vis the(ir) income and their ability to pay the monthly amortization. We are working on [reducing], let’s say, the cost of land. Because by artificially limiting the amount of land available for housing, it makes land expensive. We would like to free up more land, especially around the major cities in the country by making it not as difficult for land conversion.”

It is a basic necessity and a right of every Filipino to own a home of their own. – Jeffrey Ng, SHDA chairman of the board

Land conversion is the conversion of raw land into construction, residential, commercial, or industrial building sites. In the Philippines, the process of converting land takes two to three years, therefore artificially limiting the amount of land available for housing.

“There is more than ample land available for housing and subdivisions except that the process of land conversion takes two to three years. Now, we are glad that just last month the Department of Agrarian Reform (DAR) Secretary has shortened the land conversion process. We hope that this will ease the shortage of land for housing purposes,” says Ng.

The department has introduced a memorandum that shortens the land conversion process from 24 months to 30 days. This happened after President Rodrigo Duterte ordered the creation of a task force to look into any anomalies in the land conversion process and to expedite the conversion of agricultural lands into residential, commercial, and industrial uses; as well as, tasked the task force to simplify the procedures and do away with redundant certifications.

“We look forward to working more closely with DAR and other government agencies for us to be able to have quick land conversion approvals and for us to be able to start construction of these housing units,” he adds.

Another problem contributing to the increasing housing backlog is the outdated building codes that SHDA is striving to streamline. “A lot of these codes — building codes, structural codes, and the like — are still enacted into law, these were enacted in the 1970s and 1980s. Times have changed, so the law has to change except that these codes are legislated, to change these codes mean the creation of new laws. With so many issues being faced by the country, the legislating of new design codes for construction does not fall on the priority list. One of the things we are espousing now is to set a basic law to harmonize the different codes,” says SHDA president Raphael Felix.

“SHDA is doing everything it can to be heard within the halls of government to be able to help in the production of houses. Building and selling is not the problem. The problem is starting a project and it’s that process that we have to ease and make smoother.” — Raphael Felix, SHDA national president

“There is a bill entitled the Philippine Building Act of 2018 that is ongoing now. Its objective is to be able to blend all the codes together and if there are any changes — brought by the changing technology, changing travel patterns, the changing climate conditions — it will be through the implementing rules and regulations (IRR) without having to amend the law itself.”

“SHDA is doing everything it can to be heard within the halls of government to be able to help in the production of houses. Building and selling is not the problem. The problem is starting a project and it’s that process that we have to ease and make smoother. Any time savings, is money saved. Any money saved will endure to the benefit of the buyer also; the more we spend, the more the cost goes up especially in socialized economic housing segments where the backlogs are most felt. It’s really price-sensitive and therefore it’s really something that we have to make sufficient as fast as possible. And as I’ve said, it’s not the building and the selling; it’s land availability, it’s permitting it, it’s the planning process whereby we have to make all the different codes — electrical code, building code, the structure code, all coincide with each other and not run in conflict with each other,” he adds.

Another issue that SHDA is advocating in terms of reducing the housing backlog is the retention of tax incentives upon the passage of the second passage of the Tax Reform for Acceleration and Inclusion (TRAIN-2) bill or TRABAHO. “We are also fighting for the retention of the income tax holiday that might be removed when TRAIN-2 gets passed. If we want to help the production of socialized economic housing, the income tax holiday and other incentives must remain in place,” says Felix.

TRABAHO refers to the second package of tax reforms being pursued by the Duterte administration. The package deals with provisions in the tax code related to businesses and corporations and aims to make the tax system simpler, fairer and more transparent. It also proposes to cut corporate income tax (CIT) from 30 to 25 percent. The 30-percent CIT is one of the highest rates in Southeast Asia. In addition, it is also looking at taking away fiscal incentives, including tax exemption from businesses in export processing zones.

Many businesses have expressed concerns warning that the proposed tax package would scare off investment pledges and existing jobs particularly from the manufacturing and business processing industries.

“There needs to be things put in place by the government, and one is you don’t remove the tax holidays. Removing the tax holidays just aggravates [the housing backlog] even more. Those are the things that really affect the housing production. By streamlining the land conversion process, shortening the permitting process, shortening land conversion, and being able to open up the regions with infrastructures — these are the things that will spur housing production.

Another issue contributing to the increasing housing backlog is the availability and affordability of socialized housing. For the last 10 years, SHDA was in the forefront of introducing the concept of “in-city” socialized housing, presenting studies and meeting with the different concerned government agencies, and eventually lobbying for the inclusion of in-city socialized condominiums in order to address the lack of in-city socialized dwellings. RA 10884 eventually lapsed into law — raising the hopes of our minimum wage earners to afford a home within the cities where they work. Sadly, however, the newly approved socialized housing price ceilings present another obstacle. Felix shared that in the past Housing and Urban Development Coordinating Council (HUDCC) administrations, there was already “an agreed” price ceiling set for the socialized housing. But the price ceiling that was approved last year was way lower than the originally set price ceiling. “Instead of helping, it became a deterrent because the price per square meter was effectively reduced and made production unfeasible. Consequently, in 2018, it was socialized housing that experienced the largest decline in terms of Licenses to Sell issued, close to 50 percent.

The Department of Human Settlements and Urban Development

As an organization that is invested in its pursuit of helping the average Filipino own their own homes, the SHDA has been active and vocal in the government’s initiatives in reducing the housing backlog. Since Republic Act No. 11201 was signed  into law by President Rodrigo Duterte on Feb. 14, SHDA has worked with the government in drafting the IRRs for the creation of the Department of Human Settlements and Urban Development (DHSUD) — a newly created agency that will act as the primary national government agency entity responsible for the management of housing, human settlements, and urban development.

“Finally, after 27 years, the DHSUD is being put in place. We are very excited about it and that’s why we are very active in the crafting of the IRR, to make sure that it is not just another rubber stamp but a body that can actually make things happen for the housing sector,” says Felix.

The department will be the sole planning and policy-making, regulatory, program coordination, performance monitoring, and adjudicating entity for all housing, human settlement and urban development concerns primarily focusing on the access to and affordability of the basic human needs. Some of the regulations they are proposing to go along with the drafting of the IRRs are the generation of real-time data on housing starts, licenses to sell, and recommend policy measures to address perceived and potential issues; and the inclusion of the private developers sector in conducting adequate, inclusive, and participatory consultation in the formulation and development of policies and programs.

The final draft of the IRR will be completed and signed on June 15. Concerned agencies including the HUDCC and Housing Land Use Regulatory Board (HLURB), are currently crafting a roadmap for the new department, which will be operational beginning 2020.

SHDA, a history

Before becoming SHDA, the organization was first known as the Subdivision Owners Association of the Philippines (SOAP), an organization of subdivision developers whose aim was to influence government policies, laws and regulations that will enhance the viability of the real estate sector consistent with public welfare. In the 1970s, the real estate industry was very crude in which the typical practice then was a developer can subdivide a mother title raw land and sell it, with or without any development on said land. The buyers were left on their own to build their house by borrowing from banks, and credit institutions such as the SSS or GSIS to finance the construction.

At the time, there wasn’t an official agency to regulate subdivided lands, and this created numerous problems. Add to this, the Pag-IBIG Fund was still in its infancy and still had a lot of growing up to do before becoming the agency that it is today.

In the early 1980s, real estate developers gradually shifted to offer house and lot packages. The Pag-IBIG Home Lending Program was administered by the National Home Mortgage Finance Corporation (NHMFC) and originated by private banks. Unfortunately, the lending program faltered due to the lack of funds brought about by the combination of political and economic crisis, and NHFMC’s practice of borrowing short at higher interest rates and lending long at lower interest rates. And by the end of 1984, the National Shelter Program of the government was completely put to a stop.

However, during President Corazon Aquino’s term, she signed into law Executive Order No. 90 which identified the government agencies essential for the National Shelter Program and defining their mandates — including the lending mechanisms for home mortgages. Her swift actions inspired the members of SOAP to reorganize and redirect its mission, focusing more on mass housing. They then renamed the organization from Subdivision Owners Association of the Philippines to the Subdivision and Housing Developers Association, Inc. and amended their by-laws but kept the basic purpose of the organization but with a greater focus on housing.

From 1987 to 1992, the country experienced its very first housing boom with 400,000 housing units delivered and mortgage loans taken out. But the lending program was still not perfect, resulting to numerous collapses in the years to come — one of the reasons being the collection deficiency. It was in these situations that SHDA offered helping the government. As part of the real estate sector, they have a firsthand perspective on how to better implement the housing lending programs of the government and have offered their expertise to the leaders of that time and to the government agencies involved.

“I would refer to [SHDA’s] milestones as problem-solving. [Whenever] the home lending programs collapsed, it also affected the industry, the business. We get into a crisis, and the mission and objective of SHDA is to try to find a solution to solve the problem and revive the program,” says Architect Joe de Guzman, SHDA board adviser.

“We continue to work with Pag-IBIG Fund, we have continuous interactions with them and they listen to us. Their qualification requirements now are not too strict and it’s very practical. Due diligence is done before taking on a housing loan. And they have privatized the collection by using agencies similar to those used in credit card companies. I refer to this as active collection, whereas before, there was a collection deficiency. As long as we work closely with the government, I would site the partnership between SHDA and Pag-IBIG to be the best relationship so far,” he adds.

Why the fight for housing?

Recently, SHDA elected new officers and part of the initiatives of the current officers is to help the government in the regulatory process by convincing them to recognize the organization as an accredited private sector arm. By accrediting the organization, it will put safeguards to police their members, making sure their member developers comply with the various regulations related to their property development business. Being a SHDA member developer is akin to having a seal of good business practice within the housing industry. For many people who may not be aware of SHDA as an organization and their initiatives, they might ask themselves, why is this particular organization determined in what it does.

“Well, SHDA is not only a business organization, it has a social mission to ensure that every Filipino who wants a house can get their own home,” says Ng. “We feel that it is a basic necessity and a right of every Filipino to own a home of their own. Once they have their own house, they have an investment in the economic wellbeing of the country. A home provides stability for society and a reason for them to be productive and hardworking citizens of the country. And once they have moved into their new house, they have to pay the monthly amortization for the next 25 or 30 years. And because of this, they have every reason to work harder, and be responsible citizens of the Philippines,” he adds.

“That’s what we’re here for, and why we will continue the fight. We’ve had successes, we’ve hit blank walls, but it doesn’t change the fact that housing is needed, we have to just keep continue doing what we have to do. Yes, it is our industry. Yes, it has to be profitable, but there’s a bigger purpose — which is to house the Filipino people and it’s a basic right for everybody to have a house. On the bigger picture, that’s what we’re fighting for,” says Felix.