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There is no question that the need for affordable housing in Philippine towns and
cities are rising rather than declining, especially in recent years of seemingly
unbounded urban
population growth and housing price inflation. As the population in our towns and
cities continue to rapidly increase, the gap between housing needs and supply,
particularly for low- and moderate-income families, is widening and reaching
alarming proportions.
The reason housing in our towns and cities are in painfully short supply hinges
on the simple disconnect between supply and demand. While urban areas gain
large numbers of new households every year, only a very small number of
affordable housing units are being built. A host of factors are driving up housing
prices and holding down construction of more housing units; high land and
construction costs; slow-moving bureaucratic processes for review and approval
or denial of construction permits; complex and often inflexible codes and
regulations; the absence of residentially zoned land for affordable housing; and
limited government funds to subsidize construction of low- and moderate-income
housing.
Yet, in the midst of this housing crisis, residential construction continues. The
problem, however, is that such construction are often either a) for upper-income
groups, in the case of medium-rise or high-rise condos in urban centers; or b) too
far away from centers of employment and livelihood, even if the housing units
may be lower in price. For both cases, the challenge of affordable housing should
be viewed not only in terms of the price of a housing unit but also its location
relative to centers of employment and livelihood where a large number of lowand moderate-income households derive their income.
To address the issue of affordable housing in Philippine towns and cities, a
program of INCLUSIONARY HOUSING is needed. INCLUSIONARY HOUSING
is a critical part of comprehensive efforts to meet the growing need to address
the problems that accompany rapid urbanization. It addresses the concern for not
only housing price but also of location.
Inclusionary housing involves local ordinances that either encourage or require
residential developers to incorporate affordable units in market-rate projects as a
condition of project approval. It is similar in objective to the 20% socialized
housing requirement for subdivision projects under the Urban Development and
Housing Act (UDHA). However, the UDHA requirement is applied to residential
subdivisions which are almost always developed in urban fringe areas that are
often far away from employment centers. There is no equivalent requirement for
urban centers where a large number of low-income households find their means
of livelihood.
In other countries, affordable housing advocates are increasingly succeeding in
persuading local governments to adopt inclusionary housing programs. Cities
that have adopted such programs have enacted laws that encourage or require
residential developers to incorporate affordable housing units in market-rate
projects as a condition of project-approval. Many cities all over the world
administer inclusionary housing programs, and an equal number are involved in
negotiating inclusionary agreements with developers on a case-by-case basis.
Those cities where inclusionary housing programs exist have enacted laws
requiring local governments to plan and enforce zoning ordinances in a manner
that will provide a fair share of low-income housing to meet housing needs. The
experience so far shows that inclusionary zoning can help expand the stock
affordable housing and can generate projects profitable enough to get
developers to participate in the programs.
However, the experience also shows that these programs have their fair share of
problems. The most frequently asked questions are:
Why is it legally sound to require developers rather than the city government (and
the community at large to shoulder the burden of providing low-income housing
units for needy households? How do such programs avoid raising prices of
market-rate housing and undermining the economic feasibility of residential
projects? Predictably, the answers are mixed, supporting both sides of the issue.
To reduce the objections to inclusionary housing and zoning ordinances, several
approaches can be adopted. First, inclusionary housing ordinances should allow
property developers to make a reasonable return on a proposed project and
receive some form of regulatory relief, such as density bonuses, that partially or
wholly compensate for the affordable housing units required. Second, cities
should prepare a compelling case for adopting mandatory programs. It should
demonstrate that construction of private, market-rate housing units have impacts
on specific community interests that are addressed by the inclusionary
requirement for example, that new market-rate housing creates a need for
workers who can afford only lower-cost housing or that it displaces low-cost
housing needed for existing residents.
The cost impacts of inclusionary housing would depend on the relative
desirability of the community in the metropolitan housing market. In a highly
desirable community such as cities which are regional trading centers, for
example, developers could raise unit prices to provide at least part of the
subsidy. In a less desirable community, constraints on housing price increases
would force developers to absorb the cost of affordable units except that in time
as developers factor subsidies into their pro-forma calculations, they would pay
less for housing sites, in effect passing the cost back to property owners.
The significance of economic impacts becomes almost moot, if an inclusionary
housing and zoning program provides incentives that largely offset cost
subsidies, such as density bonuses, fee waivers, reductions in code standards
for subsidized units, and expedited approval processes. These contributions to
reducing development costs, while not always making up for all the cost
differences between market-rate and lower-cost units, can allow developers and
builders to make sufficient profit to warrant housing production.
For most rapidly growing cities, which are highly desirable housing markets,
builders should regard inclusionary requirements as a cost of doing business,
and that builders can make such projects profitable. From an economic
standpoint, each inclusionary project must be considered as a whole whereby
cost and income trade-offs relating to the number of units of all types, land and
site development costs, sales prices and rents, and other factors combine to
generate a bottom-line financial picture. Developers and local governments need
to work out feasible incentives for inclusionary programs. This should produce
positive results.
The pros and cons of the legal and economic issues raised by inclusionary
housing will likely not be easily resolved. But everyone concerned with crafting
workable inclusionary programs can make certain the following principles guide
program administration.
1. Linking inclusionary housing to comprehensive development
programs.
Inclusionary housing programs should be viewed as one of the battery of
mutually reinforcing housing programs that make up a comprehensive and
community-wide, public non-profit/private effort to construct and improve