IDB - Inter-American Development Bank
IDB - Inter-American Development Bank
08/06/2024 | News release | Distributed by Public on 08/06/2024 12:45
Third Regional Housing Forum 2024: A Milestone in Sustainability and Housing
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The IDB Group in coordination with the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) and the Secretaría de Desarrollo Agrario, Territorial y Urbano (SEDATU), held the 3rd Regional Forum on Housing 2024 "Disruptive Innovation in Sustainable Housing for Vulnerable Populations in Latin America and the Caribbean" on July 25 in Mexico City, with the participation of 12 ministers and vice ministers of housing from Latin America and the Caribbean, authorities from the U.S. Government, as well as representatives from Canada and Europe.
This meeting brought together more than 500 face-to-face experts and more than 9,500 online participants from around the world, including national housing agencies, development banks, builders, private banks, microfinance institutions and institutional investors. The challenges of the housing deficit in the region, caused by accelerated urbanization, changes in household composition, migration and the formation of new households, were addressed.
During the development of this third edition, innovative solutions to reduce the housing deficit were discussed, focused on populations without access to social security and in vulnerable situations. These solutions stand out for being sustainable and resilient and integrate aspects of gender equality and social inclusion.
Presentation. Secretary of Agrarian, Territorial and Urban Development.
The Secretary of Agrarian, Territorial and Urban Development stated that housing, from a social perspective, must be a constitutional right, and to this end, the real needs of the population must be understood. Currently in Mexico, not only new housing is required, but also the improvement of the conditions of existing housing. To achieve this, the Mexican government in the current administration established a "self-production policy" providing economic benefits and subsidies to individuals so that they can decide how they want to transform their housing according to their own needs. It is also important to promote the planned growth of cities, where housing has access to basic infrastructures such as health centers, transportation routes or work centers. To this end, it is important to update urban plans to identify territorial inequalities and contribute to reducing the housing backlog. Currently, 300 plans have been updated (4 regional, 8 state, 268 municipal and 20 metropolitan) with an investment of 321 million pesos and 1,437 mobility, infrastructure and service projects have been defined.
Professor Emeritus of TUFFS University in the United States addressed strategies to produce affordable housing in Latin America and the Caribbean, which is the most urbanized region in the developing world, with 82% of the population living in cities and about 18.3 million intra-regional migrants. One of the main challenges in the region is the lack of adequate housing for approximately 104 million people, with Afro-Latinos and indigenous populations being the most affected. The cost of housing can be up to 30 times higher than the average annual income, necessitating a housing environment that stabilizes and improves family security.
To address homelessness, there is a need for appropriate redirection of subsidies; generation of accessible and well-located land, including simplification of permits and regulations; innovative strategies to obtain financing, as well as the creation of an accessible banking system that encourages savings and offers affordable mortgage products; leveraging land as well as existing housing with government involvement that can also play a crucial role in financing affordable housing and knowledge dispersion. Among the innovative strategies highlighted to raise additional funds, one can consider inclusionary zoning for social housing development, taxes on high-cost properties and voluntary contributions from the private sector, resources that can be earmarked for housing production or improvement. In addition, the use of existing land and buildings can be optimized through the acquisition of surplus properties and the conversion of underutilized properties, such as offices and shopping centers, to residential use.
Panel 1. Data collection and housing information to address the housing shortage.
What are the main sources of information that allow the measurement of the housing deficit? Heads of the Organization for Economic Cooperation and Development (OECD), the Economic Commission for Latin America (ECLAC), the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) and the Oficina Nacional de Estadística (ONE) of the Dominican Republic agreed that household surveys are a highly relevant source for analyzing social inequalities in terms of access to housing and the relationship between housing and quality of life. However, one of the limitations of this source is its territorial scope. Considering that this limitation in surveys is one of the advantages of population censuses (due to their territorial scope and the possibility of working with specific groups), censuses are an important source of information for carrying out comparative analyses at the regional level, always considering the link between housing and society as a transversal axis.
Keynote Presentation. "Housing Solutions for Older Adults".
The Director of the Housing and Aging Society Program at the Harvard Joint Center for Housing Studies in the U.S. discusses how the aging of the population is significantly transforming housing needs and markets. As the number of older people increases, there is a challenge to provide safe and affordable housing with access to essential services and opportunities for community participation. In LAC and the United States, the proportion of seniors is rapidly growing, highlighting the need for targeted policies and programs to support these populations. Access to adequate housing is crucial to the health and financial security of older adults, as high costs can lead to reduced spending on health care, food, and necessary services. In addition, the quality and characteristics of housing, such as accessibility and location, are critical to ensure safety and enable independent living.
As part of the solutions to the identified challenges, better coordination between housing programs and various public and private institutions is needed to address the multifaceted needs of older adults. There are promising solutions such as shared housing and family apartments for older adults, which address challenges of isolation, accessibility, safety and affordability, but there remain significant barriers to their wider adoption. Investment in infrastructure is needed to enable individual older adults and their families to easily access programs designed to help them. Affordability requires a great deal of buildup from various subsidy programs, which are limited, and partnerships between developers and housing providers and service agencies. In addition, there are other types of solutions to help seniors such as reverse mortgages, cash-out refinancing and other programs.
How can the main challenges be faced to address the housing deficit in the countries of the region more quickly? Ministers of Housing and Urban Development of Latin America and the Caribbean (Argentina, Dominican Republic, El Salvador, Guatemala, Panama, Paraguay and Guatemala) discussed the actions being taken in their countries to encourage sustainable housing for vulnerable populations as a result of the challenges identified in the value chain studies. Based on the IDB-led housing value chain studies, it is possible to identify weaknesses and opportunities to improve efficiency and facilitate the design of housing policies, products and programs so that the public, private and social sectors can jointly respond to the needs of the low-income and/or vulnerable population: improve governance and regulatory frameworks, diversify subsidy and insurance schemes, innovate in financial products, promote business intelligence, innovate in sustainable design and materials, and strengthen collaboration and statistical capacities in the region.
Presentation. Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT).
The General Director of INFONAVIT highlighted the various actions that the Institute has taken to reduce the country's housing backlog. Currently, INFONAVIT is the largest credit granting institution in the country with a 70% share of all loans granted nationwide, assets that represent more than 6 percentage points of the GDP.
Likewise, the national government is working on a constitutional reform regarding housing, the purpose of which is to allow INFONAVIT to invest part of its resources in the construction of rent-controlled housing that does not exceed 30% of the worker's salary and with the option to purchase after 10 years of inhabiting it. Once the reform is approved, INFONAVIT's regulations would have to be updated in order to define the modalities of investment in construction, leasing and maintenance of buildings, define the rules of operation, change internal regulations and establish an area dedicated to construction, define an initial budget to initiate investments in housing construction, identify a land reserve suitable for the development of adequate housing, well located, close to work centers and initiate the construction of housing.
Panel 3. Alternative resilient and inclusive housing solutions to address the housing deficit.
What alternative mechanisms have been used to address the housing deficit with resilient solutions for vulnerable populations? Heads of housing and urban development agencies in the United States, Canada, Europe, Brazil and Chile considered that taking into account the magnitude of the housing deficit in LAC, the annual formation of households and migratory movements, it is estimated that the housing gap could be closed in more than 30 years under the current response of governments and the private sector, It is therefore important to understand the characteristics, timing and speed of the demographic transition in each country, as well as population aging trends, migratory events and their causes, since they can lead to new trends in housing demand. Understanding the above allows the design of appropriate public policies to address the housing deficit and integrate society with adequate housing solutions such as reverse mortgages for the elderly, rental housing for people who cannot or do not want to buy a home, such as young people, single-nuclear families, people in labor mobility and the armed forces, which have been successfully developed in the USA and Canada, or housing schemes for the elderly and the elderly, which have been successfully developed in the USA and Canada. In the U.S. and Canada, or innovative financial schemes implemented in Europe such as Covered Bonds used to finance financial institutions so that they can generate new mortgage loans; or guarantee funds for the coverage of home improvement loan portfolios that are being developed in Brazil, which mitigate the default risk levels of financial institutions.
How can cities in the region optimize the use of existing urban land to meet social housing needs? The Lincoln Institute of Land Policy, Empresa Metropolitana de Vivienda y Desarrollo Urbano, Federación Interamericana de la Industria de la Construcción (FIIC), Habitat for Humanity and UN-Habitat agree that the scarcity of developed land is a key challenge for investment in affordable housing. It is crucial that local governments lead the development of territorial and urban planning, in coordination with national governments for the management of targeted subsidies. Available instruments include land use regulations for intra-urban social housing, urban densification, capital gains capture, taxes on vacant land, tax incentives, simplification of procedures and the creation of land banks to produce social housing.
What type of financial instruments or structures are being used to capture long-term resources with competitive interest rates for the supply and demand of social housing? Representatives of Ginnie Mae's Capital Markets Office and actors involved in housing finance indicate that in LAC, low banking penetration among middle and low income and informal labor limit housing finance. Mortgage debt as a percentage of GDP in LAC averages 8.2% (with significant differences between countries), which is low compared to the United States (53.12%) and Europe (41.7%). Therefore, it is essential to involve the private sector in the development of sustainable low-income housing through innovation in banking and financial products that facilitate the acquisition and improvement of housing with a focus on gender and inclusion. The securitization of mortgages allows the assignment of a portfolio of mortgage loans to a trust to issue stock certificates that can be placed among the investing public, thus reducing the risk exposure of the mortgage portfolio of the institution that originates the mortgage loans, while acquiring a new source of funding to generate new loans. Similarly, social bonds make it possible to finance loans for micro, small and medium-sized enterprises, including those run by women, as well as loans for the acquisition and improvement of housing for women in vulnerable situations; or funds for affordable and sustainable housing supply to increase the availability of capital for the development of sustainable housing built by small and medium-sized developers.
What are the measures that housing developers are working on to make their projects not only affordable, but also viable in the long term so that they contribute to the well-being of low-income families? Heads of various entities that have collaborated with IDB INVEST, comment on how the private sector can assume an important role as a provider of complete or incremental, quality, tailor-made, sustainable and affordable housing solutions for the benefit of low-income families, for which it is necessary the existence of a greater supply of sustainable housing, considering the reality of the target population, which often involves labor informality or low wages, lack of appropriate guarantees and a fluctuating income.
We invite you to learn more about the Third Regional Housing Forum 2024 and enjoy with our recap video of the event at: