THE VENEZUELAN HOUSING POLICY OF 1979-1983
AND ITS EFFECT ON THE FORMAL PRIVATE
SUPPLY OF HOUSING
by
Beatriz Coromoto Ramirez Correa
Arquitecto.
Universidad del Zulia
Maracaibo, Venezuela
December 1976
Submitted to the Department of
Urban Studies and Planning
in Partial Fulfillment of the
Requirements of the.
Degree of
MASTER OF CITY PLANNING
at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
June 1984
Copyright
(
Beatriz Coromoto Ramirez Correa, 1984
The author hereby grants to MIT permission to
reproduce and to distribute copies of this thesis
document in whole or in part.
Signature of
the Author
d&(omot-6 Ramirez Correa
eatri Z
epartment of Urban Studies and Planning
Certified by
I yn Sagal4', P
,/ h
Pl
fess/fr
of Urban-
s /Supervisor
/7
Accepted by
4.1F
MASSACHUSETTS iNSTiTUTE
OF TECHN;LoGy
AUG 1 0 1984
G
/
e n he 'r
7
, Ch'Krina n ,CP
Commit tee
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Page has been ommitted due to a pagination error
by the author.
(pages 104, 122, & 169 )
2
THE VENEZUELAN HOUSING POLICY OF 1979-1983
AND ITS EFFECT ON THE FORMAL PRIVATE
SUPPLY OF HOUSING
by
BEATRIZ COROMOTO RAMIREZ
CORREA
Submitted to the Department of
Urban Studies and Planning
in June of 1984, in partial fulfillment of the
requirements of the Degree of Master of City Planning
ABSTRACT
This thesis evaluates the efficiency of the program of incentives to private developers contained within the Venezuelan housing policy of 1979-1983, which aimed at promoting
the construction of low-cost housing units for moderate income families.
This thesis argues the program of incentives was not effective because; a) the program was too broad in scope, it intended to cover a very wide range of households and did not
consider limitations in resources, b) it intended to encourage construction of units which were not profitable real
estate investments, given the market costs and inflation,
without implementing complementary measures that either reduced costs or increased subsidies, c) the features of the
program which could orient production favored the construction of the most expensive units within the program, and d)
the outcomes of the producer approach tend to respond more
to producers' interests and expected profits than to the
needs of the potential consumers.
As a result, units
produced were not affordable by the target households.
The conclusions and recommendations are targeted to improving the producer oriented approach and to search for alternative, more effective producers.
The changes proposed are;
a) to reduce the range of target households, and to include
variables controlling quality of production, b) to implement
strategies for cost reductions and to evaluate complementary
subsidies, c) to eliminate tax exemptions from the program,
and d) to implement measures to increase the confidence in
the marketability of the low cost units.
A mixed approach
which combines the modified formal private sector approach
with an additional program for smaller scale developers is
likely to be more effective in producing housing units for
moderate income groups.
Thesis
Supervisor:
Title:
Lynn
Sagalyn
Professor of Urban Planning
3
TABLE OF
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7
Context
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29
Introduction
II.
The
PAGE
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5
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Acknowledgements
I.
CONTENTS
.
The Venezuelan Housing Policies for the
Period 1979-1983......
.
.......
The Features Identified as Critical in
the Housing Problem . . . . . . . . .
The Official Institutional Framework. .
The Housing Financial Sector
......
The Housing Policy Approach
......
The Policy Programs .
.
.. .......
III. The Program 4 - The Incentives to the
Private Sector
..
. .
. . . . . . ..
o..
The Initial Regulations -. ..
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..
o..
The Incentives to the Developer
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.
The Benefits to the Buyer
. .. .....
The Incentives to the Financing
Institutions . .
. *.....
. .......
The New Regulations and the Regulations
for the 1974-1979 Period . . . .
. . .
- - -. . . . . .
The Subsidy Program
IV.
.
48
53
57
59
62
73
74
79
83
85
87
90
The
The Response of the Private Sector:
Production of Housing Units, Its Relation
with the Policy Goals, and the Market
107
.
.......
.....
Behavior . . . .
The Characteristics of the Units
110
.. ..
. . . . . . ..
....
Produced .o
The Reasons Behind the Supply Response. . 120
. . .134
o..
The Evolution of the Market . .
The Situation of the Housing Market in
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Some Illustrative Cases ..
Conclusions . . . . . . . .
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1983 .
V.
43
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140
140
152
The Feasibility of Implementing the
. . . . -157
Cost-Price Evaluation
Program 4:
Financial Evaluation of the Target Units
159
-.-.-.-.-.-.-.-.-.-.-.
within Program 4
172
.--.-.-.-.-.
... .
Conclusions
4
CONTENTS
(Continued)
VI.
PAGE
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181
The Recommended Changes to the Program . .
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Cost Reduction Strategies
Complementary Construction Subsidies . . .
- -.
Modification to the Incentives . . .
Summary of Modifications to the Program 4.
The Search for Alternative Developers.. . .
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Conclusions and Recommendations
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Index of
Charts
Index of
Figures.
Bibliography
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212
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5
ACKNOWLEDGEMENTS
I would like to thank all
the people who made
this the-
sis possible in one way or another, but a list that includes
Some people helped me
everyone would be very long.
my
arguments
clearer
sharper
and
with
useful
to make
and
comments
suggestions, others helped in the collection of information,
support and encouragement
and still others gave me the moral
so necessary
in undertaking
a
task such as
this;
to all
of
them I owe my special thanks.
I
am
thankful
to
Professors
Lynn
Sagalyn
Wheaton, my thesis advisor and my reader,
and useful
ideas
my work.
about
and
William
for their interest
advisor, Pro-
My academic
fessor Lisa Peattie, deserves my sincere thanks for her orientation and encouragement during my two years at MIT.
new
discover
helped
and
dimensions
I also wish to thank all my professors at
my
in
interests
She
career.
MIT, from whom
I
learned such a great deal.
I recognize the cheerfulness and fellowship that characterizes my classmates;
without that enthusiasm, the intermi-
nable work would
been unbearable.
to
Karen
Margolis, Randal
among
Shouccair,
Daymond
the
in
the
Marcia
Rucker,
MCP
Hamid,
and Gamal
encountered
close
have
fellows,
among
the
of
classrooms
as
I am also
and
Siegal
well
as
many other
MIT.
You
indebted
all
Edward
to
Diana
friends
will
I
stay
to me in my heart.
My thanks also goes to those who were so kind and helpto
information.
Here,
I must
CONSTRUCCION
and
during
statistics,
willing
my
Venezuela
visit
ful
the
OCEI,
mention
who
made
developers whom
to spare me a moment of
Omar Bello
of
the
to
Venezuelan
I
collect
the
the
people
available
interviewed,
their valuable
Central
necessary
from
to
FUNDA-
me
their
who
were
time,
to
Bank, who offerred
so
Dr.
me
6
reports
the
many
opened
doors
Pinedo
Tulio
that
of
for
me,
and
Brige,
and
institution,
like
Ramon
Jorge
Perez.
to
all
of
Correa, Hector
Meyer
who
those
Trejo,
Cohen deserves
my very special thanks, he overcame the difficulties of time
and distance
to make
the
last
minute
information
available
to me.
The economic support from FUNDAYACUCHO and Corpozulia is
The
acknowledged.
efficient
secretarial
work
of
Susan
Lichauco is appreciated.
moral support, and encouragement
I acknowledge the love,
of
my
mother, my
Jasmin.
My
my deepest
at
MIT
go
well
acknowledgements.
son,
wouldn't
companionship,
cooperation
for
in
Venezuela,
especially
from
my
sister Tania, and my friends Anita, Cecilia, and
I give
studies
love,
friends
family and
he was
and
thanks to Humberto,
have
ample
beyond what
been
possible
without
his
His
loyalty
and
support.
can
my husband.
be
described
in
these
Lastly, I want to thank Arturo Manuel, my
my sunshine during
the dark days,
me constantly feel that there is still
and
made
life outside of MIT.
7
INTRODUCTION
The
intervention
housing
market is
official
programs
Venezuela.
was
the
Venezuelan
55 years old.
(Banco Obrero)
Bank
of
in
to
1928
orient
the
the
the main cities
the
beginning
production
the
of
of
the
housing
in
the government intervention
direct
for the working class.
sing units
in
creation of the Labour
signaled
However, until 1958,
concentrated mainly on
The
government
construction
of
hou-
Those actions focused
on
of the country which were urbanizing rapid-
That constructivist approach was exacerbated during the
ly.
dictatorship period, when the problem of increasing marginality was intended to be solved by building large scale highrise
In
developments.
against
tion
the shacks"
of
the
that
proved
housing
period,
to be a
for
needs
the
policy
big failure
the
called
in
rapidly
the
"war
solu-
urbanizing
Venezuela.
The
true
beginning
started after the
of
the
Venezuelan
housing
dictatorship was overthrown
in
policies
1958, when
wholistic and integrated nation wide approaches were developed.
levels
Those
of
policies
the
demand
considered
and tried
the different affordability
to match
them with
ferent mechanisms available to supply housing.
years
the
different
housing
policies
have
the dif-
Thus, for 26
included
incen-
tives and regulations to stimulate the formal private sector
to
produce
socially
targeted
housing
units
called
"social
8
interest
housing".
switched
from
lower-middle
solutions
private
least,
for
to the
to
stated
production
direct
lowest
produce
and
income
the
goals.
broadened
the
of
former.
range
interest."
amount
Similarly,
of direct
sector and have
tegies.
There
and
of
the
indirect
incursioned in the
are no doubts,
has
units
the
groups,
but
the
for
provision
Those
Consequently,
the
government
indirect
using
had
income
of
the
amount
of
policies
have
subsidies to
field of
have
groups
increased
the private
financing stra-
the policies of
resources
at
considered to be of
the
recent governments expressed clearly these trends.
regardless
of
the
been,
policies
targeted
raised the sale prices of the units
"social
the
direct
the
sector
increasingly
and
the
class
the
Progressively,
two more
However,
invested by the gov-
ernment to stimulate private production, the producer orienThe majority of the units produced
ted approach has failed.
had been too expensive to be bought by the groups the policy
intended
to
channelled
serve.
into
the
Even
though most of
market,
we
can
the units had been
argue
about
the
extra
costs paid finally by the consumer or by the government, and
about
the
efficiency
characteristics
of
the
of
the approach.
units
produced
profit maximization orientation
than
In addition,
responded
more
the
to a
to the consumer needs,
raising questions about the adequacy of the production.
Several
reasons have
been
responsible
for
the
critical
role assigned to the production of low-cost housing units by
9
the
private
shortage
most
of
the
the
showing
in
sector
a
and
general,
away
low cost
in
the
share
been
additional
production that
in
the speed
in
this sec-
An
wide employment.
nation
cons-
sector
residential
the
the GNP, and the importance of
of
source
relevant
and
traditional
particular, had in
as
kept
government
the
These arguments have been backed up by the statis-
truction
tor
if
country
the hou-
in alleviating
restrictions for private investment
the
housing.
tics
in
the private
the belief
an important role
sector could play
sing
them is
One of
sector.
could be
argument
has
built in,
given the private sector has the expertise and the
access to the necessary resources7
tal,
and
sector
already part
the
to
industrial
the
strong
sector,
the private
is argued
the ne-
system and possesses
Lastly, we can
placed on private production also
the importance
forget
responds
of
it
to put housing units up.
cessary connections
not
Also,
entrepreneurship.
is
namely land, labor, capi-
political
counted
and
economic
construction,
have
ties
the
with
the
political power.
In addition, the advocates for the potential role of the
housing production point out
sector
in
low cost
inefficiencies
in
production
private
by
the
public
sector
in
the
terms
of output, production speed, and efficiency of resources invested.
private
middle
A
complementary
sector
income
could
groups,
assumption
produce
the
units
effects
at
of
is
that
most
although
for
filtering
the
down
the
lowerwould
10
extend the benefits to the lower income groups by liberating
These units will then be
previously occupied housing units.
taken by less wealthy families.
the
the benefits will spread to the overall spec-
run,
long
that in
Thus, the belief is
trum of the housing needs.
This thesis focuses on the evaluation of
of
level
of
the
and the
program
of
prices
adequacy of the producer approach
to the
is
argued
was
not
units
the
efficient
produced
units within
expensive
It
situation.
the
because
did
distribution
correspond
not
to
of
the
Private production concentrated on the
policy target goals.
most
economic
and
political
country's
the
market costs and
units targeted by the program given
inflation,
affordability
groups, the feasibility of construction
target
the
the
to
examines
It
1979-1983.
period
produced
the units
of
adequacy
the
presidential
the
for
policy
the housing
sector contained within
to the private
stimulus
the program of
the
Those
program.
units
were
not affordable by a high proportion of the target households
regardless
for
the
given
and
late
the
The
buyer.
because it
sector
of
of
implementation
program, overall,
a
subsidy
was not
program
realistic
intended to encourage construction by the private
of
low-cost
units
the
private
market
procedures.
The
that were
very difficult
construction
construction of
costs,
to build
regulations,
the cheaper
units was
very unlikely without the government implementing complementary
measures
oriented
toward
reducing
costs
and
restric-
11
tions or increasing the level of subsidies to the producers.
taken
the
of
Because
production,
and
all
affecting
variables
outcomes reflected
the most expensive
Production
that.
construction
in
the
of
features
private
to
profitable
program, which
the
build
residential
That outcome was exacerbated by
Venezuela.
the
concen-
the ones which offerred
units,
to obtain the standard returns in
the potential
had
which
approach,
integrated
program could not modify the way the market
the
the
trated on
more
an
consideration
into
works
of
lack
it
made
and
units,
expensive
and
less risky
not
did
modify drastically the perceived marketability risks for the
units.
cheaper
that
outcome
producer
The
because
it
approach
also
is very likely
contributed
to expect
to
the units
produced would respond more to producer interests and expected profits than to the needs of the potential consumers.
a consequeqnce of
As
tion,
inventory
jects
stopped,
the characteristics of the produc-
accumulated,
"crisis"
and a
construction
in
the
country was voiced by the mass media.
was
exacerbated
situation.
increase
and the
in
by
the
However,
the
we
interest
lack of liquidity,
rates,
housing
argue
the
ongoing
market
of
prothe
The market distortion
financial
country's
will
of
that
and
political
regardless
currency
of
the
devaluation,
the problem would have been pre-
sent, although maybe in a less dramatic fashion.
This would
have occurred because the true root of the problem is in the
level
of prices of the units produced which are not afford-
12
The upcoming elections undoubtedly
able by the demand side.
both sides waiting
suppliers and the buyers,
the
from
tions
lot of expecta-
they created a
problem because
worsened the
for the new government to solve
the problems in the way most
convenient to them.
developers, more
order
effectively encou-
to
housing
low-cost
of
production
the
rage
in
that
thesis argues
This
drastic measures
That program must
First of all,
be adequate.
not
housing,
of
production
private
or
gram
argument
group
supports the
the design of
first
the
cial
to be
intended
be
to
have
it
outside
covered
substantially
the
by
for
will
outcome
of
the
from those
the
smaller.
proThis
reducing the target
program, concentrating
Similarly,
non-regulated
the
within
incentives and regulations
housing categories.
conditions
units
drastically
recommendation
the program of
three
the
if the government wants
expensive
more
from producing
otherwise
affect
to produce low cost units, the be-
formal private developers
nefits
and
intervene
that
elements
different
the
integrated and
and a more
coordinated program has to be undertaken.
consider
private
by
units
favoring the
market
for
the
finan-
must
differ
regulated
market.
Secondly, the government will have to look for ways of reducing
of
the different kinds of costs incurred in the production
housing
units.
Some
others are
tion
costs,
sing
production
in
of
these
embedded
Venezuela.
costs relate
in
The
to construc-
the mechanisms
government
must
for houre-exa-
13
mine
all
housing
the
ordinances,
of
low-cost
and
standards
affecting
to adjust and adapt them to the
in order
production
production
norms,
housing.
Unnecessary
and
stringent
conditions need to be eliminated.
More realistic and appro-
priate
contribute
norms
and
standards
would
to
production of low-cost housing more feasible.
making
the
Likewise, the
government could reorient the design and technical
characte-
ristics of the building systems commonly in use, in order to
together with
allow,
of
development
high
low-rise
proportion
produce
great
the
of
cluster
built-up
savings
in
of
modification
housing
area,
costs.
the norms,
solutions
and which
That
are
with
likely
reorientation
the
a
to
in de-
sign and technology must include evaluation of the materials
used
in construction, seeking
the reduction
in
imported in-
puts, similarly, the trade-offs between labor versus capital
be evaluated.
technologies must
intensive
It
is also para-
mount that an evaluation of the efficiency of the mechanisms
and
procedures
permits,
which
necessary
imply
to
time
obtain
and
building
money
losses
and
be
occupancy
undertaken.
In relation to construction costs, additional subsidies will
have
to be considered
duce
the
could
cheaper
be
in
the
if we want private developers to pro-
units within the program.
form of
construction
Those subsidies
financing
and land
availability which seem to have been effective in the period
analyzed,
market
or
prices.
required
by
a
supplying
An
materials
evaluation
developer
of
to build
and
equipment
the
amount
of
at below
subsidies
the cheaper units
must be
14
carefully done.
program would
tive
Thirdly,
concentrations of
and
An
them in order
have
which
to
proved
be
In
housing.
moderate
income
proposed to
reorient
the program of incentives
sector
vate
by
and
tives
civil societies.
ment
the
could
costs
formal
private
needs
is
rage
the
amount
the
in
the
units
recognizes
scales
of
coopera-
subsidies
development
would
be
of
because
housing
avoided.
respond
some
of
units
by
Also,
to
better
the
consumer
In addition, this alternative will encou-
development
promote
of
produced
is
for the pri-
like
developers
it
this approach, the govern-
With
developers
higher.
will
author
the
reduce
incurred
likelihood
and
non-profit
sense,
other
to
program
oriented
producers
and
the
channelling
ineffective.
this
for
ducers
levels,
to evaluate alternative pro-
is
recommendation
important
in the
different
to orient
different price
production at
the
those
eliminating
contained
be examined, strengthening the effec-
have to
and graduating
ones,
features
the
a
of
small
better
this
to
medium
distribution
change
in
sized
of
contractors
wealth.
orientation
is
The
likely
to
generate a lot of political controversy.
The
search for alternatives becomes very important when
the resources of the country have been reduced so drastically,
the
need
to
country faces a period of austerity, and
look
An
evaluation
we
recall
the
for
of
more
the
efficient
policy
oversupply
utilization
outcomes
is
of
becomes
happening
in
there
is a
resources.
critical when
a
period
when
15
squatter settlements are proliferating
in the main cities of
It also becomes critical when we consider what
the country.
could have been some alternative outcomes if the country had
residential
the
and
is
construction
to
potential
also
in
resources
the
employed
certain
that
sector
increase
it
Only
cess.
be
cies
more
in
Venezuela
in
the production
has access
to
has
of
effective
in
the
dynamism,
units.
the resources
of past experiences can
light
certain
It
needed
that is not a guarantee of suc-
housing production, but
for
is
It
way.
another
obtaining
housing poli-
kind
the
of
units
we
believe the country needs the most.
While
licy for
of the overall
an in depth evaluation
housing po-
the country will provide us with a wider knowledge
to assess the problem, it is out of the scope of this paper.
the po-
This analysis will concentrate on the evaluation of
the
licies affecting
namely
vate
sector,
even
though the
production of
private
units by the formal priand
constructors
developers,
broader context will be provided.
Our ana-
lysis will not include the proportionately greater contribution to housing production by the informal
it will
not
governmental
trate
on
the
include the evaluation of housing
agencies.
policy
sary
to
framework
compare
Likewise,
program
of
the
for
production
by
the analysis will concenfor
incentives
last presidential period
sector during the
though a
sector, similarly
the
private
(1979-1983).
Al-
historical reference would be neces-
outcomes with
those
of
the most
recent
16
we
governments,
in
oldest
The
country.
the
available
is not
outcomes
about
information
The
analysis.
comparative
that
out
carry
to
unable
are
private
recording
statistics
sector production are from 1978, and they only account for a
tions,
will
we
interviews,
and
field observa-
period considered,
for the
available
tistics
However, backed up by the sta-
relationships.
causal
about
the
be certain
to
allow us
doesn't
group,
control
a
of
lack
with
together
circumstance,
That
cities.
central
few
to
able
be
infer
relations
with which to support the arguments.
This
thesis
is developed over six
Chapter
chapters.
1
starts by providing a general background of the situation in
the
housing
the
most
the
housing
ween
the
the
market
important
in
government
framework
historical
and an
political and
market.
economic
1983
economic
events
for
affecting
Here we will see the interactions betthe production sector, and
regulations,
Also,
situation.
explore
will
we
in
general
terms the effects of the economic changes in the demand side
of
the
the
market.
interest
The
rates,
role
events
currency
the
like
the
devaluation,
liberation
of
lack
of
the
the decrease
in
the
level of
sa-
elections will
be
highlighted.
We
investment
and
liquidity,
and
the
upcoming
vings,
of
will characterize this period as one of high economic instability, a
lot
of regulatory changes, growing
bad business expectations.
inflation, and
17
analyzes
2
Chapter
on
to concentrate
by
to
targeted
ces
the
intervention
to
comparable
tion,
were
vate
sector
and
of
community
attended
participa-
through
the pri-
middle
for
units
gua-
the resour-
ones to be
channelled
those
provision
the
for
groups, the
income
did not
resources
We will demonstrate
lowest
government
direct
of
distribution
concentration.
that
rantee
the provision of housing for lower
planned
the
groups,
the
though
even
that
period
stated the resources were
very conception,
from its
policy,
is
made
argument
The
considered.
the
for
policy
housing
the
income
We will argue that the design of the policy was not
groups.
limited resources
the
given
realistic,
of
the
country, and
did not respond to the well known concentration of the defiincome
lowest
the
cit
on
not
propose
drastic
any
Moreover,
modification
production
for housing
channels
groups.
of
the policy did
the
traditional
the resources plan-
because
ned for the consumer-oriented approach were very small.
policy
was
very ambitious
it
for
pretended to cover
95%
The
of
the Venezuelan households, and as a consequence of the policy
design,
through
forts
ting
the
was
there
a
broad
resources
on
the
of
range
the
of
potentiality
diluting
for
ef
of
concentra-
those
households
households or
production
the
who represented a more profitable market.
In
this
chapter, we will
its premises, the
different
planned to approach
identify
the policy goals
and
programs and how the government
them, and
the amount of resources chan-
18
The main institutions acting in
nelled to each program.
detailed analysis of the Pro-
Chapter 3 provides a more
that
first
benefit
to
intended
program
the
holds
argue
will
We
developers.
the supply of
affecting
one
the
4,
(Cordiplan), and the
(MINDUR).
National Housing Program
gram
the analysis, we will
Plan for the Nation
VI General
the
use
For
identified.
be
also
market will
the
by private
housing
the
was
house-
of
range
broad
very
and
that the so-called "social interest housing" included houses
only by
affordable
stimulated
policy
prices
the
income
groups
middle
high
the
targeted
by
the
was
The
class.
not
policy,
range
considering
even
ture
intending
target
in
the
have
improve
to
groups;
a
spend
a
very
middle
of
to
the
the
the
lack
period
affordability
when
program;
was
prices
the
control
of
level
the
implemented
of
An additional
too high.
of quality
expense/income
high
We will discuss the fea-
consumer subsidy
offerred were already
relates
to
receive heavy subsidies.
or
ratio
would
no
targeted
be able to afford the units, the lower group of
households
the
In order
changes in the financial(conditions of thelmarket.
to
by
affordable
of
the
units
critique
measures within
the
policy because the additional criteria stated to qualify the
units was
As a
the number of bedrooms.
consequence, it was
likely to expect the producers could reduce areas and locate
the
units
out
of
the
in
inappropriate
places
program protection.
in
order
to get
Those weaknesses
the most
in
design
19
could cause
the
marketability problems later on.
features
production
were
of
the
the
offerred
by
likely
to
housing
market,
it
land,
cost
given
the
to
favor
risks
were
units
to
compared
of
the
the
former
lower.
benefits of
reduced the marginal
cost
the
the benefits
benefits
presidential
but
only
entry
of
of
new
those with
and political
housing.
for
were
the
the
producers
access
to
connections.
A
complementary
still
marginal
attractive
benefits,
of expensive
question
whether
to produce
thus
it
given
the
producing
is
the
that the
regulated
expensive units
was
units would
the
Therefore,
argument
housing production outside
in
resources
really encourage any innovative way of
production
will
marketing
perceived
regulations
capital,
conditions
market
the
stimulate
did not
low
likely
most expensive units because
lowest
the
were
The benefits built up within the program were also
period.
like
program
features also
design
producing
the
while
higher
Those
of
We will argue
likely
be
to
expect
maintained.
limitations
of
We
financial
resources in the country and the stated goals of the policy,
this potential outcome was appropriate.
Finally,
changes
in
since
the
the
policy
financing
did
conditions
not
nor
consider
potential
potential
limita-
tions
in government resources, and given the possibility the
units
produced
government
were
resources
the
most
will
be
expensive,
it
exhausted
and
the policy would be imperative.
was
likely
adjustments
the
to
20
In
the development of
program
in
structure
developers,
this chapter, we will analyze
the graduated benefits
terms of
the
to the
financing institutions, and buyers, according to
the sales price of the units produced; and the necessary institutional arrangements to
also
to
compare
those
will
the
offerred
explore
ferred
changes
to
in
the
the
Decree
of
the
Ministry of
Number
214
potential
The
We will
benefits
presidential
related
period.
We
that the non-regulated market ofFor the analysis of
and
the
Financing and
the Venezuelan Central
information.
the
former
developers.
4,
of
in
the benefits
the
implement the program.
Bank
the
complementary
Program
resolutions
Urban Development, and
(BCV),
will
of
serve as the source
affordability analysis will be carried
out using income statistics by the Central Office of Statistics
and Information
nation
wide
months and
(OCEI).
surveys
Those statistics are based on
carried
out
systematically
they are the most reliable source of
every
6
information
for incomes given the deformed results of the 1980 census.
Chapter
4
evaluates
the
private
sector
production,
its
relations to the policy goals, and the behavior of that segment
on
of
the
the
housing
price
market.
adequacy
of
the
The
evaluation focuses
produced
units
households and to the policy goals.
to
An analysis
the
mainly
target
of the way
units got financed, built, and purchased will also be included.
on
the
It will
be
demonstrated
most expensive units
that
production
within
concentrated
the policy.
We will
21
though
that even
argue
can not
it
the con-
be demonstrated,
centration of the production on the most expensive units was
the Program 4.
influenced by some features of
we
will
explore
practices
to
how
in that
making
the
the
other
conditions
the housing
segment
of
investment
in
the
In addition,
and
traditional
market contributed
higher
priced
more
units
attractive, regardless of real higher risks of marketability
We
because of the reduced potential demand for those units.
will
the
follow
sized
units,
project
and
we
will
that contributed
locations
evaluate
We
high
built outside
cost units
will
argue
unaltered
speculate
in
could
for
will
the
remained
supply
light
the
supply
for
this
most
of
expensive
financed
in
its
medium
inconvenient
to the problems of
steady
units
and
units
We
policy.
will
the
the probability,
covered
by
Program
faced
by
argue
the
the
lower
4
We will realize the subsidy
majority
the
most
expensive
units,
thus benefiting the households with the highest incomes.
will also
of
production
non-regulated
the
about
fact
about
on
the policy protection
those
regardless
of
production
later
the
of
have a similar behavior.
program
the
speculate
marketability.
we
of
concentration
We
restrictions to obtain formal financing
income
groups
within
the
of
scope
the
program were not really reduced, as a consequence, financing
to
the
build
and
purchase
portfolio
contrast,
provided
huge
to
the
units
restrictions
amounts
produce
the
of
most
was
imposed
minimal
by
the
construction
expensive
regardless
of
policy.
In
financing
units
and
in
were
many
22
cases,
intentionally
thoroughly
carried
without
projects
or
out
not,
by
feasibility
the
appropriate
banks.
market
characteristics, together with
These
studies
were
many
Consequently,
studies
were
not
put
up.
difficult economic
the
situation generated inventory accumulation that provoked the
so-called
"housing
figures of
financier
even
though
level
crisis".
We
and developer
that participation
of
investment
developers
greater
banking
control
of
is
will
how
highlight
the
joined in many projects,
prohibited
undoubtedly
the
by
law.
That
to
some
gave
market
and
facilitated
manipulation of resources.
In
sum,
during
this
the
period,
deformation
of
the
production of housing by the private sector was exacerbated.
Production
sive
to
be
concentrated on
bought
empty buildings
by
the
the
high cost
policy
too
expen-
targeted groups.
Those
stand as a symbol of
units,
the market deformities
exacerbated by the wrongly conceived policy and by the overall
socio-political-economic structure where
the policy was
introduced.
The
mainly
some
quantitative
on
statistical
evaluation will
figures
from
be
developed based
FundaconstrucciOn,
indeces from the Venezuelan Central Bank.
and
The qualita-
tive analysis will be based on field observations, newspaper
23
and
journal
lopers
in
and on
articles,
of
February
1984.
by some deve-
interviews given
cases
Project
will
serve
to
highlight some of the arguments.
Chapter
of
the
5
units
private
analyzes
promoted
developers,
the
feasibility
by Program
given
the
the
construction
4 being undertaken
market costs
by
and price
the
rest-
This chapter will illus-
rictions contained in the program.
trate
of
that the set of costs and regulations affecting resi-
dential
construction
production
of
in
low-cost
Venezuela, made
of
that
units could be carried out and still
leave profits for the developers.
combination
very unlikely
factors
that
That happens because of a
involve
not
only
direct
cons-
truction costs, such as land, materials, and labor7 but also
costs
incurred as
employed,
the
procedures
a
consequence
current
and
standards
mechanisms
of
the
and
necessary
building
technology
regulations,
to
obtain
and
the
construction
and occupancy permits.
This
chapter will
illustrate
volved
in the
production
loping
three
hypothetical
the
were made.
standards,
cases,
we
cases, some
cost
of low-cost
apartment units with 2, 3,
velop
the
building
restrictions
housing
cases
and 4 bedrooms.
in-
units by deve-
corresponding
In
to
order to de-
assumptions regarding areas and costs
The first reflects the building and urbanization
the
will
second
refers
observe
how,
to
cost
in
order
indicators.
to
sell
the
From
the
cheaper
24
the regulated prices,
units at
50%
would
be
ones would
and
necessary
be
earned.
lower
Even
returns
though less
costs of up to
in
reductions
than
the
extreme,
common
some
cost
reductions would also be necessary for the higher cost units
to be as profitable as other real estate investments.
Also
explored
in
this
chapter will
its of
similar characteristics
4,
with
but
Those
lower
units are
and
the
majority
the
informal
by
the
sector's
the
fact
are
produced in
some by government
informal
ability
that
un-
to those promoted by Program
sales prices,
developed,
be
sector.
to achieve
Venezuela.
institutions,
We
will
great
discuss
cost
reduc-
tions by avoiding many restrictions and regulations faced by
the formal sector.
We will
because
estate
it
conclude
by
intended
investments
saying
the
that
the
private
were
program was
develoeprs
not
as
unrealistic
undertake
profitable
real
for them
without including complementary measures to reduce construction costs
recommend
reduce
the
potential
needs.
or increase
the
search
amount
for more
of
the
for
level of subsidies.
alternative
necessary
developers
subsidies
adequate units
Finally, we
and
that could
increase
the
produced for the consumer
25
6
Chapter
carried out
in
dations
a
of
for
housing
the
summarizes
conclusions
from
the
analysis
the preceding chapter and provides recommeneffective way
more
for
low-middle
the supply
of influencing
income
groups.
The
conclusions
refer to the changes necessary to increase the efficiency of
a
program of
changes
which
the
incentives
proposed
refer
to
units
are
to
the
divided
private
those
the modification of the variables
to qualify
the
target group, and
oriented
toward
low-cost
housing
being
the
three
The
categories;
produced,
into
developers.
reduction
of
the
program
inclusion of the variable area;
increasing
the
investment
construction,
namely
those
feasibility
strategies
for
of
cost
reduction and the evaluation of complementary subsidies; and
last,
those
changes
program, aiming at
have
been
to
and
features
strengthening
effective
availability
the
in
within
the
the measures which seem to
orienting
construction
contained
production,
costs,
and
like
eliminating
land
those
measures which were not, such as tax exemptions.
Three non-exclusive alternatives are explored, identifying
for each one the advantages and disadvantages, and their
likelihood
for success.
The
first alternative evaluated is
maintaining the producer oriented approach, but implementing
more drastic changes in the design of the policy in order to
obtain
units
more
suitable
proach relies on production
medium
to
large
sized
to
the
by
traditionally well
firms.
It
target
will
be
group.
argued
This
ap-
developed
that
the
26
likelihood
of
modificatons
the
in
changes
success
are
the government
is
amount
to be
introduced,
is
as a
approach,
even
uncertain
because
require
system works.
whether
of
this
proposed would
the way the
tique
with
The
structural
government
resources needed
if
drastic
some
of
modification
second approach considers
direct producer, a
the
if
straightforward cri-
could allocate
direct
the huge
construction
is
going
and whether we can guarantee an efficient
undertaken,
production in time and quantity, given the known inefficiency of
large bureaucracies
Venezuela.
sectors,
the difference
of producers targeted by the policy.
of
producing
small
to
lower
cost
medium scale
to
units
for
lies
in the kind
class
by
the promotion done
by
the
low-middle
societies, and support
from the pub-
That support could be technical,
financial, or
organizational,
access
third approach
The challenge consists
producers with
cooperatives and civil
lic sector.
The
It requires the participation of both
is consumer oriented.
public and private
in
land,
and
can be
capital,
oriented
toward facilitating
materials,
equipment,
and
the
entre-
preneurship.
The
and
tion
recommendations are based on past observed behavior
current
are
trends.
Among the criteria used in the
quantity produced,
government
directed
time
resources
for
production,
or equity
evalua-
amount of
required, potential
for adequacy of the units produced, degree of utilization of
existing resources and market mechanisms, political clout of
27
short
and
and
long
to
studies
specify
supply of
on the
term consequences
the
better
hou-
The need for
of wealth.
sing units and on the distribution
further
the program,
degree of government control of
each approach,
is
recommendations
also highlighted.
A
mix of the
mended
as
existing
the most
resources
and because
of
producing
and
housing
be recom-
third alternative will
because
appropriate
in
expertise
allows the
it
it makes
building
use
of the
housing
units
development of an alternative way
which
seems
to
have
a
high
potential
Recommendations about the necessary changes to
for success.
be
first and
introduced in the design of a program to orient the pri-
vate
for
sector
production
a
planning
program of
promoted by
ducers
red.
It
is
are
argued
included.
with
for medium scale
incentives
cooperatives
this
criteria
Similarly,
pro-
and associations are explo-
mixed
approach
the
amount of
units produced will be reduced less drastically, the likelihood
that
is
sumers
for
the
the units are more appropriate
higher, and the
overall
extra cost
country will
be
to the target con-
for the government and
lower.
It
is
likely with
this approach, deformities in the way the market works, like
the
one observed in
cause
the five past years would not occur be-
production would
respond
learning
profits
less
to
uniquely
be
would
more
consumer
business
oriented
interests.
the
and would
Moreover,
be
built
in
distributed
among
different
experience
would
be
process
and
a
the
producers and
28
Surely, this approach would
not among a few big developers.
face
influence
maras
opposition,
political
and
the
formal
production
La
Camara
de
alternative
resources
mainly
is
could
viable
be
la
sector
has
if we
think
to
to expensive
some
the
of
Fedeca-
However,
of
alternative
high
political
through
Construccion.
channelled
of
because
the
this
existing
construction
rise units
that do
activities
instead
not sell.
After all, what the government should look for is
that
the
resources
invested
by
the
country
produce
the
planned outcome and be employed in the most efficient way. V
29
CHAPTER
1
THE CONTEXT
The year 1983 was a hard year
first
time
since
Venezuelans
ago,
mobility
were
dependent
felt
seriously
on oil
possibilities
of
its
suffering
in oil prices
,
for
revenue and
from
the
of
artificial
Venezuela's
bonanza,
of
the
the
sharp
recession, and
After a
the closing of the international financial markets.
period
years
economy,
for 96%
effects of
a world wide economic
26
rapid upward
Venezuela's
threatened.
for 70%
hard currency, was
decline
their
started
democracy
electoral
the
For the
for Venezuelans.
financial
situa-
tion came to a critical point.
For
deral
government
imports,
rived
time in
the first
too
imposed
and domestic
late.
democracy, the fe-
the Venezuelan
controls on
prices.
By February
the currency exchange,
However,
these
1983, when
the
controls ar-
government
an-
nounced the fiscal and monetary measures, foreign and domestic
investors
od,
shrinking
had withdrawn $15
the
once
billion
abundant
in a
foreign
15 month peri-
currency
reserves
and causing a serious liquidity problem.
1.
The value of the oil exports was reduced by 12.6%
between 1982 and 1983.
That reduction exacerbated the
decrease in oil revenues experienced between 1981 and 1982.
30
The
of
control
cognition
state
of a
the nation
currency expressed
the
of economic
emergency
the way of economic catastrophe.
external
government
last
few
the
political
Those
years
out
seemed
cases
scandals
moral
in
Venezuela
and
impossible
preceding
rampant
of
together with
and
crisis
fear
to
called
that
by
In
.
year's
administrative
the
in the
an
addition,
elections
corruption.
crisis,
growing
originated a
nation-
monetary
inflation3
of
1
repay
fear
internal and
The
debt which had been skyrocketing
campaign
unemployment 2,
wide
re-
of almost 16 million people experienced the
of going
brought
official
the
american
journalist,
"The
,4
Venezuelan Crisis of Confidence"
The negative impact of the international economic situation
and
on
the
the country's
control
generated a
of
the
reduction
mated as 2.4%
income for
in
currency
the
the concept of oil exports
undertaken
Gross
National
to
control
Product,
esti-
for nominal GNP and 4.5% for real GNP 5 ,
1.
Venezuela's foreign debt was estimated at $35
1983.
2.
20%
it,
Some estimations
in 1983.
assume that the unemployment
billion in
rate rose
3.
Even though inflation between 1982 and 1983 was estimated at 7%, it was a consequence of strict control of the governmentT controls that could not be sustained much longer.
4.
The
Boston Globe Magazine, October 16,
5.
BCV Boletin Trimestral.
1983.
Producto Territorial
page 13.
1983.
Ano 2, No. 4, Octubre-Diciembre
Bruto (Gross National Product),
31
That reduction was a consequence
compared to the year 1982.
of a decrease in capital formation and the level of savings,
the
decrease
and
agricultural
level of
1983
showed a
in
activities
of
sectors,
and
construction,
a
general
manufacturing,
reduction
in
the
investment and personal consumption.
was
also a
year
when
many
sectors
dramatic lack of equilibrium.
construction
sector, and
components,
the residential
One
in particular, one
sector.
The
of
the
economy
of them was
the
of its greatest
formal
private
supply of housing, which had been oriented mainly toward the
high
middle
the
logical
class
consequence
circumstance,
together
of
the country and
an
array of
tion
sector
for
changing
sidy
tions
of
the
have
of
with
exceeded
inventory
the
the
demand
accumulation.
overall
economic
the coming national elections
the
They
protests,
housing
blamed
industry,
the
situation.
mainly
the
government
They
accused
arguing
rates.
They
complained
against
the
Statistics
about
the
extraordinary
illustrating
with
That
situation
stirred up
from the producconstructors
and
the
the
government
the monetary regulations and of modifying
program.
interest
to
concerns and
developers.
sector
seemed
banking
financial
of
the subinstitu-
increase
the
and
in
situation
the
in
32
the
housing
television
industry
were
programs,
and
discussed
in
newspaper
conventions
organized
that
Venezuela
on
had
up
to
September
accumulated
55,219
41,677 or 75%, were ready
those,
sale,
accounting
33% were built
the market since
in 1983,
1981.
Thus,
nancial
losses
due
to the
loans.
Sales
had
reduced
increasing,
even
though
35%
19832
finished
for sale.
Of
in 1982,
and
expressed
units,
of
the units on
18%
had been
developers were having
fi-
interest payments on construction
dramatically,
the
truction had also reduced.
that
for
1
purpose in the main cities of the country
Statistics
articles,
activity
in
and
inventory was
residential
cons-
21,729 units were paralyzed due
1.
A national convention was organized by the Chamber of
Construction on July 9, 1983, to discuss and analyze the
crisis in the construction sector.
The crisis was voiced
indicating that more than 40,000 apartments were frozen in
the country and more than 20,000were paralyzed because of a
lack of construction financing.
Similarly, in Zulia state,
the regional branch of that organization publicly announced
a convention to look for solutions to the paralyzation of
the industry (August 11, 1983).
In that conference, it was
revealed that 3,852 housing units were in stock in Maracaibo
City, of which 34% or 1,310 units had been on sale for more
than a year (considered frozen units); 89% of the stock or
Even under
3,426 units had sale prices of over Bs 200,000.
the program of graduated payment mortgages subsidized by the
federal government, only families with incomes higher than
5,000 Bs/month could afford an apartment of that price.
According to the statistics of CONZUPLAN (Consejo Zuliano de
Planificacion) only 20% of the urban families in the whole
state had incomes over Bs 5,000/month in 1980.
Panorama.
August 1983.
2.
Fundaconstruccion.
30/9/83.
Oferta
Actual
y
a
Corto
Plazo
al
33
to
reduction
consequence
of
the
unemployment
in
the
market was exacerbated by
the
As
reasons.
financial
diverse
a
construction activity,
in
construction sector had risen.
The
crisis in
the housing
economic
and
was
increased due
also
The
produced.
housing
The
(BCV)
of
the
was
liberation
the
to
1981,
el
substitute
will
we
argue
that
the
interest
Banco Central
the
mostly
affected
of
that
mechanism
de
of
it
the units
characteristics of
measure
August,
decided
to
but
economic
market,
25th
changes
regulatory
the
rates.
Venezuela
discretional
control of the interest rates, in use since the beginning of
1979,
by a
determined
system of floating
by
reasons
for
flexible
to
avoid
the
the
that
the
decision
were
of
to
rates
to the
According
market.
international
flight
interest
make
financial
Venezuelan
that would be
BCV 2
the
system
adequate
external
were,
payments.
first,
reached
level of
a
control on
that
The
the
development
more
markets in order to
money
to
foreign
which were paying much higher interest rates, and
tee an
the main
markets
to guaran-
international reserves to meet the
arguments
financial
stage
the interest rates7
to
support
market
which
made
the
decision
in Venezuela
had
inoperative
the
second, the stimulus that
2.
See Informe Economico Banco
pp. 79-80.
Central
de Venezuela,
1981,
34
would
be
third,
placed
the
the
of
and
banking
on
competence-, and
of the
The
between
differential
decision was made
internal
and
interest
the Central Bank
the political pressures on
eliminated.
technical
administrative and
the
the determination
involved in
Overall,
would be
savings
elimination
complications
rates.
on
in
a
external
time when
rates
was
As a consequence, interest rates went up dramatically
high.
Once the differentials were
and so did the price of credit.
eliminated,
of Venezuelan money to the internatio-
the flow
nal market diminished.
interest rate for housing acquisition increased from
The
12%
in
August
truction
1981
financing
to
17%
went
the
in
from
rest of
17.5%
to
the year.
19.5%
at
the
Consend
of
1981.
The increases continued in the following years, as of
April
1983
the
interest
rates
for
home
purchasing had reached the incredible
construction
and
level of 21.5% without
considering extra commmissions and additional charges
The decision makers expected the internal
would
rise
interest
the
in
rates
financial
the
beginning,
would
fall
market.
with
but
the
However,
they also
change
the
in
interest rates
expected
the
conditions
interest rates
have
maintained a high level, showing resistance to dropping.
1.
in
See Boletin Trimestral BCV, Julio-Septiembre 1983, p.
As
9.
35
it was expressed by Dr. Bruzual, the president of the BCV2
"We could ask why the
is
currently
sector.
interest rates are still high if there
oversupply
an
of
resources
There are many reasons.
in
the
financing
The ability to attract re-
sources from savers is one of them.
the second place, it
In
is obvious that the weakening of the economic system has introduced
financing difficulties
would not have
themselves
fear
of
by
companies that
otherwise
the financing institutions are
them;
ting
in
overcharging
no recovery.
on
new
credit
protec-
due
to
the
Thirdly, we cannot discard the possi-
bility that the financing institutions are speculating given
the
higher
dollars
in
of
level
level
the
risk
of
earnings
free market.
compared
to
in
the
sale
and
That business
the
purchase
now has
a
of
lower
functions
of
the
declaration
of
Dr.
the developers in
the
legitimate
financing institutions."
A
complementary explanation
Bruzual
(one many
interviews)
is
times
that
for
expressed
during
the
by
last
credit facilities were enourmous.
and
individuals
financing
banks.
sector,
These
with
used
small
the
banks
credit
or
connections
facilities
financing
2.
See Boletin Trimestral BCV,
Declaracion de fin de ano, p. 20.
period,
Many small entrepreneurs,
appropriate
the
governmental
to
to
the
open
new
societies worked
October-December
1983,
36
almost
When
without
many
companies,
defaulting
attract
reserves,
on
given
loans,
savers
by
despite
governmental
the economic
the
banks
raising
the
regulations.
situation,
competed
started
frantically
interest
rates
trying
to
to
overcome the lack of equilibrium in their portfolios.
In
but
the
also
level
housing
the
of
market,
economic
sales.
In
the
increase
situation,
addition,
in
caused
the
interest
a
decrease
government
rates,
in
the
implemented
three changes in the housing policies concerning the private
sector,
two related
program, the other rela-
the subsidy
to
ted to the refinancing program.
They were intended to dimi-
nish
was
the
losses
the great
the
government
differences
also
facing
because
of
between the market rates and the sub-
sidized interest rates.
In
gave
the
first
preference
sides
modification
for
complying
the
with
of
subsidy
the
The
second
21,
1983,
categories
from
1,
banks
modification
reduced
"C",
the program.
June
the
1983,
the
to
to
housing
being built before December 31,
mortgages
at
12%
the
"E",
those
6,
1983,
units
program
FONDUR
which,
be-
regulations
and
1982, had obtained long term
interest
subsidy,
subsidized
"D", and
December
interest
rates
or
published
rates
lower.
December
for housing
the most expensive ones within
Related to the refinancing program, enacted on
FONDUR reduced
the
amount
of
the refinancing
37
for
or
construction
"A",
ries
"B",
and
Undoubtedly,
These modifications did not
change
units
the
in
changes
the
the
affected
interest
rates
for
demand
and
in
housing
the
However, it would be narrow minded to consider those
units,
as
"C".
policies
housing
catego
the
or "E".
categories "D"
the
within
of
acquisition
the
the
factors affecting
only
level
of
sales.
25,767
housing units, or 62% out of the 41,677 units on sale belonged to categories
the
"C"
higher
and
14,623
and
"E".
program enacted
subsidy
comes
"D"
5,000
than
higher
than
Bs
25%
on
July
Bs
of
to
the
16,
to
the features
1981,
monthly
required to purchase
were
7,000
families, or
According
purchase
national
units
in-
units
"E".
households
of
Only
had
in-
comes higher than 5,000 Bs in 1983, and 327,825 families, or
13%
of
7,000
the
total
Bs1 .
payments
In addition,
to
the
in
households
bank
and
in
the country had
order to be able
to
the
government,
higher
to afford
the
than
the
families
will have to expect an increase in yearly income of at least
7.75%
tio
(see Chart 13),
over 40%,
or
to increase
the
expense/income ra-
the ratio established by the subsidy program,
and which, by the way, was considered high.
1.
OCEI,
1983.
Encuesta
de
Hogares
por
Muestreo.
ler
Semestre
38
5,917
"E",
in
units,
this
required,
have
the
case
and
Ciudad
to
planned
take
the
than
planned
had a
Guayana
cant1 .
The
wanting
to buy a
of monthly
in
"A" and
A
expected
"A",
units
whose
units
as
a
prices
were
18%
of
higher
were out of the regulated market.
the
housing market,
prices
of
we
units
consequence
would
were
in
residental
of
a
huge
than
families
remain va-
in
income for a
family
to
the
of
the
features
(see Chart 11).
the
The
stock, were housing
350,000
Bs,
thus
they
In summary, the crisis in
could argue,
the units produced
was
However, the project did not
according
or
income
large amount of emigration
expected annual increase
7,513
1198
units for middle income
unit
category
income
city where
subsidy program, would have to be 16.5%
remaining
yearly
"B",
industrial
industrial expansion.
place, and
to
Of the 2,360 units, or 6% of
late boom.
was
belonged
Bs
increase
categories
a
stock
3,000
(see Chart 12).
Guayana,
Ciudad
of
more
within
construction
14%
the expected
to be 13%
stock
or
was also caused by the
in addition
to the increase of
the interest rates, and the overall economic situation.
Unemployment
was
were
losing
lity
of
were
postponed given
1.
the
growing
in
Venezuela
and
Venezuelans
confidence
in
the economic and political stabi-
country.
We
can
Sidor, Plan IV.
assume
many
the unwillingness of
decisions
to buy
the people to ac-
39
such a
quire
strong
market,
tate
developers.
denounced.
financial
specifically,
cases
Many
their
had
been
backed
was scandalized
up by
es-
confidence
corruption
in
were
the
Some
government and
of
those projects
country
the whole
2
The upcoming
election
tions from the population.
zuelan
lost
administrative
equity downpayment.
lost
new
had
the real
It was known of projects where potential buyers
had
a
people
of
In
compromise.
government
could
governments
also
developed
a
lot
of
expecta-
In general, the feeling was that
only
have been
improve
very
the
situation.
paternalistic
and
Venepeople
sought a panacea.
The Attitude of the Government:
During
the
government
was
year
of
1983,
the
attitude
to step back from the
of
the
leaving
problem and wait until
the new government took office on February 2, 1984.
The new
government, representative of one of the two strongest political parties in Venezuela
(the other one was represented by
2.
One of those was la Chamarreta in Maracaibo City where
more than 2,500 low income families were misled with a project in which they put down 19 million Bs from their savings
as a pre-purchasing fee and the developer flew the coop.
In
addition, more than 800 million Bs were obtained from public
and private institutions to finance the
construction of the
project.
The project was a joint partnership between a private developer, FONDUR and INAVI (The National Institute of
Housing).
El Diario de Caracas, Febrero 26, 1984.
40
the leaving
sidency
in
ficial
government) which
had been alternating
the pre-
26 years of democracy, adopted the first of-
the
measures
affecting
the
housing
market,
on
February
1984.
25,
The new measures were related to new controls on the interest
rates.
approach was
A mixed
adopted
in which
inte-
rest rates on savings accounts would fluctuate with the market
while
the
the
BCV.
The
was 6%
interest
minimum
investments were
for
interest
rates
for
for the Savings and Loans, and 8%
institutions.
was
fixed at
for
the
home
rates
The
rate
construction
the
interest
of
non-regulated
interest
housing,
and
non-regulated housing units
On March 3,
1984,
for
savings
accounts
for other financing
housing
construction
interest housing and at
14% for the social
purchasing,
social
interest
fixed by
rates
at
housing
were
14%
units.
fixed
for
at
16%
For
12%
for
the purchase of
1
the new Ministry of Urban Development
in charge
of MINDUR announced the government had decided to
keep
the
program
214,
and
the
conditions as
the
frozen
of
incentives
for
subsidy
program of
Decree
in
the
sector,
1134 under
or
Decree
the same
the previous period, however, he announced
units would be
soon would be announced2 .
subject
to a
On March
29,
special program that
1984,
the mass media
1.
El Universal, Martes 28 de Febrero de 1984.
2.
El Nacional, Sabado 3 de Marzo de 1984.
41
announced
the
Fluidity of
Decree
69
named
"Regimen
Housing Market" 3 .
the
of
for
Stimulus
the
That Decree affected the
units that had been on the market before March 31 of 1983,
those
finished
units
without
condominium documents,
and
those units whose construction had been paralyzed because of
a
lack
of
financing,
or
because
of
the
previous
stages
hadn't been sold.
Basically,
the
frozen
and
a
this
units
longer
in
protection,
all
units
units
original
initial
is
this
20
wihtin
of
lower
than
not
initial
for
those
(5
the
years
subsidy)
and
subsidies
interest
units
rate
will
be
1%.
rates
under
the
For
minimum allowed
long
frozen
longer
the
than
same
for
the
in
the
as
subsidy program, the rate of annual increase
interest
to
units.
considered
Decree,
years
the
higher
authorized
term
but
under
term financing
other
terms
subsidy
subsidy
the
Decree
The
conditions
in the
of
the
Decree are outlined in the chart below.
Housing
Category
3.
Maximum Price
of Primary
Sale (Bs)
Minimum
No. of
Bedrooms
Terms of
Subsidy
(years)
Initial
Interest
Rate
A
160,000
2
10
5%
B
250,000
3
8
6%
C
350,000
4
6
7%
El Universal, Jueves
28 de Marzo de 1984.
42
Consequently, we observed the government implemented the
measures
That
channel
to
approach
was
housing
the
undertaken
of the industry and thus,
ment,
to alleviate
credit
the
to
through
units
alleviate
the
to decrease the level of unemploy-
delicate
institutions which were
to
alleviate
the
market.
paralyzation
financial situation of many
holding
unpaid mortgages
more than 12,000 million Bs in apartments unsold
all,
the
pervasive
political
for
, and over-
climate.
In
short, given the income level of the population, the government would
bing
part
help
of
the
the
buyers to purchase
losses.
Therefore,
the units
the
by absor-
excessive
prices
will be paid not by the financial sector, which has speculated with the interest rates; nor by the developers, who will
earn
the pre-established profits anyhow;
but by the buyers,
who will pay for an inflated product, and by the new government, who will have to play the conciliator.
1.
El Universal, Jueves 29 de Marzo de 1984.
This estimate includes construction loans issued by
Venezuelan Workers Bank (BTV), the Savings and Loans,
the Mortgage Banks.
the
and
43
CHAPTER 2
THE VENEZUELAN HOUSING
"Homeownership
by the
the
for
POLICY FOR THE
all,"
was
the
PERIOD
political
slogan
used
leaving government to identify its housing policy for
period
1979-1983.
policy
was
access
to appropriate
cept of
to
give
The
to
appropriate
nished units, but
the
expressed
Venezuelan
housing
housing
general
in
in
the
a
which
solutions included
of
"better
the
con-
not only fi-
for the lowest income groups.
definition
the
sites and services projects,
addition to the shelter for the individual
included
goal
population
solutions"
core houses,
and home improvement loans
licy
1979-1983
of
frastructural services and communal
In
families, the po-
housing
the
facilities.
related
in-
The overall
housing policy was not officially formulated until 1980 with
the
publications of
the VI
General
the National Housing Program
Plan
for
the Nation and
even though the first regula-
,
tions and decrees were dictated in 1979.
The
VI
economic
Plan
outlined
development
plans are
formulated
plan
by
Cordiplan
for
the
contains
Nation.
the
These
every five years and provide
sociogeneral
the gene-
1.
VI Plan de la Nacion.
Period 1981-1985.
Capitulo VI,
Desarrollo Urbano, Vivienda y Servicios Conexos.
Cordiplan
1980,
and
Programa
Nacional
de
Vivienda.
1980-1984.
MINDUR,
1980.
44
ral framework for the more specific policies of the country.
The
Housing
Program
Development
and
developed
is
provides
the
by
the
specific
Ministry
targets,
of
Urban
strategies
and programs for housing and urban development.
The
highest
VI
plan assigned
and due
play
due
priorities
construction
to
was
to
to
expected
the
the
to
housing
policy one
in
the
economic
the critical role that appropriate
in the well-being of
the population.
the
effect housing
multiplier
play
of
growth,
housing would
The policy esti-
mated that as of 1979, 800,000 families lacked adequate housing
and
strongly
their
services
related
concentrated
in
the
and
lower
that
income
the
deficit
groups.
It
was
was
estimated that an additional demand of 500,000 housing units
would
both
be
generated
population
of
distribution
that
81%
the
growth
the
following
and
in
pressed
view
the
the
Venezuelan
due
for housing
to
years
Given
it
population,
bigger cities.
that
five
migration.
of the total demand
concentrate
the
in
caused
the
spatial
was estimated
and services would
The policy statement ex-
the
magnitude
of
the
deficit
housing problem in Venezuela could not be solved
short
time;
however,
implementation
could
be
of
reached
contradictory with
every
it
estimated
appropriate
within
the
20
slogan
years.
to
produce
668,923
with
an
That
the
family would have a housing
target was
that
policies
of
by
the
the
continuous
acceptable
level
clarification was
policy which
solution of
housing
in
units
advertized
its own.
in
The
five years.
45
391,423
units
or
58%
of the
total would
be
produced by the
public sector; the difference of 277,500 or 42% of the units
were
expected
different
tasks,
ment
supplied
incentives and
the
to
to be
on
the private sector
regulations.
policy document
concentrate
by
states,
the
direct
needy groups while the private
through
This distribution of
would allow
production
sector would
the governfor
the
most
supply the units
for the middle income families.
The
broader
planned
to
be
strategies.
"appropriate
by
the
housing
for
all"
was
of
two
main
implementation
One, to maximize the production of units by the
The
benefiting
of
achieved
complementary
sector.
goal
construction
other,
from
to
the
of
the
broaden
policy
by
public
the
and
range
of
generating
the
private
income
more
groups
affordable
solutions and by implementing government supported financing
mechanisms which facilitated production and acquisition.
The
the
income groups to benefit from the policy ranged from
population
living
income
families.
tious,
given
the
year
when
the
the
In
in
the
this
informal
sense
the
areas
policy
to
the
was
very ambi-
limited resources of the nation.
first
Venezuelan
households
households
or
housing
totaled
approximately
the policy protection.
Chart
regulations
2,259,9627
2 million
families
#1 from OCEI 1
tribution of households according to income.
In
were
around
middle
1979,
dictated,
90%
fell
of
the
within
depicts the disEven
though we
46
know
not
all
the
housing
of
the
amount
the policy.
2
million
serves
to
households
were
the
illustrate
in
wide
need
of
scope
of
According to the housing program direct govern-
ment production would concentrate
on households with monthly
incomes
The
that
in
up
3,000
belonged
incomes
had
2,000
bolivares
amounts
attend
to
this category.
below
OCEI
the
for
a
government
sector for whom
Of
subsistence
the
per month
indicate
a
bolivares.
survey
formal
indicated
households
families or 68% of the Venezuelan
1,527,937
1979
73%
to
those,
1,114,142 or
level,
estimated
family
direct
at
of five 2 .
These
intervention
would
housing was
not one
of
the
first priorities and whose payment capacity was very low.
The
housing
would attend the
program
estimated
that
private
rest of the households,
production
those earning more
than 3,000 bolivares monthly, but with one important difference.
duce
The
private
housing
units
were between 3,000
sector
would
affordable
receive
by
incentives
households
whose
and 7,000 bolivares per month.
ply of units for the rest of
to proincomes
The sup-
the households, those with mon-
thly incomes higher than 7,000 bolivares per month, would be
left to market forces.
available
Even though there are not statistics
which quantify
the
size
of
the
two
househould
1.
Oficina Central de Estadistica e Informatica
(OCEI).
Encuesta de Hogares por Muestreo.
Primer Semestre 1979.
2.
Estimated by Cordiplan.
Presidencia
Coordinacion de Planificacion Nacional.
de
la
Republica.
47
groups separately, we get an indication by noting that the
household group earning more
represented
1979,
or
lies
with
only
301,173
13%
of
the
families.
incomes
than 5,000 bolivares per month
higher
households
It
can be
than
of
the
estimated
country
in
that fami-
7,000 bolivares per month
could represent not more than 5% of the total households.
The policy was to be implemented without introducing any
drastic
institutional
private
institutions
changes.
would
The
continue
existing
working
CHART No 1
DISTRIBUTION OF VENEZUELAN HOUSEHOLDS
ACCORDING TO INCOME LEVEL
First Semester 1979
MONTHLY INCOME LEVEL
Bs/month
Until
300
301 -
NUMBER OF HOUSEHOLDS
No
36,324
51,823
%
1.6
2.3
450
700
139,289
6.2
1,000
227,289
10.1
1,001 -
1,500
325,793
14.4
1,501 -
2,000
330,740
14.6
2,001 -
3,000
413,795
18.3
451 701 -
SUB TOTAL
1,524,937
67.5
11.8
3,001 - 4,000
4,001 - 5,000
5,001 - and more
266,620
301,173
13.2
SUB TOTAL
727,897
32.0
4,128
0.5
Not declared
TOTAL
160,104
2,259,962
7.0
100
Source: OCEI. Oficina Central de Estadistica
e Informatica. Encuesta de Hogares.
Primer Semestre 1979. Total Nacional.
as
public and
usual,
but
48
the government planned to strengthen and regulate the system
by
financial
assigning
philosophy
considered
that
the
incentives
and
right
tional
units
sector
to
leverage,
did
quence,
range
of
where
the
prices;
on
the
favor
resources
households.
sector under
produce
lowest
income
for
class
the
has
to
planned
we will
be
see
without
level
the middle
a
lot
design
middle
tradi-
the public
that given the political
also
As
would
underlying
thus allowing
housing
middle
were
The
private
formal
government would not
not
it.
regulations
supply of
the
the
the
lower
We could argue
Venezuela,
which
at
concentrate
overlooking
groups.
but
to
resources
a
in
context of
of
political
housing
policy
As
conse-
groups.
spread
income
over
a
a
broad
the development
of
this chapter, even though the policy expressed that the concentration should be in the lower income groups, the resources
targeted
to
the middle
income groups were comparable
to
those oriented to the lower sector of the population.
The Features
Identified as Critical in the Housing Problem
Policies are formulated to contribute in the solution of
a
problem
and
their
formulation
elements identified as critical
intends
to
correct
in the solution.
those
Hence, our
understanding of public policy can not be complete until we
comprehend what element
policy.
influenced
the focus of
the housing
49
The key features identified in the official documents as
critical
covered
the
in
the
demand
solution
and
institutional
lerated
supply
and
the
side
setting.
population
urban centers
of
of
growth,
and
search
the
financing
costs,
tion,"
by
two
housing
same
drawbacks
doubled
different
supply of
it
were
is
compete
with
market prices.
experimental re-
and
in
supply
those
the lack of
production.
private
described
understood,
by
precisely
"lack
of
over the same project
the
lack
services with
general
of
The
in
the
coordinaundertaken
timing
in
the
the construction of
contradictory
institutions.
plementarity" refers to the
to
lack of
and
institutions,
problem between
encouraged
in
the financing and
public agencies and
not
efforts
infrastructural
units
concentration
low cost housing were mentioned
public
between
However,
the
as
It was also mentioned the lack of interinsti-
complementarity
policy.
well
its effects on construc-
the
and
tutional coordination among
last
as
From the supply side the mag-
inflation and
the production of
as important.
These
excessive
limitations of
the
the deficit,
in
characteristics
problem
the low level of affordability were high-
materials resources,
tion
housing
From the demand side, the acce-
lighted as the most critical.
nitude
Venezuelan
plans
term
over
"lack of
the
com-
fact that private developers are
housing
supplied
units
by
which
INAVI
could
and
sold
eventually
at
below
50
The
is
annual
recorded
mented
rate
of, grow'h
at 3.5%.\
with
high
of
This very
the
high
concentration
in
Venezuelan
rate of
the
population
growth
comple-
urban
centers
main
cause an explosive demand for housing and public facilities.
To
this
illustrate
centrated
1936
75%
of
figures that
point,
the
in
1979,
a
compared
population
Venezuelan
showed only 35%
centers
few urban
of urban
con-
to
the
Ac-
population.
cording to the same 1979 figures, only 25% of the population
lived
in towns with less than
concentration
of
population
5,000
and
inhabitants.
the
lag
in
The
the
rapid
supply
of
housing and services has caused the explosive development of
squatter settlements around the main cities.
The
distribution of incomes
mentioned
or 904,671
at
an
before,
in
1979,
49%
families were below
income
year,
68%
comes
lower
of
of
the
than
2,000
As it was
of the Venezuelan
households
the subsistence
bolivares
households
3,000
is very unequal.
or
per
month.
1,527,937
bolivares
per
level, drawn
For
families
month,
the
had
same
in-
consequently
they could not afford the units produced and financed by the
formal
private
Bs 2 .
The
sector whose
Chart
#2
average price was above
illustrates
the
proportion
family earning 3,000 Bs/month in 1979 would have
of
265,800
income
a
to allocate
2.
BCV
Anuario
de
Series
Estadisticas,
Construccion
Privada.
Precio Premedio de Apartamentos Financiados segun
fuente por Regiones Administrativas.
Cuadro No. VI - 91,
page 369.
51
to
housing
given
consumption
different
of
prices
housing
It can be observed that to purchase the average unit
units.
would require 83%
of the 3,000 Bs family income for housing.
To purchase a unit costing 100,000 Bs would require spending
33%
of
the
proportion
main
income,
for
problem was
duced by
not
below
not
considered an
family
1
However,
.
low-middle
income
that
cheaper units were
those
was
that
exaggerated
the
rarely pro-
A complementary limitation to
families
with
low
levels
of
income
comply in most cases with the documents required to
formal
obtain
was
the private market.
homeownership
can
a
which
financing.
The
families with monthly incomes
3,000 Bs were also out of
the market
for the
finished
public housing produced by INAVI, because to be eligible for
single
the
family
or
multifamily
units,
a
family
should
demonstrate incomes higher than 3,000 Bs/month.
The
of
the
petition
policy also
supply
of
housing
identified as
funds
must
for
face
housing
in
the
critical
finance,
financial
the
limitations
given
the
com-
markets
with
1.
According to Mindur (Direccion de Vivienda), 25% of
income spent on housing is an appropriate index to estimate
affordability, because it leaves money available for other
prior expenses.
The 25% expense/income ratio is a rule of
thumb applied more or less universally.
However, recently,
world wide organizations such as AID and The World Bank,
have recognized it is a parameter applicable to middleincome but not to low-income families in informal areas
which usually spend less than 20% on housing consumption.
CHART No 2
MONTHLY PAYMENTS REQUIRED IN 1979 TO ACQUIRE UNITS FROM THE PRIVATE MARKET
(by a family earning Bs 3,000 ofmonthly income)
1*
PRICE OF
THE UNIT
(Bs)
LOAN TO
VALUE RATIO
2*
4*
3*
MONTHLY PROPORTION OF
PAYMENT INCOME REQUIRED!
INTEREST TERM
years
RATE
._.
5*
MONTHLY
INCOME REQUIRED
(Bs/month)
6*
MONTHLY
INCOME REQUIRED
, (Ba/month)
100,000
90%
12%
20
990
33%
3,960
2,475
150,000
90%
12%
20
1,487
50%
5,948
3,718
200,000
85%
12%
20
1,871
62%
7,848
4,677
250,000
80%
12%
20
2,202
73%
8,808
5,505
300,000
75%
13%
20
2,477
83%
9,908
6,193
350,000
75%
13%
20
3,114
100%
12,456
7,785
NOTES:
1* According to the housing policy 1974-1979
2* Real interest rate charged for home acquisition in 1979. It includes the
so called commissions on balances. "El factor financiamiento en la produccion de la mercancia vivienda en Venezuela". A. Cilento Sardi, page 20.
3*
4*
5*
6*
15 year term was the minimun term allowed in 1979.
It considers a monthly income of Bs 3,000.
It considers 25% of income for housing consumption.
It considers 40% of income for housing consumption.
U,
ti"
53
other
uses
of
funds, and
vings
experienced
in
the
the
reduction
last
years
on
the
level
caused by
of
higher
sa-
inte-
rest rates offerred in the external financing markets.
For
these
reasons, the policy stated the need to secure an ade-
quate
supply
of
funds
to
housing
by
increasing
channelling
government resources to the housing financing markets.
Other
identified
features
problem were
the
excessive
critical
in
increases
truction, and financing costs.
the earning
as
the
in
land
housing
prices,
cons-
The statement also mentioned
of excessive profits due
to the control
exerted
by private groups on land, construction equipment and materThe lack of
ials, and construction and long term financing.
interinstitutional
coordination
agencies
highlighted
was
also
the
policy stated the
the
public
cified.
as
the
different
critical.
public
Consequently,
level of cooperation expected between
sector and the
Similarly,
among
the
developers should be
incentives
and
clearly spe-
regulations
to
the
private sector should be stated clearly to achieve an effective
and
reasonable
participation,
compatible
with
the
policy goals.
The Official Institutional Framework
In
Venezuela
the
task
of
designing,
administering
the housing program
tive
the Ministry of Urban
power
to
implementing,
and
is assigned by the execuDevelopment
(Ministerio
54
de
Desarrollo Urbano, MINDUR).
the
program
the
applied
set
of
the
to
to a
housing
includes
the
strategy
sector and the set of goals;
the public
ludes
which
This institution formulates
incentives,
norms,
private
sector
more efficient
to
to
be
followed
by
in addition, it inc-
and
to
be
production
of
regulations
orient
the
MINDUR
outcome.
is
also
in
the overall urban development policy for the coun-
charge of
try, the supply of public buildings and communal facilities,
and
the
programs
for
designed
overall
economic development policy
Plan
under
MINDUR
development.
program
ral
by
community
the
must
competence
be
of
in
The
accordance with
formulated
the
housing
the
in the Gene-
Ministry
of
Planning
(CORDIPLAN).
set
In
the
field
of
complementary supporting
concentrates
of
Institute
INAVI)
of
on
is
public
of
a
housing,
specific
housing
of
the
are
The
developments
designers
vision
back
to
of
and
to serve
developers
INAVI.
INAVI
who
After
sells
of
works
together
agencies,
each
construction
for
de
and
mostly
under
the
completion,
and
a
National
Vivienda,
administration
These
homeownership.
low and low-middle
are
la
with
of which
The
problems.
Nacional
developments
developments
housing
set
(Instituto
Housing
in charge
MINDUR
income groups.
contracted
to
guidelines
and
super-
are
turned
the
administers
units
them.
private
INAVI
also
55
administers
sites
and
a
program
of
popular
services programs
and
credit
to
to assist
complement
in
home
its
improve-
ment programs developed in informal areas.
The National Fund
for Urban Development
de Desarrollo Urbano, FONDUR),
of
(Fondo Nacional
acts as the official supplier
land and financial resources for the housing market.
critical
function
culation of
tal.
is
to guarantee an adequate
Its
level of cir-
two important resources, land and mortgage capi-
FONDUR's
main
activities
include
the purchase
and
development of land for low cost housing, the refinancing of
the mortgage credit institutions, the administration of subsidy programs
tion
of
the
for buyers of low-cost
public-private
middle cost housing.
housing, and the crea-
partnerships
to
develop
low
and
The functions of FONDUR are in sum, to
act as developer of land for low and middle cost housing and
to secure
and support financing for
the purchase of low and
middle cost units.
The Foundation for Community Development (Fundacion para
el Desarrollo de la Comunidad, FUNDACOMUN) is concerned with
the design
for
the
and
implementation of
squatter
tions
oriented
ties,
economic
upgrading.
settlement
toward
social
integral
areas.
Its
development plans
plans
organization
of
include
the
development programs, and home and
ac-
communicommunity
FUNDACOMUN is also a nationwide institution with
56
regional
branches
is
institution
in
in
the main
charge
of
cities of
the
needs
the
of
country.
the
lowest
This
urban
income group of the Venezuelan population.
The Ministry of Health
(MSAS) and its Division of Rural
Housing is responsible for the construction of single family
units
for
rural
spatially1 ,
the
lowest
its
areas.
labor
Although
has been
cost single
actions
are
very effective
family units
including the land price).
its
in
in the country
limited
producing
(without
Part of its success has been due
to the mechanisms adopted for the construction of the units,
which
is
based
on
weekly valuations.
small
scale
contractors
and
payments
by
Unfortunately, the resources assigned to
it have been traditionally small due to institutional competition with INAVI.
This set
suppliers
private
of
of institutions work together with the private
housing
constructors
such
and
as
the
financing
developers,
and
the
institutions,
suppliers
of
equipment and materials.
1.
The Housing Program for the period 1979-1983 limited the
actions of Vivienda Rural to those centers with less than
15,000 inhabitants and located in areas where agricultural
development is planned.
Even though in exceptional cases,
they have been allowed to build in the outskirts of some
important cities like Ciudad Guayana and Maracaibo.
57
The Housing Financial Sector
The
main
housing
market
Savings
SNAP),
financing
and
in
institutions
Venezuela
Loans
are
intervening
the
(Sistema National
de
National
Ahorro
The Mortgage Banks (Banca Hipotecaria),
Societies
(Sociedades Financieras)
and
the
in
the
System
y
of
Prestano,
The Financing
Venezuelan
Wor-
kers Bank (Banco de los Trabajadores de Venezuela, BTV). The
National
and
is
Nacional
its
Savings and Loans
institutions and
private
system
has
System of
has
(SNAP) includes public
its
de
de
Ahorro y
own
Prestamo,
patrimony and acts
Superintendence
Entidades
central bank
cing.
to
regulations.
integrated by the National Saving and Loan
BANAP),
official
as
central
the
system, the private savings and loans
the
own
Its
de
of
Savings
Ahorro
y
and
Prestamo).
functions
are
to give
institutions.
Similarly,
companies of
BANAP
The
(EAP) and
BANAP
financial
is
the
Finan-
assistance
issued by those
guarantees
individual
the
(Superintendencia
the EAP's and to guarantee the mortgages
accounts to
bank of
in the SNAP assigned to the Ministry of
main
(Banco
bank which
institutions
Loans
The
the
savings
savers and serves as an
overall intermediary for the system.
The
as
EAP
mutualist
savings
are
private
societies
from people
and
financing
whose
main
institutions,
structured
objective
to
institutions.
The
is
promote
superintendence
58
of
Savings
and
Loans
exerts
the
overall
control
over
the
operation of the system.
The Mortgage Banks and Financing Societies are under the
regulation
of
the
General
The
SNAP
Institutions.
main
components
zuela.
1979,
the
the
acquisition of
the
of
In
of
the
units
housing
SNAP
or
for
Banks
and
and the mortgage
25,490
sold,
Law
and
units.
57%
at
banks are
financing
the
an
other
system
Mortgage Banks
Credit
the
in
average
price
Vene-
financed
SNAP financed
The
two
of
14,492
263,600
Bs/unit and the average loan to value ratio was of 68%.
same year,
at
an
to
value
the Mortgage Banks financed 10,999 units, or 43%
average
ced
were
by
price
ratio
construction
tions.
of
of 204,500
61%.
mortgages
Out of
the
The
this
Mortgage
The
were
total,
banks,
Bs/unit
same
year,
financed
by
and an average
4.6
these
or
two
Bs
in
institu-
59%, were
finan-
1.9 million
(41%),
2.7 million, or
the rest,
million
loan
financed by the SNAP.
The
financing
system
in
Venezuela
leaves
out
of
the
formal market a considerable amount of households who simply
can
not
afford
the
units
produced
due
to
the high
prices and to the financing terms and requirements.
sales
59
The Housing Policy Approach
The design of the housing policy was approched by classifying
the
the
demand
household
in
three
monthly
broad
categories,
income
level:
families
having
The
according
first
identified
as
than
3,000
Bs.
this
level
would be provided by direct government
tion
in
a
rural
the
implement
interest
rural areas.
of
single
housing,
facilitate
would
and
variety
housing,
monthly
incomes
was
lower
The policy stated the housing solutions for
urban
included
core
those
group
to
rates
and
solutions
family
home
purchase
special
and
The
from
housing,
improvement
of
the
units
sites
be
and
supplied
services,
multifamily
loans.
solutions,
financing
to
construc-
programs
with longer terms.
In
the
at
It was
housing,
order
to
government
below
market
also planned
to promote the development of community groups who could act
as
intermediaries
dits.
The
to
official
channel
the
institutions
programs
planned
to
of
popular
cre-
participate
in
this group were INAVI, FUNDACOMUN, and MSAS.
The
second group
included households with income
between
3,000 and 7,000 Bs/month.
duction
approaches
the
by
government,
the
private
also be
tated
to
and
be
taken-
incentives
sector.
encouraged.
secure
would
For this group,
direct
two pro-
construction
to stimulate
Public-Private
levels
the
by
production
partnerships would
In addition, regulations would be dic-
short and
long term financing,
and
to pro-
60
vide
favorable
purchasing
private
the
will
lowest
cost
partnerships.
government
will
guarantee
and
will
mortgage
insure
a
certain
regulate
the
to
societies,
stimulate
and
their
foundations
participation
the
to
the
proportion
the
use
portfolio
would also
the
in
public-
system
of
of
and
the long
funds, the
composition
Incentives
the mortgage financing institutions.
tives,
by
financing sector, the
funds
to channel
In order
also
produced
units
Related to the
provide
term mortgages.
government
to the deve-
Moreover, the government will guarantee the
tax exemptions.
of
Related
include financing facilities and
the incentives will
lopers,
sales
conditions.
of
to coopera-
be
supply
encouraged
of
housing
units.
The institutions to participate in the housing
for the second group were
participation
solutions
INAVI, through direct intervention
in public-private projects;
and
the
the
Mortgage Banks, and the BTV, through
the SNAP,
their special
fin-
ancing programs; FONDUR, through the refinancing to the credit
institutions'
participation
in
public-private
partner-
ships, and the administration of the subsidy program for the
buyers,
Even
and
though
last,
the
the
private
statistics
cooperatives
available
not classify the income groups under
for
the
and
societies.
year
1979 did
the same categories, it
is known that 426,724 families or 19% of the overall population
had
incomes
between
3,000 and 5,000
Bs/month.
It
can
61
be
assumed
the
that the
second
target
proportion of households falling within
group would
have
been around
27%
of
the
The analysis of the classification of the demand by
the
families in the country.
policy suggest
important conclusions.
First,
the conceptu-
alization of the demand by income groups was too simplistic.
In analysis
household
of
home
net
affordability, more
earnings
is
the
important
proportion
cially critical for the lower income groups.
assigned
income
for
housing
the
of resources
family could allocate to housing consumption.
of
than
consumption
a
This is espeThe proportion
varies
greatly
with the level of income, and in the policy this sensitivity
analysis was
gage
left
institutions
procedures
policy.
to
out.
However, in practice, private mort-
apply
their
overcome
Hence,
the
this
own
weakness
classification
policy did not correspond with
cedures.
they
don't
Second,
include
the
income
affordability estimation
of
of
the
governmental
target groups
by
the
realistic affordability pro-
categories
considerations
were
related
expectations or upward economic mobility.
to
too broad and
future
income
For instance, the
first category could include people employed in the informal
sector as well as
mal
offices.
Obviously, from the point
bility and access
matically.
administrative personnel employed
Also,
in
for-
of view of afforda-
to resources, both households differ drain
the
second group,
the
classification
62
could
ting
did
Here
professionals.
tic.
An
additional
is
conclusion
represents
element
that
about
important
an
can
differences
again,
include considerations
not
households to star-
from typical worker class
include
the
be
drama-
classification
size.
family
in
consideration
This
terms
of
home purchasing capability, unit size and price.
The Policy Programs
The housing policy would be implemented through four big
programs-
land
acquisition
truction,
squatter
and
development,
settlement upgrading,
and
housing
support
consto the
private sector.
Program
-
1
Land
acquisition
and
development.
As
was
mentioned, one of the elements considered a key in the diagnosis
of
land
but
period,
The
problem was
the
not
only
also
for
for
to
public-private
future
supplies
development
the
future
acquired with government
first
develop
its
programsof urban
the availability of
policy proposed
and
acquisition
resource;
be
housing
Consequently,
land.
of
the
housing
an
ambitious
plan
to
provide
this
developments
developments.
urban
The
in
land was
the
to
funds by both INAVI and FONDUR.
own
the
land
housing
second
to
to
control
programs
secure
land
and
the
current
and
speculation.
FONDUR would also develop a proportion of the land acquired
63
to
the production
promote
for middle income groups
of units
in conjunction with private developers.
The program
bolivares at
million
5,192
in
that
the
period
9,205 Hectares with a
would acquire
FONDUR
of
estimated
total investment
56.4 Bs/square
average of
an
In addition, FONDUR would develop 6,000 Hectares of
meter.
that land at a cost of 1,551 million Bolivares.
8,000
acquire
than
amount
by
both
3
bolivares3.
be
invested
of
design
be
an
average price
acquire
land would be
and
INAVI
five
of
989
1,000
11.5
million
Hectares
times cheaper.
be
invested
would
total
to
resources
of
investment
would
INAVI would
in
the
7,732
five
million
We could consider that most of the resources to
by
FONDUR
the land and
FONDUR
housing
middle income groups.
to
total
INAVI
the
FONDUR
would benefit middle
price of
land at
for a
and
FONDUR and
total
years
of
Therefore,
bolivares.
The
Hectares
meter
Bs/square
less
1981-1985,
invested
in
in
income
land
purchasing
families,
the fact
given
development
the comparative
that according to the policy
developments were
Therefore,
land would
and
mainly
targeted
to
87% of the total resources
mostly
benefit
middle
income
groups.
3.
Componentes Fundamentales de la Politica Habitacional de
Venezuela, MINDUR, Noviembre 1982, pages 3.3 and 3.5.
64
CHART No 3
ESTIMATED INVESTMENT IN LAND ACQUISITION AND DEVELOPMENT
Bs/Square Meter
INVESTMENT
millions of Bs
HECTARES
INSTITUTION
6,743
FONDUR
-Land acquisition
9,205
5,192
-Land development
6,000
1,551
INAVI
8,655
989
56.4
-
11.5
Total investment in land acquisition and development Bs 7,732
Source: "Componentes de la politica habitacional de Venezuela.
MINDUR 1982, pages 3.3 and 3.4.
Program
the
-
2
government
Housing
tried
Construction.
to
produced
by
INAVI and
Division
of
Rural
maximize
the
the
Ministry
Housing.
THe
With
this
number
of
of
Health
program
program,
solutions
though
the
contemplated
the
construction of various solutions such as single family housing,
multifamily housing,
and
services,
red
by these
terest
rural
housing,
and home improvement
loans.
core units, sites
The units offer-
institutions were strongly subsidized with
rates which varied from
expectations of recovery.
in-
1 to 7% anually and with low
65
The
total
1981-1985
269,990
vices
sing
was
planned
of
housing
and
16,553
which
5,152
INAVI
for
the
bolivares
for
a
included
facilities.
and
by
million
solutions
communal
solutions
investment
Of
million
that
or
the
total,
31%
of
period
total
of
related
ser-
49,585
hou-
the
resources
were to be invested directly into the construction of single
and
multifamily
units
affordable
only
by
middle
income
groups.
MSAS would invest
1,820 million bolivares throughout the
period and its production was planned in 74,000 rural units.
These
units
inhabitants
would
and
be
built
were
in
towns
targeted
to
with
lower
less
income
than
15,000
groups.
In
addition to the institutions mentioned, two special programs
were
included
Bolivar
lana
Center
de
in
the policy;
and
Guayana.or
the
the
housing
CVG.
build
2,464
multifamily
built
5,259
units,
for the Corporacion
The
and multifamily dwellings.
the
units
4,459
were
while
the
to be
The rest were 800
Simon
Venezie-
Simon Bolivar Centre
housing
of which
construction of
would
CVG would
single family
"housing solu-
tions" of which 600 were serviced lots and 200 home improvement loans
It
total
4.
4
is interesting
of
units
to note
planned
for
from Chart #4
the
period,
14%
that out of the
or
56,508 units
VI Plan de la Nacion, Cordiplan 1981, pages 118 -
120.
66
were to be single family units or multifamily units
areas.
INAVI
The average price for
were
vares and
than
respectively
would
be
these types of units built by
and
100,000
boli-
they were not sold to families with
incomes
lower
3,000
bolivares
in urban
75,000
Bolivares per
or
43%
of
channeled
the
to
Bolivares
month.
Similarly,
investment
these types
in
of
11,576
housing
units not
million
solutions
targeted to
Therefore, we concluded that a high pro-
low income groups.
portion of the resources was targeted to the second group of
the
demand,
policy,
lower
the
which
is
contrary
to
expressed
as
stronger
emphasis
income
program
groups.
4,
how
We will
part
of
the
see
the
stated
later
focus
of
the
supply
for
on
the
in
the analysis
government
incentives
of
were
channelled into producing housing at similar purchase prices
to
the
single
and multifamily
units
produced by INAVI,
but
with the difference that the units offered by the public
sector
enjoyed
higher
direct
subsidies
and
facilities
for
credit.
Program 3 would
for
be
the
carried
public
sources
stated
out by FUNDACOMUN.
period 1981-1985 were
represented
the
Squatter Settlement Upgrading.
6.5%
sector.
in
this
goal
of
The
program
low
is
The resources assigned
1,709 million
of the direct
bolivares which
resources channelled through
level
of
concentration
contradictory with
concentrating
This program
in
housing
of
re-
the policy's
solutions
for
the
67
CHART No 4
PROGRAMMED HOUSING SOLUTIONS AND GROSS INVESTMENT:
NATIONAL HOUSING PROGRAM 1981-1985
SECTOR, AGENCY, PROGRAM
PUBLIC SECTOR
INAVI
NUMBER
GROSS INVESTMENT
OF SOLUTIONS
million of Bs.
391,423 (58%)
26,506
269,990
16,553
- Home improvement loans
49,499
963
- Site and Services projects
92,154
3,812
- Core units
78,752
4,885
-
41,446
3,894
- Multifamily Housing
8,119
1,258
- Communal Facilities
-
1,741
M.S.A.S. - Rural Housing
74,000
1,820
FUNDACOMUN
39,710
1,709
Single Family Housing
- Relocation loans
5,321
161
- Home improvement loans
24,299
- Home construction loans
10,090
300
242
- Infrastructure and communal facilities
-
278
- Other programs
-
728
CENTRO SIMON BOLIVAR
2,464
C.V.G.
5,259
200
-
600
-
1,628
-
2,831
-
6,424
- Home improvement loans
-
Site and Services
-
Single Family Housing
- Multifamily Housing
PRIVATE SECTOR
272,500 (42%)
-
TOTAL PUBLIC/PRIVATE SECTOR
668,923
-
Source: VI Plan de la Nacion.
Cordiplan 1981.
Page 117.
68
lower
income groups.
In addition,
it is contradictory with
the concentration of the deficit in urban housing
Program 4 reflected
the
Support to
the Private Sector.
the concern of the government
housing needs of the middle
of
the
of
the
economy,
limitations
to
middle
income
purchase
This program
for the solution of
income groups.
groups
housing,
The
content
inflationary conditions
stated that given the
policy
1
were
facing
serious
government
consequently,
assistance was imperative.
Government action would be channelled through three subprograms,
government
assistance
and
sing sector, stimuli and incentives
refinancing
to the
for constructors and de-
velopers, and the subsidy program for the buyers.
cy
estimated
produced
by
with
the
the
incentives,
private
approximately 55,500
sector
in
hou-
The poli-
277,5002
units
would
be
the
year
period
or
units per year.
five
That amount represen-
ted 42% of the total expected production.
The assistance to
1.
According to the survey of squatter settlements carried
out by FUNDACOMUN in 1977 (Inventario de Barrios) 4.5 million families, or approximately 50% of the Venezuelan population lived in shacks.
This inventory was carried out
nation wide in cities with more than 20,000 inhabitants.
in his article,
"Who Can Have Housing
Also, Alberto Lovera,
(Quien puede tener una vivienda en Venein Venezuela?
zuela),"
estimated 55 to 60% of the Venezuelan population
was living in squatter settlements in 1979.
Revista I.S.C.,
Septiembre-Octubre 1979.
2.
VI Plan de la Nacion Cordiplan, 1981, page 117.
69
financing
the
sector
included
allocation
to
FONDUR
of
refinancing fund for
to serve as a
million bolivares
2,400
an
mortgages supplied by the mortgage banks and financing socibolivares would be allocated
Similarly, 750 million
eties.
BANAP
to
increase the refinancing fund
supplied
by
the
to
new
savings and
injection of
summed
sing
funds
3,150
loan
for the mortgages
total
The
institutions.
for refinancing of conventional
million
In
bolivares.
additdion,
the loan amount if
would reinsure up to 75% of
hou-
FONDUR
the mortgage
had been already insured.
The
exemptions
100%
to the
incentives
until
construction
developers
maximum of
a
financing.
100%
included
and
sumptions.
Let's assume an average project with 150 housing
an average price of 200,000 Bs,
would
30 million
in
be
net
the availability of
We could obtain a rough esti-
units at
of
tax
the foregone tax payments by making some general as-
mate of
25%2
variable
gross
bolivares.
sales,
earnings.
The
we would
tax
rate
Assuming
obtain
for
the gross earnings
net
earnings were
7.5 million
this
amount of
bolivares
earnings
is around 40% 3; consequently, we obtain the tax deduction
1.
Programa Nacional de Vivienda, Period 1980-1984, MINDUR,
1980, pages 14 and 16.
2.
25% of net earnings on sale is a conservative return in
middle class housing investments in Venezuela.
Gaceta Oficial No.
Ley de Impuesto Sobre la Renta.
3.
2.277, Extraordinaria del 23 de Junio de 1978, pages 38-42.
70
would
be
around
3
million
bolivares
per
project.
If
the
227,500 units planned to be built by the private sector were
constructed
loped
in
and if we roughly consider that
projects
of
150
units
each
by
1,817 projects which multiplied
payments
tax
per project would
Assuming
payments.
exempt
we
would get
amount, a
project
24,000
12,000
Bs. with
the
300,000
the
would
70%
of
the
projects
foregone
sites
a
rural
taxes
and
services
tax
foregone
in
and services
housing
the
were
the magnitude of
INAVI sites
in an
and
obtain
5,410 million bolivares in
million bolivares
lot
Bs.
we
3 million on tax
To give an idea of
standard
costs
build around
only
3,815
taxes for the country.
that
total
then
they were deve-
unit costs
government could
lots or
150,000
rural houses.
Similarly the subsidy program would establish subsidized
interest rates
for the buyer.
In order to make a
rough es-
timate of the amount of funds the government could expect to
channel
of
to
the subsidy program, we will assume
an average
dard
fixed
and at 17%
unit
costing
200,000 Bs.
rate mortgage of 179,000 Bs.
interest rate.
the purchase
financed by a stanwith a
20 year term
Let's assume the interest rate in
charge of the buyer were 7% during an 8 year period in which
the government paid to the bank the difference.
amount
1,200
the
Bs.,
government would
the
difference
have
between
to
the
The monthly
pay would be around
market
monthly
pay-
71
ments,
or
or
1,300
ments
2,500 Bs.,
Bs.
made
Thus
the
present
value of
the stream
of pay-
by the government would be around 69,000 Bs.
would
the government
Assuming
loan.
and the payment assigned to the buyer,
recover
of
20%
per
that
subsidized loan from the buyer, the average expense per unit
would
amount
targeted to
70%
or
to 55,200
Bs.
the private
units
179,750
If we assume
sector
were
produced,
and
received
the
average
272,500 units
and of
those
the
subsidy,
amount of government funds needed for subsidy payments would
amount
12,400
to
million
bolivares,
of
that,
only
2,500
million bolivares are likely to be recovered.
In
sum,
Program 4
would
government
million
gone
for
tax
the
of
implementation
require around
resources;
the
19,365
in
including
main
million
the
components
of
bolivares
of
the refinancing program, 3,815 million
and
12,400
to
amount,
around
13,715 million
payments,
gram.
Of
that
not be
recovered.
public
sector
toward
the
in
lower
If we
direct
recall
support
gross
government
3,150
estimation,
the
in fore-
subsidy
or 70%
investment
production,
prowould
by the
oriented
income groups, was estimated around
26,506
million; we conclude the proportion of public resources oriented toward the production of middle income housing was indeed considerable, even with conservative estimates.
This
1.
The 20% recovery assumes the buyers would only repay to
the government the principal or the principal plus a very
low interest charge.
72
fact
of
is
the
supply
in obvious
contradiction with one
policy which was
of
housing
for
to
the
distribution of the deficit.
of the main goals
concentrate resources
lower
income
groups
due
in
the
to
the
73
CHAPTER 3
the
sing
INCENTIVES TO THE
THE
policy placed
housing
general
PRIVATE SECTOR
the design
the emphasis that
2,
have seen in Chapter
We
of
-
PROGRAM 4
THE
supply of
on the
hou-
Here we will analyze
for the middle income groups.
in
detail the content of the Program 4, which affected directly
supply of units
the
by
the private
to
benefit
was
that
Second,
resources.
too
targeted income groups was
the
prices of
the target
given
broad
the
real
limitations
level
affordability
continuous
program.
units were
to
adjustments
Third,
concentrate
cause
the
units
were
tion,
the
the
the
higher
policy
from the beginning
That
feature,
nancial
peared
period.
a
a
design
since
the beginning
to be
features
benefits
the
on
of
the
of
the
the
perceived risks
did
not
include
a
in
the
program tended
higher
producing
too
For this rea-
introduced
and
cost
the
units be-
higher
cost
In addi-
lower.
complementary
feature
to produce better distributional effects.
program
restrictions
as
needed
production
expected
of
in
overestimated, as a consequence,
high for the groups they intended to benefit.
son,
be ar-
income groups the Program 4 in-
gued first that the range of
tended
It will
sector.
subsidy
designed to remove
faced
by
program
the
lower
later,
in
some of
income
the
the
fi-
buyers, ap-
middle
of
the
Fourth, the policy did not consider potential chan-
ges in the financing conditions nor potential limitations in
government
resources.
Last,
the
program did
not
introduce
74
changes
any drastic
in
the
for
channels
housing
production
and it did not really encourage any innovative way of producing
lower
ever,
it
lower
cost
that
a
cost
the
formal private
sector;
expected the suppliers to produce great
housing.
good
ntrate
housing by
on
For
proportion
the
units
all
of
the
these
reasons,
units
the
suppliers
it
amounts of
was
likely
would
conce-
comfortable
produ-
produced
were
for a market they believed would handle well.
cing,
how-
It was
also likely to expect government resources would not be sufficient
to
back up
the
planned production and
some adjust-
ments to the regulations would need to be made.
The Initial Regulations
The
initial
duction of
regulations
housing
in
that
affected
the private
the period considered were
pro-
the decree
Number 214, of July 27, 19797
the related resolutions of the
Ministry
2744,
Number
of
48,
Finance,
dated
Number
July 30,
19807
and
and the
Urban
Development,
resolutions of
the
Venezuelan Central Bank
(BCV) of July 31,
1979, and May 6, 1980.
This set of norms intended to stimu-
late
the
formal
private
sector
to
1979, November 13,
provide housing and
ser-
viced land for the lower-middle income group of the country.
They provided
incentives and regulations
production, and
purchasing of
the decree Number 214.
for the
financing,
the housing units promoted by
On July
16,
1981,
the
Program 4 was
75
complemented with
the
Decree
1134 which
sidy program for homebuyers.
announced
together
with
the
decree
Number
2 years later.
The
mary
to
level
the
were
homebuyer,
to
a
sub-
Although this subsidy had been
formulated until
goals
established
increase
the
stimulate
214,
it
was
not
subsidy program's priof
continuous
affordability
production
of
to
the
units promoted, and to implement an innovative mechanism for
low-cost
subsidy
panded
housing
program was modified
the
coverage
by any credit
difications
tions
Later,
finance.
in
the
institution.
were
the
of
introduced
financial
on
by the
subsidy
March
decree
to
account
market.
1452, which
to those
In addition,
the
units
the
ex-
financed
two subsequent mofor
changing
FONDUR was
institution which would qualify
1982,
24,
units
condi-
designated
eligible
the
for
the
#5 provides a summary of the main features of
the
program.
Chart
initial
regulations,
tended benefits
cing
lower
to the
institutions.
policy,
the
income.
but
them
according
to
developer, homebuyer, and the
According
emphasis
cost units
households
classifying
should
to
be
the
in
goals
the
of
the
production
the
in-
finanhousing
of
the
the range of beneficiaries would cover
earning from 3,000
to 7,000 bolivares in monthly
Consequently, in the formulation of the incentives,
the degree of benefits was planned to increase with the decrease in the sale price of the units produced and purchased.
However,
some of
the benefits were equally assigned for all
76
CHART No. 5
INITIAL GOVERNMENT
REGULATIONS
AFFECTING THE PRIVATE
HOUSINGMARKETIN VENEZUELA.PERIOD 1979-1983
HOUSINGUNITS CHARACTERISTICS
Category
Price of
Primary Sale
2*
No Min.
of Bdras
A
Until
Ba. 100,000
also until
Be. 85,000
single faa.
units when
2 or 1
growing
to
2
B
C
D)
Until
Be. 150,000
and until
Be. 200,000
in Caracas
Metropolitan
area
e. 201,O0
to
Be. 250,000
Income tax exemptions 3
Sales
Rent
100%
75%.
or
100%
if 3
Bdrm
2
Be 151,000
to
Be 200,000
and Bs 250,000
in Caracas
Metropolitan
area.o-
BENEFITS TO THE BUYERS
INCENTIVES TO THE DEVELOPER
100%
for 10
years
counted
from
the issuance
of the
occupation
permit
60%
.
Minimum of
Construction
Financing
100% of
land development and
construction cost.
It excludes
land purchasing.
Except in
the case of
public-private programs or
land development programs
of Maximum
Mortgage
Credit
of Minimum of Maximum
long term
Mortgage
Financing
Credit
95% of
Bank valuations
95%hen
90% of the Bank valusale price aticredits
95% of
Bank valuations
90% of the
sale price
95% of the
Bank valuation
RefinancTax
Exemptions
by FONDUR Land develos
Auruisition
ment andand o served
purchase L
lotsr
Term of
Financing
years
unless
otherwise
declared
by the
buyer
85% of the 90% of the
7%
fte
for
purchase of
housing
ation
exemption
over the
interest
earnings
for concept
of financing of
land purlaenddevelopment of
site and
services
projects
carried out
by FONDUR
and INAVI
Condition:
Minimum
financing
3
50%
85% of
Bank valuations
80% of the
sale price
Mortgage
eBCV
and Reinsurance
50% of the
credits for
purchase of
housing
85% of the.
Bank valuation
65% of
security
value
Selling
serviced
finanmum
100% tax
exemption
over the
interest
earnings
for concept
of finanacquisition
of lots
cing is
granted
FONDUR will
reinsure
the amount
financed by
the morttution over
75% of the
sold by
FONDUR.or
INAVI
sale price
if the sortgage has
been already
insured
Condition:
the minimum financing
must be
65% of the
security
value with
a three
year term
E
E
to
Be. 350,000
It includes:
20
20%
- Decree No 214 of July 27, 1979
- Joint Resolution of the Ministry of Financing and Urban
Development of July 30, 1980
- Resolution of the Venezuelan Central Bank of July 31,
November 13, 1979 and May 6, 1980.
Ie The qualification of the units and the
supervision
3-
4"
1979;
must sum up 60 %
of the institution
share of mortgages
Subject to the developer
getting for the buyer a loan at least for the amount re-
quired in
for a tere between 15 and 25 years.
the decree and
In the case the developer Is
a partnership every partner will enjoy the benefits
of 100% tax exemption for concept of
5"
under Ba. 350,000
FONDUR and
INAVI the
developers
will also
get the
100% tax
exemption
75% of the 75% of the
sale price Bank valuation
sales.
FONDUR
will acquire from the banking institutions securities with
mortgage
guarantee.
of the projects done by FONDUR.
2* Primary sale is understood as that which takes place for the first time, after the
Issuance of the occupation permit. The elaboration of the sales document
place after the official date of the decree No 214 to be able to quality.
shall take
At least 30% of the
mortgages issued by
the financing institutions must be
oriented toward the
fkind g of this
The difference between the proportion
of mortgages financing units under
Ba. 200,000 and units
land to
75% of
Bank valuation.
Resolution of the
July 27, 197
6*
Funds
maxi-
100% of the
for
purchase
of housing
Between
ot
90% of
Bankcredits
antions :
REGULATION FOR
PORTFOLIO COMPOSITION
INCENTIVES TO FINANCING INSTITUTIONS
6* This financing includes land development and unit construction and purchasing and was
required from mortgage banks and financing societies.
77
the inclusion in
As we recall from Chapter 2,
sales prices.
Program 4 of that range of households had only left out
the
the highest 5% of the households in the country, leaving 95%
of
the
to
population
We can
beneficiaries.
be
argue
that
any policy that pretends to be so universal in scope is runthe
ning
failing
of
the
the
risk
to
of
some
benefit
needs and
importance
too much
either diluting
the
of
or
effects,
given the
groups,
magnitude
Thus,
for housing.
limited resources
the
its
priorities or targeting realisti-
of setting
cally the programs.
We can observe from Chart #5,
that the Program 4 classi-
benefits of the regulations according to two vari-
fied the
ables;
the price of the primary sale and the number of bed-
rooms.
These two variables combined pretended to orient the
production
king
into
toward
account
units produced
units
those
the unit
the
matched
tion
with
the
restriction
dimensions
of
number
of
room size,
would
take
size;
the
lowest cost
thus
concentration
characteristic household
the
with
size.
bedrooms
place
of
However,
is
ta-
intended the
the
demand
while
a
and
rela-
necessary, without
is
likely a
in
order
it
they
but
to
reduction
locate
in
the
a
room
units
within the scope of the policy, and thus to benefit from it.
Related
of
to the
prices went
bolivares.
from
This
price
target
less
broad
than
level
100,000
range was a
we
observe
bolivares
consequence
the
range
to 350,000
of
the
con-
78
supply
for
#2,
Chart
income
come
policy to secure an appropriate housing
the housing
cern of
to
of
middle
the
income
afford a
3,960
whose
unit
Bs/month was
price
of
groups
units
gram
not
within
for
the
This
did
However,
scope
income groups
4.
tions
units
producing
not
this
holds
true
than
tion of
affordability the expense
sidered
by
of
program was
calculated
also
the programs7
In
by
the
income
lower
those
targeted by Pro-
the
financial
condi-
very unlikely.
the estima-
income ratio of 25%,
In
the policy
con-
document,
income ratio was considered in
but
later on,
when
the
subsidy
implemented, it was stated the subsidy would be
using
illustrates
household
12,456 Bs/month.
if we use for
appropriate.
it is not stated what expense
design
in-
by the way, was
conclusion is valid
Mindur as
an
program and of producing
considering
change, which
Bs,
the program had the poten-
the
higher
from
equivalent
affordable
of
recall
100,000
The
for a unit costing 350,000 Bs was
tial
was
required.
a few words, since its conception
the
As we
groups.
group
Nevertheless, we
a
40%
expense
that
using
could
know
40%
income
as
the
theoretically
the
ratio
ratio.
of 40%
Chart
ratio,
afford
would
the
the
be
No.
2
target
units.
to
high
a
boundaries
was
a
financial compromise for many families.
The
variable
only
location
not
factor
considered
locational
within
the
in
design
the
consideration
refers
city
to
of
an
the
policy.
allowance
The
for a
79
price increase in the units produced in the Caracas Metropolitan
Area.
prices
This
allowance
tried
in the capital city.
locational
factors
perceived
could have
tions
were
units
in
protection
by
unterestimated
inconvenient
consider
higher
land
We could argue the ignorance of
a
big
of units for speculative reasons.
the
to
or
the
location
It could cause that given
the
and
impact on
policy,
market
generation
of
considera-
higher
priced
areas would
inappropriate
take
place.
The
Incentives to the Developer
Two
variables were
used,
the
income
tax
exemptions
the availability of short term and long term financing.
feature
tion
the
the
because
price
over
net
policy stressed was
this
of
variable was
the
unit
earnings
the
the
produced.
from the
sale
tax
exemption varied dramatically.
financing was
types
of units.
lated
construction
not
lien
be given
the
interest
income
therefore
planned
financing,
to projects
rates
"E",
On
and
rates
were
regulated
exemption
100%
exemption
the
variation
available
in
for all
from the regu-
construction
loans
would
land with any kind of
change
term financing.
at
to
tax
policy did not
for short and long
exemp-
the other hand, 100%
to be
developed on
The
the tax
The
graded according
Land financing was excluded
associated with it.
interest
of
ranged from
category
construction
one
The
for
"A" to 20% for
role
and
16%
for
By
the
1979,
construction
80
financing,
below
12%
for
the
250,000
Bs,
13%
purchase
for
of
units
units with
between
14%
and
those units with sales prices above
In
for
Bs
and
for units between 350,000 Bs and 500,000 Bs,
to the developer.
500,000 Bs.
tax exemptions were not avail-
the non-regulated market,
able
prices
250,000
350,000 Bs,
16%
sales
Even
though in the
tax law,
the tax
rates vary according to the amount of declared net earnings,
we could assume an average tax rate of 35%l.
maximum
short
SNAP, mortgage
and
long
banks,
term
financing
Similarly, the
obtainable
or financing societies was
from
the
75% of the
bank valuation, and the maximum mortgage term was 25 years2
We can assume that given the incentives, building within
the
regulated market was very attractive because 100%
cons-
truction financing was available, tax payments were reduced,
and
the
higher.
loan
to
value
Building
ratios
outside
the
for
long
term
regulated
financing were
market,
we
could
infer, would continue being attractive for developers with
1.
Ley del Impuesto sobre la Renta, Gaceta Oficial No.
Page 38.
2277, extraordinaria del 23 de Junio de 1978.
It considers an average building with 24 apartments at a
sales price of 500,000 Bs per unit and a return of 25% on
sales.
2.
Normas de Operacion del Sistema de Ahorro y Prestamo,
Gaceta Oficial No. 2755 Extraordinario, 17 de Marzo de 1981,
and Ley General de Bancos y Otros Institutos de credito,
Gaceta Oficial No. 1742 Extraordinario, del 22 de Mayo de
1975.
81
capital assets and in those cases where the expected profits.
would
compensate
investments
to
for
be
the
tax
payments.
For
another
condition
attractive,
this
kind
would
of
be
necessary; high confidence in the marketability of the units
because of a riskier and smaller market.
Within the program;
it is very likely the combination of
these variables would influence the production by increasing
the
from
construction of
that
First;
planned
even
the
in
higher cost units
the
though the
policy)
because
(opposite outcome
of
three
reasons.
policy also graded, the availability
of long term financing and loan to value ratio, according to
the sales price, the developers know of the restrictions the
formal
financing
system
places
on
the
granting
of
credits
for low or lower-middle income groups.
Therefore, given the
perceived
the developers would
tend
to
higher uncertainty on
concentrate
on
those
sales,
buyers
for whom the
of long term financing were more secure.
ability of
long
term financing
programs
also
categories
enjoyed
produced
"A"
much
and
more
"B"
housing
of
Second7
units
Program 4
competitive
Anyhow, the avail-
for the more
was also contemplated in the policy.
at
and
selling
obtention
expensive units
public housing
similar
those
prices
public
conditions
.
to
units
Thus,
the developers could fear their projects could not have such
1.
The interest rates for the acquisition of public housing
varied from 1 to 7 percent, with a mortgage term of 30
years.
82
high
demand
given
Third,
sing.
ting
from
costs
more
incurred;
Therefore,
returns
income
the
more
the
greater
is
sales
accounting
In
in
the
easily;
if the
and
expenses
expensive
more
amenities
whose
higher,
the
proportion
of
production
compensate
for
the
can
be
or
the
added.
because
in
the margin more for
can
be
inflated
In summary, even
term financing was
expensive
rates.
for higher
the cheaper the units
of.long
more
tax
produced,
units
costs
tax exemption rate was greater
regulated
expenses
the potential
for instance, imported finishings.
the
than
better
the
units
that level, buyers are willing to pay on
perceived
hou-
for decreasing artificially
addition,
the
by public
calculated by subtrac-
revenues
expensive
higher potential
income.
offerred
is
income
or
fictitious
taxable
the
expectations
taxable
the
gross
likely
the
units
These
could
three
more
reasons
together with the important fact that construction financing
was
available
100%
for
equity requirements
all
to the
kinds
of
units,
which
owning
of
land, and
reduced
knowing
the
critical role financing plays in construction, it was likely
to expect
units.
to
a
concentration
of
production
on
the higher
cost
An additional consideration is that the restrictions
issue
mortgages
to
finance
land
acquisition would place
an advantage on those big developers in control of the land.
This
likely
stated
small
very
consequence
generally
developers and
of
of
was
in
contradiction
encouraging
reducing
tion resources by few developers.
the
housing
monopoly
with
a
goal
production
of
by
construc-
83
The Benefits to the Buyer
The
initial
benefits
to
the
buyer
consisted
of
increa-
sing the minimum loan to value ratio according to the units'
sale
price
and
The
idea was
and
the
requiring
to
reduce
a
at
minimum
maximum
monthly payments.
loan
term
of
the required
Both measures
15 years.
downpayment
intended
to regu-
late the mortgage conditions to make the units produced more
affordable to the target groups.
the
buyer did
not include
Initially, the benefits to
considerations related to the
in-
terest rate and did not consider mortgages instruments other
than
the standard fixed rate mortgage.
The Chart No. 6 expresses
the monthly payments required
to purchase
the
gram 4,
the monthly incomes required from the household
and
units with
assuming
the proportion of
sumption
were
the
come
the
range
of
25%
and
monthly
the
initial
incomes assigned to housing con-
40%.
incomes
From the chart
we observe
required with
program.
Monthly
25%
that
expense/in-
incomes higher than 4,000 Bs were ne-
the cheapest units in contrast with the
3,000 Bs/month expressed by the policy.
with
Pro-
ratio did not match with the targeted income groups of
cessary to purchase
two
regulations of
housing
less
categories
than 12,000
income group
the
were
not
Bs/month
program
Similarly, the last
affordable
by
households
in contrast with the
intended
to
benefit,
whose
highest
income
CHART No 6
LEVELS OF INCOME REQUIRED TO AFFORD TARGETED HOUSING UNITS
(financing conditions according to decree No 214)
MINIMUN
LOAN TO
VALUE RATIO
A
Until 100
90%
90,000
10,000
15 yrs.
12%
1,080
4,320
2,700
B
101 to 150
90%
135,000
15,000
15 yrs.
12%
1,620
6,481
4,050
C
151 to 200
85%
170,000
30,000
15 yrs.
12%
1,620
6,481
4,050
D
201
to 250
80%
200,000
50,000
15 yrs.
12%
3,150
12,602
7,875
E
251 to 350
75%
262,5000
87,000
15 yrs.
13%
3,321
13,285
8,303
NOTES:
LOAN AMOUNT
(Bs)
DOWN PAYMENT
(Bs)
MINIMUN
LONG TERM
FINANCING
1*
INTEREST
RATE
MONTHLY
PAYMENTS
(Bs)
2*
MONTHLY
INCOME
REQUIRED
3*
PRICE OF
PRIMARY
SALE
(000's Bs)
HOUSING
CATEGORY
1* Effective Market Interest Rate by December 1979.
2* 25 percent was considered in Venezuela to be the maximun proportion of income a family
should expend in housing consumption.
3* It considers 40% of expense/income ratio.
MONTHLY
INCOME
REQUIRED
85
should not exceed 7,000 Bs/month.
families
cheapest
the
afford
could
income
observed
we
ratio,
come
Using 40% for expense/inwith
3,000
units
"A",
Bs
monthly
of
even
however
the last category "E" was out of reach
with this high ratio,
these reasons,
For all
for families earning 7,000 Bs/month.
it is not surprising that later the government implemented a
affordable
produced
units
the
make
to
program
subsidiy
by
the planned groups.
The Incentives to the Financing Institutions
In order to assure there would be enough supply of cons-
tives
and
controls
included
were
term credit
long
and
truction
in
for
the target units,
mortgage
for the
the program.
financing
incen-
institutions
The regulations which
inten-
ded to have distributional effects on the kind of units proproportion
the
duced were
restriction
of
The
on portfolio composition.
gram established
that
the
and
refinanced,
mortgages
refinancing pro-
FONDUR would acquire from the banking
institutiosn securities from those loans issued with a mortguarantee.
gage
refinanced,
The
ced.
"B"
finance
while
the
only
refinanced.
higher proportion
the lower
loans
would
A
be
of mortgages would be
the purchase price of
the unit
to finance the acquisition of units
refinanced
purchase
50% of the
by
FONDUR
in
units
"C" would
loans
to purchase
of
100%,
be
units
the
finan"A" and
loans to
refinanced
75%,
"D" would
be
86
housing
trate
units
those
on
default
cheaper
likely
loan
applications
those
on
and
in
faced
with
formal
the
the
financing
would concenprobability
lower
meet
to
able
buyers
restrictions
the credits
expect
to
the
knowing
and
it was
markets7
the
without specific loan proportions
category,
the
of
buyers
finance
Given
units.
target
program
the
se-
institu-
mortgage
the
issued by
loans
regulation
this
of
design
per
finance
would
tions
the
of
60%
least
to
lower and that
205,000 Bs or
units whose purchase prices was
at
loans would
the mortgage
of
30%
least
at
that
cure
tried
composition
portfolio
restrictions on
The
the
of
credit
requirements.
In order to implement this portfolio regulation periodic
In case the institutions
check ups were scheduled.
complied, an
sited
amount equal to
the Venezuelan
in
should be depo-
the difference
Central
(BCV) until
Bank
had not
the right
proportion of credits were issued, then the deposit would be
were
only granted
velopment,
not
financing of
for the
and acquisition
for
the
tax
exemptions,
land purchasing, de-
sites and
services projects7
for the construction or purchasing of finished units.
The
design
restrictions
will
incentive,
additional
The
refunded.
have
of
were
enough
the
based
funds
program
refinancing
on
to
a
set
of
refinance
and portfolio
assumptions.
the
mortgages
FONDUR
issued-
87
the
financing
tions
to
issue
tution would
units;
conditions would allow
and
lopers.
that
kind
be willing
the
Until
target
what
of
to
the
mortgage-, the
issue
financing
mortgages
units would be
extent
financing institu-
for the
produced by
insticheaper
the deve-
these assumptions were
valid
is
something we will explore in Chapter 4.
The
New
Regulations
and
the
Regulations
for
the
1974-1978
Period
The
policy
7.
for
Chart
No
those
offerred
wing
similarities
the
1974-1978
Comparing the
prices
covered
policy
only
in
the
by
benefits
1979-1983
and
the
to
differences.
four
is
the
period,
1974-1978
considered
period
we
find
the follo-
range
was
categories,
of
sales
smaller.
That
from units
less than 75,000 Bs to units costing 250,000 Bs.
the
to
account
included.
Tax
first
the
Thus,
periods.
Prices for
the
a
old
the
regulation
the
were
The production
tax exemption scheme was
to
financing was
100%
1979-1983
the
same,
80%
land
also
of the
tax
ex-
tax exemp-
similar for
construction
period,
1974-
fifth category was
last category was entitled to a 50%
entitled
to
in
and
entitled the developer to 100%
Construction
were
opposite
inflation,
to the sales price.
two categories
emption,
tion.
for
exemptions
graded according
ries
costing
1979-1983 period were raised compared to those of
1979
in
developers with
The
policy
summarized
all
both
catego-
financing,
but
financing
was
88
CHART No 7
GOVERNMENT REGULATIONS AFFECTING THE PRIVATE HOUSING MARKET IN VENEZUELA. PERIOD 1974-1979.
HOUSING UNITS CHARACTERISTICS
PRICE OF
PRIMARY SALE
INCENTIVES TO THE DEVELOPER
%
No MINIMUM
MINIMUM
INCOME TAX
OF BEDROOMS
AREAS
EXEMPTIONSTCONSTRUCTION
1*
SALES
RENT
OF MINIMUM
INCENTIVES TO FINANCING INSTITUTIONS
INCENTIVES TO THE BUYER
INTEREST
RATES
FINANCING
%
OF DOWNPAYMENT
THBORRV D
T
2nd MORTGAGE
%
MINIMUM
TAX EXEMPTIONS
LONG TERM
OVER
FINANCING
EARNINGS
INTEREST
3*
80% of land
At least 25% of the
mortgages issued by
the financing institutions must be oriented toward the financing of this kind
of units.
purchase.
100% of land
development
and construction financing.
Until
2 or more
75,000
60 sq a
100%
20% of the
downpayment
REGULATION FOR
PORTFOLIO COMPOSITION
100%
80% of land
purchase and
-3 or more
Until
70 sq
m
100%
-
land develop-
8.25%
20% of the
downpayment
ment.
115,000
100% construction financing.
75%
of sales
price
100%
60% land
Until
m
2 or more
60 sq
3 or more
70 sq m
75%
100%
development'
consIt%
truction financing.
50%
100%
Not specif-
150,000
9%
20% of the
downpayment
Until
75% 4*
50%
250,000
9.25%
5*
25% of the mortgages
issued.
ic.
In addition to the
previous percentages 25% of mortgages should finance
units with a price
Until
500,000
lower than Bs 500,000
It-includes:
- Instruccion Presidencial No 12.
-
1*
- Minimun areas for social interest housing. It includes only the areas
2*
-
Decree 1540 and complementary resolutions.
fixed for multifamily units for comparison purposes.
- Law that modifies the SNAP and other Banks.
The housing units should receive
financing for purchase for at least
On August 4, 1978 the interest rates were raised to 9.75%, 10% and
10.25% respectively. Qualification and supervision of projects to
15 year.
(Between 15 and 25 years).
be done by FONDUR. These rates do not include commissions on bal-
Additional Regulations:
ances which by 1979 were at 2%.
The financing for the units not qualified by the
decree could not obtain financing higher than 2,000 Bs/sq a. or 70% of the
bank valuation. In addition only projects within the decree could get mort-
-
4*
- It does not include
5*
-
gages are issued at the preferential rates fixed by the regulations.
tax exemptions for financing of land purchase.
gages to purchase land or to built on land with liens.
The decree 2228 dictated in 1977 established two mechanisms to control
the sales price of the units produced:
- The sales prices can not be higher than 30% of the valuatior price fixed
by the bank which provided the construction financing.
- In resale operations the price can not be higher than the original price
plus 15% of annual increase.
Tax exemptions over the interest earnings for concept of land adquisition, land development and construccion financing provided the mort-
3*
It does not include
land development.
tax exemptions for financing of land purchase and
89
available
for
that
was
the
while
development
first
in
was
the
two
categories.
1979-1983
100%
for
all
Another
period,
governmental
categories,
variation
the
land
1974-1978
policy graded it in 100%, 80%, 60%, and market rate from the
cheapest
to
the
most expensive category.
requirements on land were lower in the
Therefore, equity
1974-1978 policy, and
land and land development financing were graded according to
the sales price.
The
long
for all
cheapest
in
ranged
unit
one.
the
from
to 75%
95%
the
However, a
at
75%
of
sales
price
1974-1978
lowed
for
nings
for
period,
the
sales
sale price
thus,
period
even
price
we
for
for the most
could assume
the
expen-
included
the uncer-
tax
institutions over the
for sites and
regulations
in
for
both
regulations
while
the
for
in
interest earthe
financing
lumped
important
1974-1978
period
1979-1983
institutions
land acquisition
services projects.
periods
An additional
the
for
loans
development
together.
loans,
exemptions
the
portfolio
financing institutions did exist.
acquisition
encourage
though
from the 1979-1983 policy were al-
financing
home
the
to
program
the
lower-income buyers obtaining financing was higher
exemptions different
tried
set
refinancing program was not
and tax exemptions for the
Tax
of
of the
1974-1979 program,
tainty of
in
financing was
categories, while in the 1979-1983 policy, long term
financing
sive
term
the
established
land
The portfolio
lowest
difference
and
categories
was
that
that
the
FONDUR
90
would acquire the regulated units not sold within a two year
purchase
the
and
have
would
units
no
failed to pay
buyer
INAVI
would
of
with
the
condition
marketability
size,
reduced
location,
influenced
the
price
the
that
weaknesses,
This
etc.
perceived risks
for
It was also included that in case the
the units.
marketing
sales
95%
identifiable
could have
incentive
occur
would
the
be
price would
inappropriate
as
such
or
purchase
The
term.
for a term longer than 6 months,
return
to
the
financing
institution
FONDUR
85%
of
the principal mortgage balance.
The Subsidy Program
The subsidy program, or decree Number 1134, dictated on
1981,
consisted of a government loan without inte-
July
16,
rest
for an amount large enough to cover the difference bet-
ween the market monthly payments on the loan and
the maximum
subsidy.
The Fondo
payments
monthly
de
Nacional
established
Urbano
Desarrollo
by
the
(FONDUR) was
designated
the
administrator of the program and would also be the holder of
the
secondary mortgage.
would
The
private
hold the primary mortgage.
financing
According
institution
to the program,
once the term of the subsidy is over, the beneficiary should
pay the
return
full
to
market monthly payments and in addition, would
FONDUR
the
subsidy
in
monthly
installments,
but
91
without
interest
tinuous
future
charges.
increases
The
subsidy program assumed con-
in income by the buyer which would
enable him to fully afford the growing payments on the loan,
and the subsidy repayments.
Even
was
though
planned
since
peared only
rates.
produced.
conditions
chase
larger
to
required
and
40%
hadn't
of
the
the
complement the
the
control
25th
the
for
of
of
the
August
of
been
of
1981,
housing
when
the
financing
the
time
purchase
from
the end of 1981.
coincidence
tried
went
of
the
two
to avoid even more
of
the
housing
of
the
units
units
already
8 illustrates the monthly payments and
to purchase
the target units
expense/income
implemented.
units would
proportion
for
rates
for home acquisi-
to 19.5% at
sale
interest
interest
of
1981
the
it ap-
substituted by a sys-
Construction
subsidy
program
program 4,
conditions
control was
the
subsidy
liberation of the
financing
facilitate
Chart No.
level
program
about
by saying
intended
25%
17%.
speculate
stringent
ring
to
the beginning of
regulations
of
interest rates, the rates
increased
income
the
discretional
floating
could
and
the
After
mechanism of
We
to
in
worsened
acquisition.
17.5% at
1979
changes
undoubtedly
tion
implementation
one month before the
The
tem of
the
the
We
have become
Venezuelan
ratio,
can
if
see
conside-
the
how
impossible
households.
subsidy
the
pur-
by an
even
According
CHART No
8
LEVELS OF INCOME REQUIRED TO PURCHASE TARGETED HOUSING UNITS
(financing conditions without subsidy in 1981)
HOUSING
CATEGORY
PRICE OF
PRIMARY
SALE
(O0'sBs)
MINIMUN
LOAN TO
VALUE RATIO
LOAN AMOUNT
(Bs)
DOWN PAYMENT
(Bs)
MINIMUN
LONG TERM
FINANCING
(years)
INTEREST
RATES
MONTHLY
PAYMENTS
(Bs)
1*
MONTHLY
INCOME
REQUIRED
2*
MONTHLY
INCOME
REQUIRED
A
Until 100
90%
90,000
10,000
15
17%
1,385
5,540
3,462
B
101
to 150
90%
135,000
15,000
15
17%
2,078
8,311
5,195
C
151
to 200
85%
170,000
30,000
15
17%
2,616
10,465
6,540
D
201
to 250
80%
200,000
50,000
15
17%
3,078
12,312
7,695
E
251
to 350
75%
262,500
87,500
15
17%
4,040
16,160
10,100
NOTE:
1* It assumes 25% of income channeled to housing consumption.
2* It assumes 40% of income channeled to housing consumption.
93
in the first semester of 1981
to the statistics of the OCEI
only
554,330,
country
had
or
23%,
incomes
of
higher
the
than
total
households
5,000
Bs/month.
in
the
Thus,
the
families could theoretically afford those units without subsidies, or without increasing
the proportion of the expense/
income ratio.
The
subsidy
more favorable
subsidy
will
established
-
the
for the cheaper units.
be
calculated
on a case by case basis.
regulate
that
in
growing
conditions
The
would
be
repayment of the
amounts
by FONDUR in
The basic variables which would
the subsidy were:
The
inital
interest rate
in charge of the buyer which
will be valid only for the first year of the mortgage loan.
rate
At
to
least
reach
1% yearly
increment
the market
rate.
in the
This
initial
interest
increment would be
decided by FONDUR.
-
The
term
of
the
subsidy, which
would
vary
with
the
unit's primary sale price.
should
The
term
not
mortgage
for
exceed
and
it
repayment
the
would
term
start
of
for
the
the
the
subsidy.
repayment
year
of
following
This
term
the
first
the
end
of
the subsidy.
1.
Oficina
Central
de
Estadistica
Informatica
(OCEI).
Encuesta de Hogares por Muestreo.
Primer Semestre, 1981.
94
-
The
should
at
minimum
concede
term
the
private
financing
for the repayment of the
institutions
first mortgage, set
15 years.
The
subsidy
also
established among
qualify for the program the
Lack of adequate housing.
-
To
times
the
a
amount
stable
of
monthly
the
requirements
to
following:
-
have
the
income
of
monthly payments
at
least
during
2
the
1/2
first
year of the subsidy.
-
To
be
Venezuelan
or
to
have
lived
in
Venezuela
for
more than 5 years with one's family.
-
Availability
expenses 1
to
of
complete
the
the
downpayment
and
incedental
the
documents without
need to
incur additional financial compromises.
-
To
have
signed
the
documents
where
the
mortgage
bank
has agreed on the credit terms.
In
a
Financing
complementary
and
the
resolution
Ministry of
between
Urban
the
Ministry
Development,
ables to regulate the subsidy were established as
the
of
vari-
indicated
in Chart No. 9.
1.
These incidental expenses include fire and
rance, as well as legal and adminstrative fees.
life
insu-
95
CHART No 9
VARIABLES TO REGULATE THE SUBSIDY PROGRAM
MINIMUN TERM OF
PRIMARY MORTGAGE
INITIAL
INTEREST
RATE
TERM OF THE
SUBSIDY
A
5%
10 years
20 years
B
6%
9 years
20 years
C
7%
8 years
20 years
D
9%
7 years
15 years
6 years
15 years
HOUSING
CATEGORY
11%
E
as the overall goals of the policy expressed the
Again,
benefits of the subsidy were planned to be greater the lower
the price of the unit purchased, in terms of subsidized in
terest
ment
rates,
of
tended
the
to
duration
first
of
the
mortgage.
facilitate
the
subsidy, and
term for repay-
Similarly, those
purchase
of
benefits
the units
in-
by reducing
the monthly payments in charge of the buyer and by spreading
the repayment of the loan over the years.
Chart
purchase
No.
the
10
depicts
units
the
targeted
monthly
by
the
income
decree
required
to
#214 with
the
financing conditions established by the subsidy.
how
the
subsidy changed potentially the range
We observe
of households
96
CHART No 10
LEVEL OF INCOME REQUIRED TO PURCHASE TARGET UNITS
(According to
HOUSING
CATEGORY
PRICE OF
PRIMARY
SALE
(000's Bs)
MINIMUM
LOAN TO
VALUE
RATIO
MINIMUM
LONG TERM
FINANCING
(years)
MARKET
RATE 1*
INITIAL
INTEREST
RATE 2*
features of Subsidy program,
SUBSIDIZED
INTEREST
RATE (First
year)
TERM OF
SUBSIDY
(years)
year 1981)
LOAN AMDUNT
(Bolivares)
TOTAL
MONTHLY
PAYMENTS
(Bs)
FIRST YEAR PAYMENTS
DONE BY
GOVT.
DONE BY
BUYER
MINIMUM MONTHLY 3*
INCOME REQUIRED
(Bs/month)
MINIMUM 4*
MONTHLY
INCOME
100
90%
20
17%
5%
12%
10
90,000
1,320
726
594
1 ,485
2,376
101
to 150
90%
20
17%
6%
11%
9
135,000
1,980
1,013
967
2,418
3,868
C
151
to 200
85%
20
17%
7%
10%
8
170,000
2,494
1,176
1,318
3,295
5,272
D
201 to 250
80%
15
17%
9%
8%
7
200,000
3,078
1,050
2,028
5,070
8,112
E
251 to 350
75%
15
17%
7%
6
262,500
4,040
1,219
2,821
7,053
11 ,284
A
Until
B
10%
NOTES:
1* Market interest rate for home
purchase
2* It was estimated to increase at least
in
1981.
1 percent yearly and it will be determined by FONDUR.
3* The subsidy established the monthly income should be higher than 2 1/2 times the monthly
payment made
to be 40% of
by the
buyer in the
first year, or in other words it allows the payment
the income.
4* It estimates 25% of monthly income for housing consumption.
97
No.
than
higher
observed
we
8,
Bs
5,500
could
expense/in-
to cover an
subsidy
a
without
units
the
afford
incomes
families with
only
that
From Chart
afford the units.
could
who
With an expense/income ratio of 40%, the
come ratio of 25%.
minimum theoretical level of affordability included families
principle,
In
income.
monthly
but it allowed to increase the proportion of declared
month;
incomes
channelled to housing
resents
a
in
burden
serious
That proportion rep-
to 40%.
family
any
can
Therefore,
many
families
subsidized
interest
rate
would not
financial compromise.
such a
be
willing
highly
the
of
regardless
that
assume
becomes
and
budget
even more critical the lower the monthly income.
we
Bs/
1,500
to
requirements
income
the
reduced
subsidy
the
in
Bs
3,400
than
more
with
undertake
to
However, estimating the house-
hold monthly income using 25% of income for housing consump-
thus lower
monthly income would be 2,400 Bs,
Bs
real
the
match
In
group.
income
target
of
range
observe
we
program,
subsidy
the
with
tion
summary,
the
groups
income
the
minimum
the 3,000
than
subsidy
from
benefited
to
tried
the
program with the originally targeted income groups.
Charts
charge
"A",
and
"C"
"E".
during
annual
for units
"E".
The
-
buyer
the
of
increase
11
No.
13 develop
and
We
the
government
see
how
the
schedule
for
of
housing
payments
categories
monthly payments
the life of the subsidy an average
"A",
question
13% for units
to
ask
becomes
"C",
and
whether
in
would
of 16.5%
7.7% for units
the
households
98
incomes
those
with
expect
really
could
a
such
continuous
is no
high increase in their monthly earnings, knowing there
evidence
in
growth
income.
in
come would
the
need
Venezuelan
Even more,
which
even
with
the
heavy
for
the
affordability
sequently,
general
need
produced
huge
and
for
is
units
of
that
in
if
too
that
resources
even
lower
high
households.
One
the
to
the
in-
Therefore,
were
the
likely.
amounts of
second
sustained
increases
unlikely.
the
level
were
such a
the households with
very
subsidies,
two outcomes
ment would
units
in
of
the average
to be higher
earnings,
price
history
in
Con-
govern-
target
right
the
kind
of
units got produced and financed, many of the targeted households
would
not
be
willing
to
acquire
the
subsidy
the
financial
compromise.
The
1452
first
modification
dictated
on
March
government
journal
on
lished
subsidy
could
had
the
more
were
than
within
March
limits
1982,
29,
be
2 bedrooms
the
to
30,
and
and whose
established
the
published
1982.
extended
was
This
to
in
decree
those
the
estab-
units which
prices
of
by
decree
the
decree
primary
sale
214
even
though the construction of those units had not been financed
by
the
SNAP,
institutions
Banks,
Mortgage
targeted
by
the
or
Financing
Decree
214.
Societies,
Thus,
the
the
exten-
sion included commercial banks and any other credit institution.
The modification
was valid only
for
the units
built
99
CHART No 11
REPRESENTATIVE SCHEDULE OF PAYMENTS WITH THE SUBSIDY
FOR UNITS A
BUYER
YEAR
LOAN
BALANCE
AMORTIZATION
PRINCIPAL
INTEREST
TOTAL
PAYMENT
BY GOVT
PAYMENTS BY BUYER TO
TOTAL
GVT
BANK
MONTHLY
PAYMENT
(total)
INTEREST
RATES
_
0
7,128
594
5%
1
90,000
15,256
584
15,840
8,712
7,128
2
89,416
15,148
694
15,840
7,942
7,898
0
7,898
658
6%
3
88,724
15,021
819
15,840
7,090
8,750
0
8,790
733
7%
4
87,906
14,871
969
15,840
6,202
9,638
0
9,638
803
8%
5
86,936
14,693
1,148
15,840
5,569
10,271
0
10,271
855
9%
11,210
934
10%
11%
6
85,788
14,482
1,359
15,840
4,630
0
11,210
7
84,430
14,232
1,608
15,840
3,644
12,196
0
12,196
1,016
8
82,822
13,936
1,904
15,840
2,610
13,230
0
13,230
1,103
13%
0
14,573
1,215
15%
9
80,918
13,586
2,254
15,840
1,267
14,573
10
78,664
13,171
2,669
15,840
602
15,238
0
15,238
1,269
16%
11
75,995
12,680
3,160
15,840
0
15,840
0
15,840
1.320
17%
12
72,835
12,099
3,741
15,840
0
15,840
5,361
21,203
1,767
17%
13
69,095
11,412
4,480
15,840
0
15,840
5,361
21,203
1,767
17%
14
64,666
10,597
5,242
15,840
0
15,840
5,361
21,203
1,767
17%
15
59,423
9,633
6,207
15,840
0
15,840
5,361
21,203
1,767
17%
16
53,217
8,492
7,348
15,840
0
15,840
5,361
21,203
1,767
17%
17
45,868
7,141
8,700
15,840
0
15,840
5,361
21,203
1,767
17%
18
37,169
5,541
10,299
15,840
0
15,840
5,361
21,203
1,767
17%
19
26,870
3,647
12,193
15,840
0
15,840
5,361
21,203
1,767
17%
20
14,676
1 ,404
14,435
15,840
0
15,840
5,361
21,203
1,767
17%
Thesubsidy established the repayment would be
made in
- Price of Primary Sale:
Bs 100,000
BS 90,000
- Market Interest Rate:
17%
- Initial Subsidize Rate: 5%
- Total increase in monthly payments in the first
twelve years 197% Average annual increase 16.5 X
- Loan amount:
increasing amounts begining one year
after the end of the subsidy.
FONDUR would
determine the rate of increase and the initial
repayment amount on a case by case basis.
Here,
the repayment was distributed evenly
during the remaining term of the first
mortgage.
100
CHART No
12
REPRESENTATIVE SCHEDULE OF PAYMENTS WITH THE SUBSIDY
FOR UNITS C
YEAR
LOAN
BALANCE
AMORTIZATION
INTEREST
PRINCIPAL
TOTAL
PAYMENT
BY GOVT
PAYMENTS BY BUYER TO
BANK
GOVT.
TOTAL
BUYER
MONTHLY
PAYMENT
(total)
INTEREST
RATES
1
170,000
28,816
1,112
29,928
14,112
15,816
0
15,816
1,318
7%
2
168,888
28,612
1,316
29,928
12,610
17,317
0
17,317
1,443
8%
3
167,572
28,369
1,559
29,928
11,097
18,831
0
18,831
1,569
9%
4
166,013
18,083
1,845
29,928
9,584
20,344
0
20,344
1,695
10%
5
164,168
27,744
2,185
29,928
8,081
21,847
0
21,847
1,821
11%
6
161,983
27,342
2,586
29,928
6,599
23,329
0
23,329
1,944
12%
7
159,397
27,866
3,062
29,928
5,153
24,775
0
24,775
2,064
13%
8
156,335
26,303
3,625
29,928
2,533
27,395
0
27,395
2,283
15%
29,928
0
29,928
0
29,928
2,494
17%
9
152,710
25,637
4,291
10
148,419
24,847
5,081
29,928
0
29,928
6,976
36,905
3,075
17%
11
143,338
23,913
6,015
29,928
0
29,928
6,976
36,905
3,075
17%
12
137,323
22,807
7,121
29,928
0
29.928
6,976
36,905
3,075
17%
13
130,203
21,498
8,430
29,928
0
29,928
6,976
36,905
3,075
17%
14
121,772
19,947
9,981
29,928
0
29,928
6,976
36,905
3,075
17%
15
111,791
18,112
11,816
29,928
0
29,928
6,976
36,905
3,075
17%
16
99,975
15,939
13,989
29,928
0
29,928
6,976
36,905
3,075
17%
17
85,986
13,367
16,561
29,928
0
29,928
6,976
36,905
3,075
17%
18
69,425
10,321
19,607
29,928
0
29,928
6,976
36,905
3,075
17%
19
48,818
6,716
23,213
29,928
0
29,928
6,976
36,905
3,075
17%
20
26,605
2,447
27,481
29,928
0
29,928
6,976
36,905
3,075
17%
NOTES:
-
Price of Primary Sale: Bs 170,000
The subsidy established the repayment would be
-
Loan Amount:
made in increasing amounts begining one year
Bs 170,000
- Market Interest Rate:
- Initial Subsidized Rate:
- Total increase
first
13%
in
after the end of the subsidy. FONDUR would
17%
7%
dtermine the rate of increase and the initial
monthly payments in
ten years 133%. Average annual
the
repayment amount on a case by case basis.
increase
Here, the repayment was distributed evenly
during the remaining term of the first mortgage.
101
CHART No 13
REPRESENTATIVE SCHEDULE OF PAYMENTS WITH THE SUBSIDY
FOR UNITS E
YEAR
LOAN
BALANCE
AMORTIZATION
INTEREST
PRINCIPAL
TOTAL
BUYER
PAYMENT
PAYMENTS BY BUYER TO
BY GOVT.
MONTHLY
INTEREST
BANK
PAYMENT
RATES
GOVT.
TOTAL
(total)
1
262,500
44,310
4,170
48,480
14,630
33,850
0
33,850
2,821
10%
2
258,330
43,547
4,937
48,480
12,240
36,240
0
36,240
3,020
11%
3
253,393
42,635
5,845
48,480
9,903
38,577
0
38,577
3,215
12%
4
247,548
41,561
6,920
48,480
7,646
40,834
0
40,834
3,403
13%
5
240,629
40,288
8,192
48,480
5,494
42,986
0
42,986
3,582
14%
6
232,437
38,782
9,698
48,480
1,894
46,586
0
46,586
3,882
15%
7
222,739
36,998
11,482
48,480
0
48,480
0
48,480
4,040
17%
8
211,257
34,887
13,593
48,480
0
48,480
6,476
54,956
4,580
17%
9
197,664
32,387
16,093
48,480
0
48,480
6,476
54,956
4,580
17%
10
181,571
29,428
19,052
48,480
0
48,480
6,476
54,956
4,580
17%
11
162,519
25,924
22,556
48,480
0
48,480
6,476
54,956
4,580
17%
12
139,963
21,776
26,704
48,480
0
48,480
6,476
54,956
4,580
17%
13
113,259
16,865
31,614
48,480
0
48,480
6,476
54,956
4,580
17%
14
81,645
11,052
37,428
48,480
0
48,480
6,476
54,956
4,580
17%
15
44,217
4,170
44,310
48,480
0
48,480
6,476
54,956
4,580
17%
NOTES:
- Price of Primary Sale:
- Loan Amount:
- Market Interest Rate:
-
Initial
in
The subsidy established the repayment would be
made in
17%
Subsidized Rate:
- Total increase
in
Ba 350,000
Bs 262,500
10%
monthly payments
increasing amounts begining one year
after the end of the subsidy. FONDUR would
determine the rate of increase and the initial
repayment amount -on a case by case basis.
the first eight years 62%. Aver-
age annual increase 7.75%.
Here, the repayment was distributed evenly
during the remaining term of the first
mortgage.
102
or
in construction by July 16,
rage
the
sale
and
whose
the
Decree
of
the
#214
It
agreed with
independent
intended to encou-
units built during
housing
characteristics
1982.
of
the
the
period
those established
source
for
in
construction
financing.
The
second modification was the
Ministry of
#231
Finance
established
#1989
and
joint resolution by the
and Ministry of Urban Development
published
on
December
6,
1983.
This
modification allowed the concession of preferential rates to
purchase
the units whose occupation permits had been issued
before the 31st of December, 1982, and whose characteristics
matched with
long
term
the ones
interest
established
rate
was
by the decree
or
12%
lower
tried
by FONDUR,
for
home
to
reduce
due to the
acquisition
the
differential
fact that
charged
financing societies was 21.5%1.
program
given
the
conditions
the
the
the
maximum
This resolu-
subsidized
in 1983
by
the
and
commission charges were 1% of the loan amount.
tion
214 if
rate
paid
interest rates
mortgage
banks
and
We can assume the subsidy
in
the
financial
becoming unbearable by the Government which had
market
was
to implement
modifications to the original program.
1.
Boletin Trimestral, Banco Central de Venezuela, JulioSeptiembre 1983.
In mid 1983, the interest rates for home
acquisition were around 21.5% for mortgage banks and financing institutions and around 17% for the savings and loan
institutions, page 9.
103
The
last
was
considered
the
joint
to
Urban
of
the
subsidy during
December
published
resolution
Ministry of
1983.
modification
the
21,
Development
It
1983.
Ministry
of
the
period
contained
Finance
#2005
issued on December 20
#234
and
of
This modification changed the initial interest rates
in charge of the buyer for the housing categories
"C",
and
"E"
and
categories
"A"
and
"B",
rates would
illustrates
increases
the
initial
and the
the
proposed
monthly
interest
rates
from January
changes
income
for
variables constant.
other
be applied
though the
Even
on
in
kept
their
effects
have a
definitely
reduce
it
would
on
new
14
the
required to purchase the units.
modification would not
affordability,
The
Chart No.
1984.
and
"D",
strong impact
the
economic
burden the subsidy program represented to FONDUR.
A
modification
published June
Ministry
of
2,
related
1983.
The
Finance and #187
dictated on
lopment
June
to
1
the
refinancing
joint
resolution
of
program was
of The
#1719
the Ministry of Urban Deve-
reduced
the
proportion of
mort-
gages refinanced from the portfolio of mortgages held by the
Savings
and Loans, Mortgage
FONDUR's
mortgages
and
to
compromise
issued
refinance
to
was
Banks, and
reduced
construct
70% of
the
or
to
Financing Societies.
refinance
purchase
mortgages
for
80%
of
units
"A and
units
"C".
the
B"
The
The Libraries
Massachusetts Institute of Technology
Cambridge, Massachusetts 02139
Institute Archives and Special Collections
Room 14N-118
(617) 253-5688
There is no text material missing here.
Pages have been incorrectly numbered.
( p. 104)
CHART No 14
MODIFICATION OF SUBSIDY PROGRAM AND MONTHLY INCOME REQUIRED
(Joint Resolution of December 20, 1983)
2*
1*
HOUSING
CATEGORY
INITIAL INTEREST RATE
DECREE 1134 MODIFICATION
FIRST YEAR MONTHLY PAYMENT
DECRE 1134 MODIFICATION
MINIMUN MONTHLY INCOME REQUIRED
DECREE 1134 MODIFICATION
A
5
-
594
594
1,485
1,485
B
6
-
967
967
2,418
2,418
C
7
10
1,318
1,640
3,295
4,101
D
9
11
2,028
2,273
5,070
5,683
E
11
12
2,821
3,150
7,053
7,876
NOTES:
1* It assumes market interest rates of 17%
2* According to the subsidy program the minimun monthly income would be 2.5 times the monthly
payment
during the first year.
HC)
U,
106
modification did
mortgages
for
not consider changes
units
financed remained at
ted
the
need
"E",
50%.
therefore
Again,
in
the
the refinancing of
proportion
to be
re
this modification reflec-
for reducing government expenses
channelled to
the Program 4 due to the financial crises in Venezuela.
107
CHAPTER 4
OF THE PRIVATE SECTOR:
THE RESPONSE
THE PRODUCTION OF HOUSING UNITS,
ITS
RELATION WITH THE POLICY GOALS,
AND THE MARKET BEHAVIOR.
Even though it can not be said the production of housing
in a given period responds uniquely in either a posi-
units
tive or negative way, to the instruments of the related housing policy, we can argue that by analyzing the characteristics
of
the
supply and
other
account
the
market behavior and taking
can get quite
factors involved, we
are
point
of
quired
very
difficult
view.
is
important
First
simply not
elements
numerically
or are
to
from
establish
of all,
the
level
of
Secondly,
available.
the
affecting
a good un-
In our case, causal rela-
derstanding of the policy impact.
tions
into
a
information
re-
many subtle and
outcome are
not documented.
statistical
not
expressed
Thirdly, the subsequent
changes in the policy and in the economy complicate the picture even further.
will
leave
out
many
problem and will
come.
In sum, a strictly quantitative analysis
of
the
not allow
variables
us
to
at
the
heart
fully understand
of
the
However, from the data available, we can analyze
the
outthe
evolution of the supply of units and the market characteristics during the period.
havior with
with
field
the
We can also relate the observed be-
policy features and complement the analysis
observations
and
direct
interviews.
This
108
strategy
bined
can
give
us
approach will
insights
the
be
into
one
the problem.
in
followed
That com-
the
elaboration
be
mentioned.
in this chapter.
Two
First,
the
ludes
of
limitations
data
to
used
for
analysis
the
availability of the
mitation
is
single-family
less
and
was estimated at 16%2.
clusion
would
of
suppliers
the
have
when
we
in
Moreover, it
our
family
concentrated
on
inc-
However, this
the
the
total
is not
li-
share
of
production
likely their in-
offerred
the
supply
a direct consequence
conclusions
units
mostly
the
consider
row-houses
changed
single
This is
of
informationi.
serious
units
must
evaluation
only multifamily units.
the
price
the
given
by
higher
that
the
the
private
prices.
The
second limitation relates to the lack of a control group and
an historical framework.
Given
that
we want
characteristics
our
changes,
unable
gram.
to
and
the
evaluation
record
Similarly,
what
we
to analyze
impact
remains
happened
should
changes
of
the
the
consider
supply
on
those
because we
absence
a
the
program
speculative
in
in
time
of
the
frame
are
pro-
longer
1.
Fundaconstruccion funded in 1978 traced mainly evolution
of apartment units.
2,
Vivienda.
La Gestion del Gobierno.
No. 83-45, p. 19.
Revista Inmobilaria
109
than
five
years
and
compare
the
outcome
to what
was
happe-
ning in the preceding period with the former regulations.
Unfortunately,
country.
that
The
information
statistics
to
is
also
record
unavailable
housing
unit
in
the
production
started being collected in 1978 and they included only a few
central
cities.
This
circumstance
limits
this
analysis
to
saying how well the supply characteristics matched with the
policy goals,
lementary
lyze
the
havior
and
to make some
information.
But
if
response, we can not
responded
to
inferences, drawn upon
it
is
true
comp-
that we can ana-
really argue whether that be-
the policy
being
analyzed
or
it
would
array
of
units
have been present without it.
This
chapter
will
show
how
out
of
the
regulated by the Program 4, production concentrated on categories
"D"
and
"E",
the
the
deflated
average
the
majority
of units
large
share
though
in
of
one
the
way
most
price
of
remained
targeted
or
expensive
the
at
units
a
Even
produced
though
dropped,
levels unaffordable by
income
another,
ones.
groups.
great
share
Hence,
of
the
a
even
units
produced got channelled into the market, the consumer or the
government had to pay the excess prices.
the
policy
features, but
the
market
and
mic
environment
cuss
was
how one
the range
in
also
the
the Venezuelan
contributed
to
We will argue that
traditional
political
this
practices
in
and socio-econo-
outcome.
We will dis-
of the serious drawbacks of the program design
of prices of
the regulated units.
That range
110
was
broad
too
riately
as
the
a
benefits
fewer
goal
chose
could give
building
production
to
them the
was
the
not grade
each
category
As
that
reached
housing
the
units
on
on
appropof
units
the
which
higher potential
concentrated on units "D" and "E"
in
concentrate
concentrated
produce
marketability problems.
"crisis
to
most
The developers had the choice among a wide
they
accumulation
was
program did
the
from
consequence,
and
lieved
intended
because
expensive ones.
range
the
housing,
low-cost
and
if
a
they
be-
returns
and
production
consequence
until a level of
caused
market."
We
inventory
publicly
a
will
also
declared
observe
how
the subsidy program subsidized a high proportion of the most
expensive
weak
units
effect
of
within
the
the subsidy
policy
and
on sales.
we
will
We will
observe
the
question the
equitability and the adequacy of the subsidy as a government
expenditure.
We will conclude by saying that given the mar-
ket
conditions,
the
units built by the formal private sector and
vernment
wants
there
to
seems
stimulate
to be
the
a
standard of
production
of
prices
if
for
the go-
lower
cost
units that are affordable to the lower-middle income groups,
more
strict
regulations
should
be
dictated and
alternative
suppliers should be promoted.
The Characteristics of the Units Produced
Some
will
give
general
us
a
characteristics
broader framework
of
for
the
overall
production
the evaluation of the
ill
According
private sector production.
in
depicted
months
of
ela.
Chart
1983,
No.
between
14,
412,071 housing
to MINDUR
1979 and
statistics
first
the
units were built
three
in Venezu-
Of these, 189,552 units or 46% were public sector pro-
duction,
225,519
sector.
This
in the
units,
or
outcome
54% corrseponded
differs
from
the
to
the
private
1979 housing
policy
total production and in the distribution of the proAccording
duction.
to
the
general
policy,
668,923
units
would be produced and 391,423 units or 58% of the production
would
be
the
task of
units,
or
We
observe
can
the
42% would be
public sector.
in
that even
the
hands of
though
neither
Likewise,
272,550
the private
sector.
sector reached
the
target goals, the public sector production was further away.
It
fell
short
by
about
200,000
units, while
the private
sector difference was around 47,000 units.
The
intensity of production by
the public
sector showed
dramatic variations.
Comparably, the production by the pri-
vate
stable.
sector was more
first year
nomic
tors
Both
fell dramatically in
due to the drastic changes
situation.
between
in the
country's eco-
The reduction experienced by
1980
and
1981
could
be
the
the two sec-
attributed
to
the
adjustments to the new policy dictated in July of 1979.
1.
Informe Prelimirar,
op. cit., p. 19.
Vivienda,
La
Gestion
del
Gobierno,
112
Chart
Variations
15
in Production
Public and Private Sector
Sector
1979-1980
1980-1981
1982-1983
1982-1983
Public
+21%
-8%
+13%
-45%
Private
+16%
+9%
+13%
-28%
Revista InmoLa Gestion del Gobierno.
Vivienda.
Source:
biliaria No. 83-54, p. 19 and Fundaconstruccion; Apartamentos Ofrecidos en el Periodo Cuatro No. 04.
The
trate
figures
the
indicated
distribution of
sector according
duction
in
in
the
We
proportion
of
crease
and
concentration
on
"E".
The
proportion
units
350,000 Bs.)
could
say
"A" and
ing
0
"B"
the
ted
1%
"A"
"C"
and
affected
26% of
of
the
in
In 1981,
and
"B"
and
In
than
1979, when we
production,
production,
units
in-
"D" and
(more
"Others"
the
the
of units
"A"
units
3% be-
dropped to
and the proportion
disappeared
total
1983
illus-
of units
the reduction was even more dra-
In 1983
and units
production.
in 1979, units "D" and
production,
the total
private market
"A" almost
1
the dramatic re-
the production
hadn't
represented
formal
units
only
while
the
policy
reduced to 7%.
matic-
Figure
can observe
units
the shares of units "A".
in
and
remained relatively constant.
the
"B"
16
the units produced by the private
to price.
of
Chart
"E"
their
On
"B"
the
represen-
other
hand,
represented together 37%
comparative
That increase was continuous for every year.
share
was
of
68%.
Related to "C"
CHART No 16
DISTRIBUTION OF UNITS OFFERED ACCORDING TO PRICE
CATEGORY
PRICE OF PRIMARY SALE (Bs)
1979
No
1980
No
%
%
1981
No
%
1982
No
%
PERIOD
1979-1983
1983*
%
No
No
%
A
100,000
844
4
1,000
3
160
0
90
0
16
0
2,110
1
B
150,000
5,702
23
5,469
18
2,290
7
1,019
3
158
1
14,638
10
C
200,000
3,877
15
5,576
18
6,422
19
5,845
15
2,983
15
24,703
17
D
250,000
5,169
20
8,144
27
11,617
35
14,798
39
6,726
35
46,454
32
E
350,000
4,380
17
5,134
17
7,306
22
10,434
27
6,387
33
33,641
23
5,643
22
5,196
17
5,646
17
5,999
16
3,072
16
25,556
17
25,615
100
30,519
100
33,441
100
38,185
100
19,342
100
147,102
0
(Others)
More than
350,000
TOTAL
100
Source: FUNDACONSTRUCCION. Area Urbana 99. Total Nacional. Cuadro 04. Apartamentos ofrecidos
en el periodo clasificado por Area y Precio de Venta.
Note: Statistics for 1983 include only until September production.
H
114
FIGURE No 1
DISTRIBUTION OF UNITS ACCORDING TO PRICE
979
1980
-23%
17%-
22%-
-18%
-I
15%
18%
1!
27%
20%
1 81
1982
,717% J.
-15%
1
~%
UNIT TYPES
Source:
Note:
A
I7
35%
27%
M
B
.
C
D
E
FUNDACONSTRUCCION. Area Urbana 99. Total Nacional. Cuadro 04.
Apartamentos ofrecidos en el periodo clasificado por Area y Precio
de Venta.
Statistics for 1983 include only until September production.
0ers)
115
and
"Others",
iod.
their
proportion
was
similar
The constant production of units
during
"0",
that
per-
the ones not re-
gulated, gives us an indication of a market independent from
the effects of policy regulation.
As
we
recall
the production of
earning
the goals
of
Program 4
low-cost housing
3,000 and 7,000 Bs
between
were
to
encourage
affordable by households
in monthly income.
How-
ever, when we analyze who could afford the average unit produced, we
fied by
concluded that
the policy as
the units without
no households within those classi-
low-middle
income groups could afford
the subsidy program.
Chart No.
17
illus-
trates the weighted average of the units produced related to
the number of households who could afford the units with and
without
the
unit was
Bs
of
subsidy
program.
We
observe
that
the
average
affordable only by households with more than 8,000
monthly
income.
From
1981
on,
only
the
households
earning more than 9,000 Bs/month could afford the units produced
without
requirements
subsidies.
to
5,000
The
subsidy
Bs/month,
but
program
less
than
lowered
the
40%
the
targeted households had incomes above that level.
40%
of
the
expense
income
ratio
is high given
the
of
Moreover,
families
have more urgent priorities.
We
observe
how
the
outcome
was
program's goal, which pretended to
the
lower
income groups.
inconsistent
with
stimulate production
the
for
Even though we observe the defla-
116
CHART No 17
AFFORDABILITY OF UNITS PRODUCED
1979
1980
1981
1982
1983
279.52
258.25
282.02
289-93
307.66
144.53
109.85
103.38
97.0
96.5
NO OF UNITS PRODUCED
25,615
30,519
33,441
38,185
19,342
MONTHLY INCOME
8,000
8,000
9,000
9,000
9,000
203,397
207,641
180,991
185,810
186,169
AVERAGE SALES PRICE
(000's Bs) Current B8
REAL Ba
NO OF HOUSEHOLDS
IN THE COUNTRY
I
% OF HOUSEHOLDS
WITHIN TARGET GROUP
0%
0%
0%
% OF HOUSEHOLDS OF
THE COUNTRY TOTAL
9%
9%
0%
0%
7.6%
7.6%
7.6%
2*
MONTHLY INCOME
NA
NA
5,000
5,000
5,000
NO OF HOUSEHOLDS
WITHIN TARGET GROUP
NA
NA
260,535
289,366
286,798
NA
NA
554,330
612,479
614,623
% OF HOUSEHOLDS
WITHIN TARGET GROUP
NA
NA
33%
33%
33%
% OF HOUSEHOLDS OF
THE COUNTRY TOTAL
NA
NA
23%
25%
25%
II NO OF HOUSEHOLDS
IN THE COUNTRY
I.
Households
who could afford units without subsidy. Considers 40%
of expense income ratio
II. Households who could afford units without subsidy. Considers 40%
of expense income ratio.
1*
Production included until September 1983.
2*
Estimated from proportion in 1981
117
ted
price
average
rage
the
of the
unit
price
units
average unit decreased annually by 6%,
"E".
Likewise,
units produced, and
the average
remained
of
the
financed
in
category
also belonged
to category
"E".
rage loan amount made possible the purchase of units
the
the aveprice
of
The ave"D".
Chart 18
Average Price of Units Financed
(000's Bs)
1978
1979
1980
1981
1982
265.8
280.1
265.5
282.8
286.6
154.3
144.8
112.9
103.45
95.88
E
E
Current Average Price
Real Average
Price*
Unit Category
NA
E
E
Source:
BCV Anuario de Series Estadisticas 1982, Cuadro No.
VI - 91, p. 369.
*
Base year 1968 = 100
118
Chart
19
Average Loan Amount of Units Produced
(000's Bs)
1978
1979
1980
1981
1982
156.8
168.8
190.9
193.7
221.1
91.0
87.2
81.2
71.0
73.9
Current Loan
Amount
Real Loan
Amount*
Unit Category
NA
C
D
D
Source:
BCV Anuario de Series Estadisticas
VI-92, p. 370.
*
Base year 1968 = 100
D
1982, Cuadro No
From the evaluation of the units financed using the subsidy
program,
we
observe
in
Chart
No.
20
that
68% of
the
units benefiting from the subsidy belonged to categories "D"
and
"E".
on
those
ted
to
income
68%
of
Likewise, 76% of
categories.
increase
Supposedly,
financed concentrated
the subsidy was implemen-
the accessibility level of
households to
the
the amount
buyers
"appropriate" housing
benefited
from
the
the lower-middle
units.
subsidy
However,
had
to prove
incomes over the median of the target group.
Besides, those
units
got
the
could
have benefited more households had the units not been
channelled
into
the
most
the
households, benefited
expensive.
later on,
they would
of
an
buying
the
market,
In addition,
have
expensive
we
but
could also argue
from the
subsidy
to
the financial
unit.
bear
government
Therefore
we
early years
that
but
compromise
could
question
119
CHART No
20
GRANTED SUBSIDIES CHANNELED THROUGH THE SNAP,
MORTGAGE BANKS AND FINANCING SOCIETIES
(From September 1981 to August 1983)
HOUSING
CATEGORY
HOUSING UNITS
No
%
AMOUNT FINANCED
(000's Bs)
No
A
1,507
3
138,869.8
1
B
3,932
9
575,621.1
6
C
8,568
20
1,543,843.3
17
D
17,689
41
3,776,255.8
41
E
11,826
27
3,230,903.6
35
TOTAL
43,522
100
9,265,499.6
100
Source: FONDUR. Taken from "Inmobiliaria", No 83-45.
Vivienda: La gestion del Gobierno.
120
whether
ting
we
should
better,
look
the
for
an
alternative
government
way
of
distribu-
in
a
way
resources,
more
harmonious with the goals.
The Reasons Behind the Supply Response
We will question now why the units produced concentrated
There are many complemen-
on the most expensive categories.
tary
arguments
sons
can
be
to explain
found
others respond to
sector,
and
to
in
that behavior.
the
features of
the
Some of
the
rea-
Program 4,
but
traditional practices of the formal supply
the
political
the
features
and
socio-economic
conditions
of the country.
Related
to
of
the
program,
we
could argue
the potential benefits from building the alternative categories were not differentiated enough as
tion toward
cing was
the
available
tax
exemptions
can
argue
seemed
decision.
units
ments.
for
given
to be
In
cost units.
all
decreased
that
not
tential
lower
so
the
would
Here
compensate
in
the
for higher benefits
for
it is opportune
of
the
supply
critical
other words,
100% construction finan-
kinds
for
to orient the produc-
units
more
even
expensive
though
units,
we
response,
that
component
determining
the
investment
developers
from selling
the
and
the po-
the more expensive
potential
to recall
expected
higher
tax
pay-
that the regulations
121
to control tax payments are very loose in Venezuela.
tors
are
find
many
broad
in
loopholes
opportunities
it
and
evade
to
it
or
is
well
diminish
Inves-
known
the
there
payments.
In addition, tax payments are money due in the future, while
construction
of
long
cheaper
lopers
the
present
for
extends over the project
to the avai-
Even though the pergraduated higher,
of the
units
the deve-
"A" and
of
of
formal
financing
in
Venezuela
those households who can not prove
the
Venezuelan
5,000 Bs/month fall
of
the
taining
credit
"B"
would
be
more
for
this argument
households
with
within that category.
policy protection,
of
"B"
This behavior is comprehensible if we re-
by
many
families
difficult.
is that by
developers
willing
An
incomes
The
below
Thus, regardless
believed
to buy units
illustrative
the end of
is
their in-
comes, don't have stable jobs, or formal documentation.
majority
to
benefits from obtai-
the
marketability
availability
restricted
the
the units produced, we can argue that
perceived
the
in
credit was
mortgage
term
as being riskier.
call
Moreover,
long term mortgage credit.
lability of
the
needed
complementary consideration relates
A
centage
money
construction financing
higher
itself.
is
the project.
carry out
ning
financing
1981,
side
the
ob-
"A" and
comment
the financing
institutions hadn't met the requirements of portfolio compo-
The Libraries
Massachusetts Institute of Technology
Cambridge, Massachusetts 02139
Institute Archives and Special Collections
Room 14N-118
(617) 253-5688
There is no text material missing here.
Pages have been incorrectly numbered.
( p. 122 )
123
sition,
however,
to
vernment
no
deposits
kept
be
in
had
been
BCV
the
as
required
by
established
the
go-
in
the
regulation
We can also argue that the
in July 1981, covered all categories, also contri-
plemented
buted
sive
the concentration of production on the more expen-
to
With
units.
afford
tions
a
the
secure
sales
created
a
the
subsidy,
expensive
more
of
subsidy
fact the subsidy program, im-
unit,
were
gap
in
so
the
raised.
the
buyers
potential
developers'
We also
real
demand
can
for
could
expectaargue
the
the
cheaper
units because if we consider every household could theoretically buy a more expensive unit,
to
"A" and
units
quirements
terest
"B"
would face
for formal
rates,
financing.
established
gram, undoubtedly
also
those who now would aspire
of
the re-
The liberation of
the in-
the restrictions
after
one month
contributed
to
subsidy pro-
the
the
concentration
of
the production on the most expensive units because the cost
of
construction
21.5%
in
1981.
financing
increased
That fact would
lopers from building
from 16%
in
1979
to
have discouraged many deve-
the cheaper units.
An additional con-
sideration related to the subsidy is that even though in the
most
rates
favorable
for
10
case,
years,
the
after
buyer will
that,
pay
full
the return of the subsidy would be due.
well
market
below
market
payments
plus
Venezuela was going
El Factor Financiamiento en la
1.
A.
Cilento Sardi.
duccion de la Mercancia Vivienda en Venezuela, p. 18.
Pro-
124
and
bility
mainly the
the high economic instait
unemployment,
growing
buyers,
many
recession and given
serious
a
into
income
lower
was
expect
to
likely
would prefer to
ones,
defer their investments.
could have contri-
Another feature of the program which
the
to
buted
of
characteristics
The additional fea-
restrictions regarding apartment areas.
adding
bedroom
small
a
the
proportionately
get
his
could argue
We
rooms, not the areas.
to
an
unit to qualify for a
gram protection.
area would
that in many cases by
without
apartment
common
other
a
areas,
could
the pro-
increasing the
cost of
revenue
Similarly, it could happen that before planned;
the number of bed-
larger units were reduced to comply with
yet
developer
be more than compensated by the marginal
from sales.
rooms,
increasing
higher price within
Thus, the marginal
bed-
of
number
the
produced was
units
the
qualify
to
ture
lack of
the
the supply was
still
sold at
same
the
Chart
price.
No.
21
and
Figure 2 illustrate the evaluation of the distribution of units according to areas.
From them we observe how the units
increasingly concentrated on middle sizes which we can argue
illustrate
size.
23,
That
preceding argument
argument
is
also
3,
we
categories
observe
"A"
that
and
"B"
the optimization of
about
complemented with
and 24, as well as Figures 3,
Figure
for
the
4, and 5.
production
decreased,
of
Charts
22,
In Chart 22 and
small
while
sized
the
units
share
of
125
CHART No 21
DISTRIBUTION OF UNITS ACCORDING TO AREA
(Period 1979-1983)
AREA
sq.meters
1979
No
1981
No
%
1980
No
%
%
1983
1982
No
No
%
%
50
657
3
492
1
1,085
3
377
0
110
1
51-70
853
4
952
3
627
2
1,072
3
586
3
61-70
2,686
10
3,435
11
2,507
7
4,432
12
976
5
Sub Total
4,196
17
4,879
15
4,219
13
5,881
15
1,672
9
71-80
4,222
16
6,064
20
6,902
21
6,714
18
4,077
21
81-90
4,132
16
6,268
21
8,149
24
11,316
30
5,850
30
91-100
2,693
11
4,783
16
5,387
16
6,844
18
3,161
16
101-150
7,746
30
6,953
23
7,285
22
6,147
16
3,821
20
Sub Total 18,793
73
24,069
80
27,714
83
31,021
82
16,909
87
151-200
1,811
7
980
3
1,129
3
684
2
508
3
200
815
3
591
2
379
1
599
1
253
1
2,626
10
1,571
5
1,508
4
1,283
3
761
4
25,615
100
30,519
100
33,441
100
38,185
100
19,342
100
ISub Total
TOTAL
Source:
FUNDACNSTPUCCION.
Total Nacional.
luadro 4. Apartamentos ofrecidos por
Area y Precio de Venta.
*
Statistics account until September.
FIGURE No 2
DISTRIBUTION OF UNITS ACCORDING TO AREA
100
.. .. .. .. .. .. .........
...........
.. .. .. .. .... ......
...........
.. .... .... ..
.....
.. . ... ......
...
. ..
...
.........
...........
.. .. .. ... ...... .........
90
IN
80
70
60
50
LARGE UNITS,
(up to 70 sq n)
..... .... ...
40
30
MEDIUM UNITS
---- (71-150 sq a)
SMALL UNITS
(over 150 sq a)
.............
.............
............
.............
20
.............
............
.............
............
.............
............
.............
............
.............
.............
............
.............
10
..........
YEAR
1979
1980
1981
1982
1983
126
CHART No 22
EVOLUTION OF THE SUPPLY OF SMALL SIZE UNITS
(Area 50 to 70 sq m)
Period 1979-1983
PERIOD
PRICES
1979
(Bs)
No
1980
%
1981
%
No
1982
%
No
No
1983*
%
No
1979-1983
%
No
100
255
6
98
2
64
1
66
1
16
1
499
2
101-150
1,617
39
1,842
38
570
14
863
15
112
7
5,004
24
151-200
1,113
26
1,095
22
1,530
36
2,383
41
824
49
6,945
33
201-250
866
21
646
13
774
19
1,155
20
139
8
3,582
17
251-350
277
7
976
20
852
20
722
12
452
27
3,279
16
350
66
1
222
5
429
10
692
11
129
8
1,538
8
4,196
100
4,879
100
4,219
100
5,881
100
1,672
100
20,847
100
TOTAL
SMALL SIZE
Source:
FUNDACONSTRUCCION. Total Nacional.
Cuadro No 4.
Apartamentos ofrecidos en el
periodo clasificados por Area y Precio de Venta.
*
%
Statistics account until September 1983.
Within the housing program:
It
is
very unlikely a four bedroom unitcould fit
in
less
than 70 sq. m. Thus we assume that the category 251-350 would not qualify.Hence only
the four first
category of prices would qualify for the benefits of the housing pro-
gram. We assume a 2 bedroom and a 3 bedroom unit could be built in less than 70 sq. m.
FIGURE N 3
EVOLUTIONOF THE SUPPLYOF SMALLUNITS
(Area
70 sq
m)
50 % F
KEY, PRICE, TYPE
(000's Bs)
40 %
-W
100
A
101-150
B
151-200
.-
C
201-250
D
251-350
E
)350
0
30 %
,,
20 %
............
10
%
YEARS
(others)
1979
1980
1981
1982
1983
127
CHART No 23
EVOLUTION OF THE SUPPLY OF MEDIUM SIZE UNITS
(Area 71 to 150 sq m)
Period 1979-1983
PERIOD
1979-1983
1*
1979
No
%
PRICES
(Bs)
1983
%
%
No
No
%
1
100
587
3
872
3
96
0
24
0
0
0
101-150
4,085
22
3,626
15
1,720
6
156
0
45
0
9,632
8
15
1,579
151-200
2,763
15
4,470
19
4,862
18
3,458
11
2,157
13
17,710
201-250
4,226
22
7,458
31
10,481
39
13,594
44
6,587
39
42,346
36
251-350
3,809
20
4,009
17
6,210
23
9,579
31
5,877
35
29,484
25
350 2
3,323
18
3,603
15
3,981
14
4,210
14
2,243
13
17,360
15
18,793
100
24,069
100
27,714
100
31,021
100
16,909
100
118,506
100
TOTAL
MIDIUM SIZE
Source:
FUNDACONSTRUCCION. Total Nacional. Cuadro No 4. Apartamentos ofrecidos en el periodo
clasificados por Area y Precio de Venta.
1* Statistics
2*
1982
No
1981
No
%
1980
No
%
account until September 1983.
Units of this price did not qualify for the housing program benefits.
FIGURE No 4
EVOLUTION OF SUPPLY OF MEDIUM SIZE UNITS
(Area 71 to
150 sq m)
50 % KEY,PRIcE, TYPE
(000's Bs)
40
%
(
100
A
101-150
B
151-200
C
201-250
D
251-350
E
30 %
2
0
)30 0
(others)
0%
%
YEARS
1981*19..198
1979
1980
1981
1982
1983
128
CHART No
24
EVOLUTION OF THE SUPPLY OF LARGE UNITS
(Area 150 sq. m.)
Period 1979-1983
PRICES
(Bs)
1979
No
%
1980
No
%
1981
No
%
1982
No
%
PERIOD
1979-1983
No
%
1983
No
%
0
0
0
0
0
0
2
0
0
0
0
0
0
1
0
7
0
9
0
30
2
4
0
2
0
46
1
47
4
2
0
51
4
0
0
175
2
11
138
9
244
16
133
10
58
8
867
11
2,254
86
1,371
87
1,232
82
1,095
85
700
92
6,652
86
TOTAL
LARGE UNITS 2,625
100
1,571
100
1,508
100
1,283
100
761
100
7,749
100
100
2
0
0
101-150
0
0
6
151-200
1
0
201-250
75
3
251-350
294
350
Source:
0
Cuadro No 4.
Total Nacional.
FUNDACONSTRUCCION.
Apartamentos
ofrecidos en el
periodo clasificados por Area y Precio de Venta.
*
Statistics account until September 1983.
Within the housing program:
It is very unlikely a four bedroom unit could fit in less
than 70 sq. m. Thus we assume that the category 251-350 would not qulify. Thus only
the four first
gram.
category of prices would qualify for the benefits of the housing pro-
We assume a 2 bedroom and a 3 bedroom unit could be built in
less than 70 sq.
FIGURE No 5
EVOLUTION OF THE SUPPLY OF LARGE UNITS
L
(Area
350 sq
m)
90 % t-
80 %
KEY, PRICE, TYPE
(000s Bs)
201-250
D
251-350
E
20 %
0
(others)
10 %
1979
YEARS YEARS
1979
1980
1980
1981
1981
1982
1982
m.
129
"C"
units
Figure
units,
grew
4,
during
which
we
production
dramatically and
and
serve
how
which
is
But
we
to
have
"E".
see
"B",
and
even
same
number
of
the
23
middle
and
size
decreased
"B"
is on
the concentration
24 and Figure 5, we obare
due
though units
Chart
"A" and
"C"
understandable
that
the
of units
In
of
evolution
Lastly, in Chart
"A",
partly
years.
is very obvious
it
units
five
the
depicts
observe
units "D"
the
to
"C"
construction
and
bedrooms,
nonexistent,
almost
"D" were
large
costs.
required
units
"C"
were
the
lower
almost not produced at all.
The
second group of arguments
to explain why
cost units were not produced in the amounts expected relates
to
traditional
Venezuela
quired
It
is
flate
by
the
from
a
practices
developers
of
of the
nancing was
of
land
but
inflating
the
land is
to
as
Program 4 re-
equity
investment.
in Venezuela
facilitate and get
financing
to be
The
units in
but
produced.
also
to
a
to
in-
higher
increase
In the program, fi-
100% of construction costs anyway, for all cate-
credible
of
land
of housing
sector.
the
construction
the price of the units
value
supply
formal private
the
price
percentage
more
the
common and well known practice
the
gories,
in
the
the
declared
price
also a component of
banks have
the
construction
projected units.
claim mortgage
of
This
is
land
helps
to
make
costs
and
thus
the
so,
given
the unit's price.
specialized
the price
One
could
personnel to evaluate
130
the feasibility of credit proposals, but
to
depends
credit
also
on
other
in Venezuela access
like
variables
kinship
and
connections, therefore projects with inflated land prices do
pass through.
Here it
is also convenient
financiers and
the
to mention the links between
The regulations of the SNAP and
developers.
the participation of bank
general law of banks prohibit
in construction projects for
presidents, directors, or staff
which
the
credit 1 .
financing
However,
institution
is
evaluating or granting a
there are many covert cases
of bank per-
sonnel involved in real estate investments 2
Similarly, developers
truction.
Raising
raise
the declared costs of cons-
construction
costs
implies
developers
would be well protected against any major contingency in the
construction
process
that
could
require
additional
equity,
but also they could have capital available for other investments.
Even
declarations
Raising
though
by
the
construction
these
arguments
developers
costs
at
1.
Normas de Operacion del
Prestamo Titulo III, p. 11.
Institutos de Credito.
can
not
themselves
the
end
be documented,
confirmed
will
also
that.
raise
the
Sistema Nacional de Ahorro y
Ley General de Bancos y Otros
For an illustration, see the case of
2.
Ciudadela Faria at the end of this chapter.
the
Project,
131
level
of
profits even before sales
additional
sense
capital will
are finished.
reduce the level
Moreover,
of risks.
In
this
it is easier to inflate construction costs when the
more
more expensive because there are
units are
items where
costs can be covered and additional ammenities in some cases
imported
prices
where
Consequently
higher
cost
can
not
be
checked
units
have
also
higher
easily.
potential
for increasing costs and thus profits.
An
additional
building
codes.
consideration
In
order
to
relates
to
the
Venezuelan
obtain construction
and
occu-
pancy permits, interminable red tape must be carried.
It
is
a lengthy and complicated process where payment of bribes is
involved.
Those
total.
is
It
process,
bribes
must be
paid even if
compliance is
just a non-recorded extra cost built
otherwise
permits
don't
get
through.
into the
Moreover,
standards are not graded according to the price of the units
produced.
In
the
cost.
unit's
build
units
many cases
"A"
Consequently,
it
they
are
For instance,
are
is
the
same
more
as
too
high
in
relation
infrastructure
those
profitable
build the most expensive units given
to built
for
the
costs
units
to
to
"E".
developers
to
the level of investment
required.
The
ceived
third
group
of
marketability
investment
decisions
arguments
risks.
in
are
related
to
that
We
can
argue
Venezuela
are
not
based
the
on
per-
housing
market
132
studies.
First of all, there
mation
carry
tion
to
regarding
For
holds.
signated
or
as
them
out
many
instance,
until
1981
highest
those
the
cui 70,
of
of aggregation
recent
enough
is not
so as
in
believed
surveys made by the OCEI given
to the
1980 was a big
nation wide
the
to
The in-
housing
old.
Second-
failure.
market
study,
Thirdly, there
is
security
of
a
for
market
CA
Mere-
the geDeve-
neralized confidence in Venezuela's economic welfare.
lopers
de-
5,000 Bs
the private housing markets.
is already 14 years
house-
level was
families with monthly incomes of
corresponds
most
the
kinds
infor-
informa-
available
together
that the national census of
ly,
The
lumps
be used for evaluating
formation
depth.
in
income
This level
more.
sufficient base
is not
the
most
expensive units and they based their beliefs on the real estate boom of the late
in
the
able
increases
sons
decisions were
based
units was
credit
economic
facilities
they
For
intuitive
expected
these realevels
and
Therefore,
expectations.
knew the market
smaller,
would be wide enough.
income.
mostly at
carried
the developers
although
sive
population's
and
political
on
They were expecting consider-
1970's.
for the more expenas
individuals
it
Moreover, they did not believe in the
promulgated
by
the
Decree
214.
Regula-
tions are rarely enforced in Venezuela and in this case they
involve
the control
doubtedly
held political
tary argument
"A"
and
of the
"B"
financing institutions which un-
and
economic
power.
A
complemen-
is the potential competition between the units
and
those built
by
INAVI.
Even
though both
133
would
competitive
be
in
quality,
the
units
INAVI
could
be
obtained more cheaply and without using the formal financing
Regardless
markets.
is
low-middle
low,
of
INAVI's
level
of
households
income
production, which
expectations
have
for
getting a house directly subsidized by the government.
pers why categories
interested in
not
tion of
housing units
process
in
many
complications
the
money.
the
and
extra
of
payment
expenses
until
bribes
is
at
the price
without the
units
the
bureaucratic
government
owned the
procedures.
Two
are
of
impossible to
developers
Some of them stated that those prices
an
There are
the
it was almost
the regulations;
units
possible when
all
There,
expensive, and complicated
They expressed that given the conditions
system and
build
long,
the construc-
of the common process of building.
finally built.
the
building them, because
is a
Venezuela.
accepted part
had not been offerred in the
"A" and "B"
The common answer was that the developers
amounts expected.
were
develo-
I asked five
interview in February 1984,
the
In
losing
could only be
land and facilitated
of
them
added
that
the
people for whom those units were targeted, prefer to live in
"unsanitary
housing, "
and
that
enough to meet monthly payments."
would be
The
very complicated
reasons
for this
they
were
that
responsible
In addition, they said it
to get formal
being
"not
they
financing
for them.
cannot formally prove
134
their level
lack
the
of income, they don't have stable jobs, and they
necessary
formal
tax
declarations
and required
documents.
The Evolution of the Market
From Charts
the
25
and
26,
comparative evolution
inventory
finished
that
we
tion
financing in
The
monthly average of
monthly average
ginning of
the
1982 which
we
in
1982 when
finished units
of new
could attribute
1983.
it
to
starts,
the
number
shows
a
and
of
reduc-
the total and
increased until 1982,
decreasing
That decrease
The
we observe
restrictions on construc-
starts was
period.
program.
depict
However, even though
levels of 1979 and 1980.
tically
graphs
can attribute to the
1983.
6 and 7,
the units produced, sales,
increased until
tion
subsidy
of
accumulation.
units
and Figures
the
since
the
showed a recovery
implementation
however,
did
not
the
bein
of the
reach
the
Finally, the starts reduced drama-
In general, we can
in private housing investment.
talk about a
reduction
This conclusion is backed up
by the statistics of the Venezuelan Central Bank that stated
an
average
residential
real
annual
reduction of
construction
bolivares1 .
From
for
the
15%
sale
figures,
in
the value
between
of
1979 and
we observe
BCV Anuario de Series Estadisticas 1982.
1.
87.
how
private
1982
in
inventory
Cuatro No. VI-
135
CHART No 25
EVOLUTION OF UNITS PRODUCED
AND SOLD, AND INVENTORY
1979
1980
1981
1982
1983
UNITS FINISHED
25,615
30,519
33,441
38,181
19,342*
UNITS SOLD
17,469
22,904
24,855
28,415
19,620
19,078
25,750
33,465
41,173
41,557*
STOCK
Until September 1983.
Source:- FUNDACONSTRUCCION. Total Nacional. Area Urbana 99.
Cuadro No 4 : Units Finished.
- FUNDACONSTRUCCION.
Cuadro
-
Total- Nacional.
Area Urbana 99.
No 1 : Sales.
FUNDACONSTRUCCION.
Informe
Oferta Actual y a corto plazo
al 50/9/83: Stock.
FIGURE No 6
EVOLUTION OF NEW UNITS, SALES AND STOCK.
NO oF
UNITS
40,000
KEY
m
=a=*
UNITS FINISHED
(..--projected**)
30,000-
UNITS SOLD
20,000
*.
*.*
STOCK
10,000
I
YEARS
*
1979
1980
I
1981
1982
Until September 1983.
Projected taking the average production until September.
I
1983*
136
CHART No 26
MONTHLY AVERAGE OF UNITS FINISHED
NEW STARTS AND NEW SOLD
1983
1979
1980
1981
1982
UNITS FINISHED
2,135
2,543
2,787
3,181
1,612*
NEW STARTS
3,463
3,196
2,488
2,962
1,063
UNITS SOLD
1,456
1,909
2,071
2,368
1,681
* Statistics account until September 1983
Source:
FUNDACONSTRUCCION. Total Nacional. Area Urbana 99.
- Cuadro No 01: Units finished.
- Cuadro No 04: Units Sold.
- Informe Oferta Actual y a corto plazo:
New Starts.
FIGURE No 7
MONTHLY AVERAGE OF UNITS FINISHED,
NEW STARTS AND UNITS SOLD
AVERAGE
MONTHLY
UNITS
4,0001
KEY
3,000
I-
2,000
h
UNITS FINISHED
NEW STARTS
t-
?k
UNITS SOLD
1,000
YEARS
|
I|
|
1979
1980
1981
1982
1983
137
building
was
also
were
since
increasing
smaller.
units.
up
At
the
These
beginning, because although sales
the
until
end of
1982,
1983,
did not include
the
the
rate
of
was
increase
stock had reached 41,677
13,677 already finished units
which did not have the condominium document.
Knowing
1981,
the
we
can
number
program was
subsidy
the
argue
the
of units
subsidy
sold or
did
in
implemented
not
the average
affect
July
notoriously
price of
the units
sold.
Figure 8 shows the fluctuations in the level of sales
during
the
the
fluctuations
most
in
period.
ned by
in the
the
Similarly,
subsidy
those
so
we
in
is
Units
could
subsidy.
the
did
economy
to
to
to
variations
change
But
the
belonging
perfectly argue
Regardless of the
the
in
against
price
highest
the
could
of
the
units
sold remained
then question whether with
at
the
to
certain,
of
the
category
of
unit
"E"
the
those households
high
or without
units sold would have had similar prices.
the
is
who purchased the subsidized units, we note in Chart
prices
to
similar
efficiency
income level of
9
prices.
variations
conclusion
the
Figure
sales
price are
average
to
The
is explai-
country.
average
one
subsidy.
the sharp decreases
of the
of
the
to attribute
1983, which
attribute
subsidy.
remained
1981
corresponds
evolution
hard
not
very difficult
after
the
program because
before
be
three months of
monthly
it
subsidy
sold.
trough
last
the crisis
depicts
the
observed
identifiable
sales
It will
28,
the
levels.
We
subsidy the
CHART No
27
MULTIFAMILY UNITS, MONTHLY EVOLUTION OF SALES AND AVERAGE SALES PRICE
No APTS.
AVERAGE*
SALES PRICE
NO APTS.
SAAV
PRICE
NO APTS.
AVERAGE'
SALES PRICE
NO APTS.
AVERAGE*
SALES PRICE
NO APTS.
AVERAGE*
'SALES PRICE
Sourcp:
SEPT.
OCT.
NOV.
DEC.
TOTAL
1,574
1,555
1,475
1,700
1,710
17,469
276.81
274.04
280.31
296.61
310.07
292.23
283.41
2,158
1,375
2,342
2,820
2,309
1,903
2,082
22,904
277.44
269.75
283.13
256.70
245.92
288.91
302.87
294.16
270.51
1,477
2,307
2,341
2,097
1,812
1,572
1,553
2,081
2,437
24,855
251.07
281.39
300.19
285.30
289.47
284.24
316.07
316.07
305.19
300.23
281.65
1,851
3,143
1,439
2,681
2,967
2,158
2,529
2,746
2,303
2,690
2,620
28,415
291.43
288.30
276.19
292.05
287.43
288.17
289.98
292.97
302.79
294.54
307.56
291.81
403
19,620
285.81
318.24
JUNE
JULY
1,708
1,650
1,042
269.92
284.44
300.24
2,242
1,145
1,452
269.64
267.28
291.41
1,940
2,599
2,639
248.87
253.76
1,288
278.74
JAN.
FEB.
MARCH
APRIL
MAY
838
1,235
1,837
1,145
255.69
261.60
273.99
1,430
1,646
205.78
AUGUST
1,766
1,130
2,540
1,589
2,206
2,528
2,141
2,188
2,586
264
279
298.51
333.49
312.17
320.35
320.40
320.30
317.26
328.02
338.43
263.05
317.55
FUNDACONSTRUCCION. Total Nacional. Area Urbana 99. Viviendas multifamiliarps: Evolucion mensual
de las ventas de apartamentos. Cuadro No 1.
Average sales price in thousands of Bolivares.
00
139
FIGURE No 8
NO OF
UNT
MULTIFAMILY UNITS MONTHLY EVOLUTION OF SALES
4,000-
3,000
2,000
1 ,000
lisil
111
1979
YEARS
I
1
1111111111111111111111111
1980
1981
1illi
1982
lill''11
1983
FIGURE No 9
Be
(000's)
MONTHLI EVOLUTION OF AVERAGE SALES PRICE
350
300
250
-
2001L
YEARS
1979
1980
1981
1982
1983
140
Chart 28
Average Sale Price of Units Sold
Price (in
000's Bs)
1979
1980
1981
1982
1983
Current Bs
279.18
265.13
275.44
289.29
311.16
Real Bs
144.35
112.77
100.97
96.78
97.82
Chart No.
29 confirms
concentrated
increasingly
of units
"D" and "E"
the argument,
on
units
the apartments sold
"D"
and
"E".
The
sold during the period was 53%.
the concentration of production on units
"D" and "E"
sold units also concentrated on those categories.
29
shows
how by
belonged to
of
the
those
1983,
62%
of
the
the un-
Chart No.
the unsold units
on
the
market after
1981,
the subsidy program, but also the year of
of
Due to
two categories, and curiously enough,
units unsold had been
year of
ration
September
share
interest
rates.
By September
68%
the
the libe-
1983,
the ave-
rage price of the unsold units was 297,130 Bs in current bolivares,
or
93,410 in real Bs.
In any case,
it fell within
category "E".
The Situation of the Housing Market in
By
55,219
1983
the end of September 1983,
Venezuela had accumulated
finished
41,677
for sale.
units,
of
those,
or
75%
were
ready
The rest, or 13,542 units, were already finished,
but the developers had been unwilling or unable to formalize
the
condominium documents
required to market the units.
Of
CHART No29
APARTMENTS SOLD CLASSIFIED ACCORDING TO SALES PRICE
CATEGORY
SALES PRICE
(000's Bs)
1979
Amount
%
1980
Amount
1981
Amount
%
A
Until
100
256
1
1,847
8
B
101 to
150
3,373
19
3,755
17
2,135
C
151
to
200
2,758
16
4,124
18
5,092
D
201
to
250
4,173
24
5,075
22
E
251 to
350
3,156
18
3,926
3,753
22
17,469
100
OTHER
More than
1982
Amount
%
1983*
Amount
%
%
TOTAL
Amount
%
3
36
0
118
1
2,978
3
7
841
3
404
2
10,506
9
21
5,255
19
2,344
13
19,573
18
7,452
30
11,656
41
6,128
33
34,484
31
17
5,576
23
6,488
23
5,727
31
24,873
22
4,177
18
3,848
16
4,123
14
3,691
20
19,592
17
22,904
100
24,855
100
28,399
100
18,410
100
112,006
721
350
TOTAL
100
* Statistics account until September 1983
H
fp
CHART No 30
MULTIFAMILY HOUSING. APARTMENTS UNSOLD CLASSIFIED BY PRICE AND TIME ON THE MARKET
CATEGORY
SALES PRICE
(000's Bs)
APRIL-SEPTEMBER
1983
Amount
%
JANUARY-MARCH
1983
Amount
%
1982
Amount
BEFORE 1981
1981
Amount %
%
Amount
TOTAL
%
A
Until
100
15
0
0
0
30
0
22
0
365
7
433
1
B
101
to
150
135
1
8
0
315
4
556
8
681
12
1,927
5
C
151 to
200
1,945
17
387
13
1,837
13
897
12
983
17
5,917
14
D
201
to
250
4,039
38
852
28
5,380
37
2,625
35
1,231
21
13,783
33
E
251
to
350
3,164
29
1,211
40
4,145
28
1,992
30
1,466
25
11,984
29
1,615
15
585
18
1,081
15
1,090
18
7,513
OTHER
More than
TOTAL
Source:
19
1
350
10,784
100
3,068
2,512
1
100
1
14,641
100
1
7,671
100
18
1
7,671
100
5,994
1
100
FUNDACONSTRUCCION. Total Nacional. Area Urbana 99. Cuadro No 13. Cantidad de Apartamentos por
vender clasificados por precio de venta segun afno del documento de condominio.
I-
143
the
unsold
units
14,641
13,852
units,
35%
or
or 33%
of
the
been
had
stock had
1983,
finished in
the market
been on
since
1982, 7,671 units or 18% had been finished since 1981.
These
statistics illustrate that even though the heavy accu-
mulation started
of
acteristic
14%
of
the
after
1981,
the whole
stock
was
recorded
ses
the developers due
loans.
32,063
In
units were
in
21,729 units whose
cial problems.
marketed,
109,111
be
on
5,944 units
the
market
or
before
to interest payments on construc-
addition
to
the
55,214
construction
in less than 2 years.
and
to
char-
inventory of units was generating financial los-
The
tion
Even more;
period.
1981.
to
inventory built up was a
and
finished
units,
expected to be
ready
The situation worsens when we add
construction was paralyzed due
the
to finan-
In summary, assuming all units were finished
almost
5 years
units, assuming
would
the average
be
needed
to
sell
the
annual sale rate showed
during the period, or 22,613 units per year.
Some
Illustrative Cases
Given
the
firms'
and
projects'
individual
characteris-
tics, many are the situations and the reactions to the problem.
Based
side
in
pace
are
units;
on
three
the
categories-
selling
and
paralyzed.
interviews we
those
The
the
those
units-
who have
project
could classify the supply
who
those
the
although
who
are
not
construction of
Ciudadela
Faria
in
at
a
slower
selling
the
the
projects
Maracaibo
City
144
illustrates
case
the
a
other
in
the
sales
projects
developer
tained
well
or
the
institutions
location,
and
the
case.
investments.
as
the
have
that
in
a
good
delays
During
main
in
the
reasons
the
the
characteristics
firm with
represents
for
this
period
someone
to
of
the
the
make
sure
and
the
appropriate
project.
and
hesitated
the
sus-
He
ex-
in the market has provi-
reputation
crisis
the
purchasers
firm,
of
earnings
interview,
given
the
circumstances, prestige has been a winning note.
in
the
developer who can assimilate
the 40 years of experience
the
It
compensating
confidence
financing
ded
by
mentioned
sales,
pressed
first
long experienced big
decrease
with
the
of
very
seller
prior
could
to
actual
The buyers
buying from
respond
to
their
In addition, this pro-
claims long after the sale was made.
the
long term financing secured before the project
was started.
It should be mentioned that given the scale of
ject had
the
project
and
in
order
to
obtain
the
interim
many regional mortgage banks had to be involved.
financing,
This gives
us an idea of the developer's accessibility to the source of
financing
project
for
site
the
short
and
long
term.
has good accessibility and it
addition,
is
located in an
area considered good for middle class residential use.
characteristic,
the
developer
said,
has
the
In
been
This
critical
to
gain buyers in the current circumstances.
Complementary
to
the
construction
of
units,
this
deve-
lopment firm has as subsidiaries other companies involved in
145
supply
the
of
stores, and
ment
of
bricks.
less
firm
the
2
last
scarcity
escalations
to
due
to
and
raised
8-10%
but
the union,
from
and
construction
were
Wages
claims
cost
delay
that
inconveniences
years
hardware
the develop-
contingency expenses.
increase
cement,
This characteristic makes
vulnerable
materials,
like
materials
construction
in
the
stated the project did not experience any serious
developer
in
the
the cash flow of the project
Therefore,
construction stage.
costs
increases in
or serious
interruptions, delays,
did not suffer from serious alterations.
Ciudadela
is
Faria
second phase
the
expect,
would
confidence
fact
they
that
three major
project
good
in
cities
of
5,000
the
for
10%
of
the
of
which
The construction
to what one
short
is
conditions
selling
units
contrary
units),
planned
market
are
run.
up
by
the
sales
in
the
backed
total
Their
of Zulia state.
The construction of the
1980 and
started
in
started
(2,500
being
is
project
in the first stage.
2,487 units were built
of
a
sales
in
1981.
Thus,
since the beginning, the sales were benefiting from the subThe prices of the apartments fell within ca-
sidy program.
tegories
"D"
pressed
that
could
of the
he
not
and
to
only be
"E"
of
the
build units
carried out
cost of
in
214.
decree
"A"
and
"B"
developer ex-
is a
locations where
sales.
He
added
the
utopia and
the
land on the prices were very low.
said the government is backing up
securing
The
incidence
Moreover,
construction but it is
important
thing
was
to
146
build
units
below
the
350,000
Bs
mark,
or
in
other words,
falling within the benefits of
the program, but in
the high-
er
assembled
stages
categories.
the
in
firm.
The
The
1973.
land
first
Until
was
purchase
1980,
when
in
took place
construction
three
in
by
the last
1959,
started,
the
land
was held empty regardless of the good location (Northwest of
the
city,
next
represents a
ket
as
to
case of
condition.
collateral
nections
the
University Campus).
Ciudadela
Faria
financial strength in a difficult mar-
They have
enough capital
and assets
to use
for their borrowings, and they have good con-
with
the
financial
sector.
In addition,
they can
compensate for delays in sales with earnings from other projects
and
they
construction
two
most
and
of
have
materials.
critical
financing
degree
don't
to
In
sum,
components
materials.
worry
of
to
they
bottlenecks with
have
control
residential
this
With
flexibility
about
adapt
the
construction-
advantage
to
of
they
changing
have
a
market
conditions.
In
selling
the
second
the
units.
to the problem.
group
are
those
subtle
is going
not
way
dropping
the
prices.
in the downpayment
of
is
done
in
to take and which they
A minority has started in
prices are made
negotiation
are
The majority are waiting for the action the
expect are going to be favorable.
very
who
I could identify two opposite responses
recently elected government
a
developers
private
(up to
The
reductions
100%).
between
in
This kind
developers
and
147
In
buyers.
tion,
they
One
of
do
to,
projects
experienced development
a
project
units
in
La
called
the
they
can
nor
is
are
out
first
having
they,
carried
the
lower
by
with
section of
28
losses
prices.
big
another
and
They built
and
buildings
Maracaibo, on
1,049
a piece
of
Certainly, the
barrio.
land which used to be occupied by a
situa-
big
firm in Maracaibo City.
Florida,
northwest
the
illustrate
expressed
plan
not
the
that
two cases
developers
the
but
the
area is not identified as appropriate for middle class residents,
and
factor,
we
could
given
the
reduction
Financing,
for
Faria,
secured
was
of
sources
quired
by
the
and
half
"D").
of
1980,
units
asked
troubles with
answer
was
past
two
lems
with
needs,
long
1974
run,
first
at
price
These
the
405
of
years,
only
but
materials
The
in
Bs
labor
had
because
1981,
by
is
the
had
in
to
category
330,000
in
Bs
five
project
had
labor.
The
around
they hadn't
ac-
sold at
11% yearly
whether
risen
they
was
4114 addi-
price,
apartments
case,
Between 1979
of materials and
he expressed
this
according
1978.
(top
sales.
Ciudadela
land
"cheap"
increases average
developers
in
In
1980 and
the
determining
apartments were
250,000
cost escalations
that
as
too.
and was
a
level of
construction.
Between
sold
been
the general
multiple
in
"D").
the
"E").
I
to
were
the
were
Lately,
years.
in
has
Construction started
(category
(category
prior
this
and
short
company
developer.
tional
the
financing
the
215,000
conclude
10%
in
the
had any prob-
stock
80%
of
the
and in addition, they own supplies of bricks, cement,
148
and
ceramic
fits
of
tiles.
construction
beginning,
it.
In
the
late
this project, even
financing
stages
of
did
not
occur
the
projects
since
at- the
benefited
from
It was precisely in those last stages where the increa-
ses
of
prices
took
interest rates.
place,
attributed
When asked about
In
the market, he said.
were
cause
more
to
get
long
difficult.
term
He
besides,
we
Sales were
ject
thought
successful
(1979-1981),
After
1981
the
sales
they
he
for
confident
would rise with inflation.
the
"appreciation"
stated
"D" and
"E"
the
cheaper
incomes
ones was
of the
people
"Housing units used to get sold,
susbidy
in
the
would
first
help,"
he
three years
sold an average of
dropped
in
to build within the decree be-
financing
was
increases
We did an
addition,
the only feasible units
to
market studies, the deve-
loper expressed there weren't any.
of
though the bene-
dramatically.
expressed.
of
the pro-
273 units yearly.
Currently, the
firm
is lowering the downpayment, in some cases up to 100%.
The
City.
second case
It
has
is
El
528 units-
Bosque,
which
a project
had also
in La Victoria
pre-sale
contracts
before construction for almost 100% of the units.
truction
started
in
June
1981,
and
ended
The cons-
in November
1982.
This project is a public- private program (desarrollo mixto)
between a private development firm and INAVI,
National Institute for Housing.
The developer is the promo-
ter, seller, and builder of the units.
veloped
land
to
the
developer in
the Venezuelan
INAVI sold the unde-
1979, on
the
condition of
149
building according to INAVI's criteria for price, size, services,
etc.
(categories
"B"
and
"C"
of
decree
214).
The
site is perimetral to the city although it has good accessiFormal sales started in 1982 and after a while they
bility.
were no longer successful.
By January 1984, 144 apartments
remained
in
unsold,
potential
140
buyers
units
argued
have
category
they
"C".
have
Many
lost
their
they have referred to the uncertain economic future.
of
the
job
or
Others
have simply expressed they have found cheaper units they can
better
term
afford.
Many of them have
financing was
gram.
In
around
not
1%
to
cases,
those
of
the
very well
approved
the
the price of
undertake
illustrates
already
retired, even though
buyers
have
the units
the
subsidy
pro-
to
lose
preferred
for bank
charges,
This
compromise.
financial
the
with
contraction
of
long
the
but
case
demand for
apartments due to the unfavorable economic expectations.
Both developers expressed they plan to recover partially
the
losses.
units
a
are
even at higher
asserted
as
They
that a
prices in the
strong
consequence,
strongly convinced
inflationary
prices
will
long
they can
run.
period
sell
Both of
is
expected
rise dramatically.
the
them
and
They ex-
pressed people will need to invest in assets that appreciate
with
inflation,
choice.
zuela
the
and
real
estate
investments
are
a
They referred to the proportion of people
who did
currency
not
take their
devaluation,
capital out
in
primary
in Vene-
dollars before
and who will seek a hedge against
150
inflation.
In
ries
don't
will
secure
addition,
keep pace
they
with
expressed
inflation,
that
the
the demand for housing.
even
if
population
Given
salagrowth
that the produc-
tion of housing units will be further slowed down, they will
be
forced to buy
they were
banks
sell
going
were
and
not
that
units.
Thus,
given
the
the existing
inventory.
to
interest payments, was
meet
the
interested
the
banks'
the
banks
in
taking
business
were
current crisis,
also
The answer to how
units
was
they
selling
waiting.
that
could
not
credit,
not
Furthermore,
banks prefer to hold the loans as
paper assets and not as frozen built capital.
They will not
allow
to
the
developers,
prices of
the
ment,
if
they wanted,
the units fearing a portfolio crisis.
pers expressed
of
even
lower
the
The develo-
that the production and the financing
sector
housing industry have big hopes that the new governelected
economic
in
measures
December
to
solve
1983,
the
will
take
situation.
reasons they thought it made a lot
"favorable"
For
of sense
all
to wait
these
in most
cases because in the end they would be better off.
The
third group of developers,
represented by
those who
have the construction of projects paralyzed, must be separated
into
by those
The first category
projects subject
to legal or fiscal actions due to
mismanagement.
that
were
Venezuela
is represented
two categories.
The
financed
(BTV) and
second category
by
the
Banco
represents the projects
de
Banco Nacional de
los
Trabajadores
Descuento
de
(BND) which
151
stopped
receiving
1982
the Venezuelan government
of
the
valuations due
to the
intervention in
in the two banks.
It has
been estimated that out of the units paralyzed, 11,000 units
or approximately 50% were units financed by the BTV.
The project Ciudad El Sol in Maracaibo is representative
of
the
first
category.
It
is an
example of
administrative
corruption and speculation between developers and the director of the traditionally most solid and big savings and loan
institution in Zulia state.
ted
a
loan
4,000
for
units
450 million Bolivares
without
viability of
The ambitious project was gran-
a
serious
the project.
It
to build a
financial
project of
evaluation
of
the
is well known the director of
the savings and loan was a partner in the project.
This was
an express violation of Venezuelan banking regulations.
project
is
before
though
12
part
compensate
fill
stopped
out
of
for
the gap.
gement and
it
of
because
the
the
the
87
land
lack
it
had
cash
flow
buildings were
was
of
resold
to
available
The savings and
The
problems
even
Even
finished.
other
funds,
companies
to
they could not
loan discovered the mismana-
took legal action against
the company and
its
own director.
In the case of the BND and BTV,
were
granted without
projects
critical
many construction
loans
financial evaluations.
Many
defaulted, as a consequence.
These banks held many
152
paper
assets but were unable
ties.
With
truction
cing
the
to take care of
intervention
of
projects which depended
stopped
receiving
the
the
on
their
government,
these
valuations
banks
and
liabilithe
for
without
consfinan-
working
cash, construction of other projects also stopped.
Other
construction
projects
have
stopped
because
the
developers are no longer interested in finishing them, given
the
market
since
more
ceived
60%
most
financing
capital
sale
of the valuations, developers
of
the capital.
In
to finance other
projects will
for
Construction
was
100%;
less than 1/2 of the construction process accounts for
than
this
conditions.
had already re-
many cases,
projects,
they
thus
to
have used
finish
the
not give them any return because the earnings
belong
to the
their time in another
bank.
They
prefer
to
quit
and
use
investment.
Conclusions
From
by
the
the evaluation
private
sector
of
it
the
is
production
of
clear the concentration of
production is on the most expensive categories,
and on middle sized units.
housing units
That outcome
is
the
"D" and
"E",
in obvious
con-
tradiction with the stated Program 4 goals that pretended to
concentrate
dable
to
the
production on
households
earning
low cost housing units
between
3,000
and
affor-
7,000 Bs per
153
month.
We saw how the weighted average of
ced during
per
month
and
higher
period required incomes
the
before the
than
in
production
5,000
on
Bs
per
units
month
reach 1%
predominance
did
not
being
of
"D" and
obvious
inventory
even
since
increased
"A"
and "B"
expensive
though
the
the
"E"
subsidy
was
to
reach
units
dropped conti-
in
the production
inventory accumulation
beginning
accumulation reached
68%
We also observed the
in the same year.
the most
change,
after
In addition, the concentration of
1983 while the share of units
nuously to
higher than 8,000 Bs
implementation of the subsidy program,
implemented in July 1981.
the
the units produ-
of
the
started
period.
a critical point
That
in 1983
due
to the growing unemployment rate, lack of liquidity, and the
effects
of
high interest
rates.
In 1983
the
level of sales
dropped by 30% compared to the previous years and the number
of
units
unsold
amounted
to
41,677 units.
As
a
result
of
the concentration of production on the most expensive units,
the weighted average of the units financed during the period
belonged to category "E".
benefited
"E".
from
the
Similarly, 68%
subsidy
belonged
Their financing consumed 76%
to
of the units which
categories
"D"
and
of the resources spent on
the subsidy program.
From the observed behavior, we could speculate about the
indication
of
a
private
most expensive units.
sector
"preference"
to
build
the
Unfortunately, we lack empirical evi-
154
dence
gram
to
4
group
demonstrate
and
to
the
supply
analyze
the
effects
the
outcomes
of
causal
what
relationships
characteristics.
We
the
have
outcome
program.
the
with
the
We
would
are also
1974-1978
because statistics are
between
the
lack a
control
been
without
to compare
unable
presidential
Pro
period
simply
However, we can say,
not available.
based on the direct observations and on the interviews, that
"within the scope" of the program units
kind of
the developers preferred to produce given the
units
existing market
ther the
"D" and "E" were the
conditions.
In this case we can argue whe-
policy exacerbated the number of units produced at
those levels given the developers' perceived advantages from
building
those
perceived
units.
This
advantages not
is
not
existed,
to
the
say
low
that
cost
had
those
units
would
have been produced, because it
is
likely to expect some de-
velopers
to
build
would
have
regulated market,
preferred
to engage
units
for
the
in non-residential construction
activity, or to undertake an alternative investment.
theless,
into
we
the
can
array
argue
of
wrongly
conceived
ries
prices were
of
a
bias
choices.
in
the
non-
toward
production
Moreover,
policy
because
not affordable
by
the
the
the
Never-
was
built
choices
higher
program's
were
categotarget
group.
From the interviews and observations, it seems the developers
are
expected,
unable
the
lower
or
unwilling
cost
to
produce
units within
in
the
amounts
the program and
they
155
argued
the
the
most
scarcity
tape,
and
level
tate
of
and
the
per units.
important
cost
of
land,
the
construction
costly and
In summary, the perceived risks
costs,
lengthy
red
compared to the
returns did not seem attractive enough as real es-
talk about
ling
market
felt
that
Given
an
the
conditions
umbrella
of prices.
conditions
building
between
the
most
profitable, regardless of
tial market.
ket
were
uncertainty of the marketability of the chea-
investments.
could
reasons
studies
1979
of
market,
Given the
and
expensive
the
1983,
units
we
prevai-
developers
was
much
more
the real risks of a smaller poten-
However, we said before that, the lack of marand
also contributed
reliable
to
statistics
forecast
the
demand
to make investment decisions based more on
intuition than on informed choices.
The
reasons
for
the
developers preferring
the
more ex-
pensive units are more extensive than those publicly expressed.
First
categories
of
of
all,
100%
units within
financing
was
available
the program.
Second,
for
all
ownership
of the land
facilitated the common practice of inflating the
land prices
in order to increase
units.
expensive
Third,
units
has
cheaper units.
ding
more
inflating
more
the value of
construction
potential
the projected
costs
for success
for
than
building
for the
Fourth, tax payments as a deterrent to buil-
expensively,
it
is
not
such an
effective
measure
given taxes are future, not present, payments and the opportunities
for
tax evasion
are high
in Venezuela.
Fifth, the
156
developers
do
believe
not
financing by the
lower
program
regulations
tions.
Moreover,
competition between
ries
"A"
and "B"
in
the
they were
the
financing
potential
they would produce
in catego-
similar
units
INAVI
but
with better financing conditions for
the
subsidy program also raised expectations
of
pers
a
more
market
secure
institu-
about the
fearful
the units
and the
on
formal
regardless of the
income households,
and controls
to
accessibility
for
would produce,
Sixth,
the buyer.
in the develo-
whatever
units
they
many
vari-
produced within the program.
The
former
considerations
lead
us
to
think
ables will
need to be changed drastically in the program if
production
of
tends
be,
to
be
lower
cost
achieved.
units
What
by
the
private
sector
those necessary changes
pre-
should
their expected effects on the degree of efficiency, and
other
alternatives
or
complementary
approaches
to
produc-
tion, are questions that will be explored in Chapter 5.
157
CHAPTER 5
THE
FEASIBILITY OF
IMPLEMENTING THE
COST-PRICE
EVALUATION
We have seen in Chapter 4 that 66%
within the
its
of the units produced
range of prices of Program 4 concentrated on un-
"D" and "E" and that the average price of the units pro-
duced
during
the
expensive one.
contributed
identified
period
We
fell
within
argued how
to the distributional
the
critical
contributed
building
to
in
We
increasing
"E",
features
effects.
features
the most expensive
category
the policy
likely effects on production.
that
PROGRAM 4:
the
Program
because
the policy was
The
Program 4
per
units
the
marginal
construction
petitive
real
fects of inflation.
not
feasible
for
into
benefits
features
the
the
investments
in
market
Venezuela,
low
of cheacosts
of
and
the
ef-
This chapter will illustrate why it was
developers
to
build the
receiving complementary subsidies.
that
is
not
likely
return from other more com-
without
it
from
In Chapter
the production
acount
the average
estate
features
conceptually unrealistic and static.
taking
input,
their
the cheaper units was so
intended to encourage
without
and
identified those
units and those
argue production of
could have
Accordingly, we
to have no major effect on orienting production.
5, we will
the most
surprising
the
cheaper units
cheaper units
We will
almost
observe
did
not
158
get
produced
building
and
by
the
the
private
less
developers,
restrictive
given
the
conditions and
cost
of
potential
higher benefits from building the more expensive units.
Next,
the
we
will
building
in
operating
that
highlight
process
the
units with
the
cost
carried out
squatter
reduction
by
the
of
informal sector
areas.
settlement
effects
similar characteristics to
We will argue
the cheaper ones
encouraged by the Program 4 get produced by informal developers,
but
avoiding
at a
much
formal
lower price.
mechanisms,
This
happens because,
regulations,
and
expenses,
formal developers are able to drastically cut prices.
larly,
we
similar
will
illustrate
how
characteristics
is
the
also
production
carried
by
of
the
by
in-
Simi-
units
of
government
(INAVI and Vivienda Rural) but their construction is heavily
subsidized.
In
light
of
the
government wants
to
low-cost
by
housing
would have
of
of
controls
competitive real
mented
in
the
formal
changes
conclude
private
the
that
the
cheaper
the
sector,
level
units.
of
In
returns
the
policy would have
concerning
urbanization
the
production of
the
policy
costs
addition,
gotten
more
from
estate investments would have to be
Also, the
if
heavier subsidies to reduce the
order to make investing in
attractive.
tory
on
we
effectively encourage
to include
production
strict
observations,
more
imple-
cheaper units more
to include
standards,
regulabuilding
159
codes,
some
building
and
land provision.
obtain
construction
systems,
and
it
would
have
to
consider
Moreover, the procedural mechanisms to
and
occupancy permits would
have
reviewed to eliminate the excess costs and delays.
we
recommend
the
government explore
to be
Finally,
alternative developers,
other than the big and well developed firms currently operating
in
the market, as a way to achieve higher reduction in
cost and to
increase the adequacy of production to
the con-
sumer needs.
Financial Evaluation of the Target Units within Program 4
As
we
the
units
and
the
minimum
have
the
number
of
feasible
Even
areas
minimum
depicts
the
areas
for
though
being
three
the
Chart
No.
areas
in
could
and
buildings with
variables
apartments
offerred
that
the
program were
those
construction
rooms respectively.
illustrate
the
bedrooms.
sizes
hypothetical
develop
before,
produced within
bedrooms.
average
mentioned
be
the
are
the
31
apartments
of
sales price
2,
3,
they
Chart
3,
4
the
represent
required
2,
the
and
smaller than
market,
areas
qualify
presents
with
marketable.
land
to
by
and
No.
32
three
4 bed-
The Charts mentioned above were used to
hypothetical residential
financial
promoted by the Program 4.
feasibility
buildings which will
of
the
kind
of
units
160
Chart Number 31
Minimum Feasible Areas
(sq. m)
No. of
Room Areas (Sq. m)
Bedrooms
per Unit
2
2 Bedrooms (1 of 12, and 1 of 10)
(A&B)
Kitchen, Dining Room and Living Room
Bathroom and Service
3
3 Bedrooms (1 of 12, 2 of 11)
(C&D)
Kitchen, Dining Room and Living Room
Bathroom and
4
(E)
The
the most
currently
carried
family
units,
formal
luxury
row
70
6
formal
Service
95
10
houses.
High
not
type
of
residential
houses,
and
duplexes
On the
are
taking
they are
Single
rarely built
by
they correspond
contrary, the kind of development
place
rise buildings were
because
construction
out by the formal private sector.
(low-rise buildings),
development
areas.
common
sector, and when they are built,
mentioned above
cases
Service
56
three hypothetical cases assume high rise buildings
which are
to
22
30
4
34
30
4 Bedrooms (2 of 12, 2 of 10)
44
Kitchen, Dining Room and Living Room 41
Bathroom and
the
Total Area
(Sq. m)
in
characterizes the
the
squatter
undertaken to
considered
the most
in-
settlement
develop the
cost
appro-
priate solution for low-cost of residential development, but
because they are the ones used to estimate the price indicators backing
land
and
the
up the cases and because given the scarcity of
urbanization
most feasible solution.
regulations,
they
represent
the
161
CHART NO 32
HYPOTHETICAL RESIDENTIAL BUILDINGS
NO. OF BEDROOMS
PER APARTMENT
APARTMENT AREA
NO OF APARTMENTS
PER FLOOR
NO OF FLOORS
E
C&D
A&B
APARTMENT TYPE
2 Bedrooms
3 Bedrooms
4 Bedrooms
56 sq. m.
70 sq. m.
95 sq. m.
4
4
4
12
12
12
4 x 70 = 280
15% = 42
Area= 380 sq m
4 x 95= 380
*
15% = 57
Area= 437 sq m
3,096 sq m
3,864 sq m
5,244 sq m
BUILT UP AREA
258 sq m
380 sq m
437 sq m
L
A
PARKING AREA
LANDSCAPE AND
960 sq m
382 sq m
960 sq m
960 sq m
460 sq m
460 sq m
N
SET-BACKS
1,600 sq m
1,800 sq m
1,857 sq m
FLOOR AREA
(4 apts x Apt Area
+ i%
oof irulaTOTAL BUILDING
AREA
D
TOTAL LAND
AREA
4 x 56 = 224
15% = 34
Area = 258 sq m
+
+
LAY OUT.............
.......................
.......................
Parking
.xi... .......
Se.t bac ks
.... ... ... i*
162
the
for
estimates
cost
the
indicators represent
These
taken.
the
in
costs
private
average
below
are
They
sector.
cases,
a
implies
dicator
peripheral
accessibility, and
finishings
structures
simple
and
construction
and
to be
land cost in-
represent
costs
with
although
location,
urban
construc-
thought
The
for low-cost housing production.
suitable
good
develop
indicators for construction and land costs were under-
price
tion
to
order
In
plain
Given
materials.
the
indicators available refer to the Caracas Metropolitan Area,
the
cases
should be
representative
are
aware that it
is
that
of
however, we
location,
likely in some cities
terior
of Venezuela, costs are
bution
of
somewhat
lower.
in the
in-
The distri-
costs within a project used to estimate the total
construction
is based on a
costs and soft costs
sample of 6
buildings, carried out by a team from the Central University
in
1981.
This analysis was also done for the Caracas MetroAll cases were developed assuming 1980 as the
politan Area.
starting
year
period.
In
for
order
construction,
to
simplify
and
a
2
year
the analysis,
construction
the estimation
of returns is done before income tax payments.
I.
Hypothetical Case -
Units A and B
(2 Bedroom Units)
Cost Estimates
It
floor,
assumes
with
up to 56 sq.
a
high rise
2 bedrooms
m.
per
of
12
floors,
apartment
and
4
apartments
an apartment
per
area
163
= Bs 2,400,000
Land Cost:
1,600 sq. m at 1,500 Bs/sq. m
Hard Costs:
3,096 sq. m at 1,500 Bs/sq. m 2 = Bs 4,644,000
Bs 4,884,000
Land + Hard Costs =
69% of Total Construction Costs3
Total Construction Cost = 7,078,261
Soft Costs3.
(21% of TCC)
1,486,435
Promotion and Sales (5% of TCC)
353,913
Interest Financing
Insurance and Municipal Taxes
Professional Fees
(1% of TCC)
(1.5% of TCC)
Management and Supervision
(2.5% of TCC)
70,782
106,174
176,957
2,194,261
Bs 7,078,261
Total Cost:
Loan Amount
100% Construction Cost-Land =
Bs 4,678,261
It assumes the cost of a peripheral piece of land but
1.
with good accessibility for the Caracas Metropolitan Area.
El Diario de Caracas, Domingo 16 de Marzo de 1980. "Enfria100% en dos
miento" and "El Costo de los Terrenos aumentd
anos.
Projected cost taken from an average of 1,000 Bs/Sq. m
2.
in 1977 assuming an average inflation of 15% annually.
"Vivienda, Costos,
1977,
ISC, Septiembre-Octubre
Revista
Precio y Ganancias."
Distribution of cost according to "Estructura de Costos
3.
Alberto Aranda Arocha UCV,
en la Produccion de Vivienda."
IDEC, Marzo 1981.
164
Average Total Construction Cost per Sq. m of Apartment:
7,078,261 i
2,688 = 2,633 Bs per Sq. m
Estimation of Returns
Sales
2 years
,
Land Price =
FV of land
3,750,000
(PV) 2,400,000
,
Loan Repayment
4,678, 261
of
land at
1.
FV
is
completed
at
the
25%
end of
second
return
on
year when
construction
before
equity
taxes,
Bs
3,750,000
Total Sales = FV of land + loan repayment
Total Sa-1-s-=--3,57-0,OOO + 4 678,261 = 8,428,261
Sales Price per Apartment = Bs 175,589
Sales
Category C
Price per Sq. m = 2,702 Bs/Sq. m
Assuming
apartments
were
sold
at
the
regulated
100,000 Bs/unit, then sales 4,800,000
FV of Land = 4,800,000 -
4,678,261 = 121,739
which means the developer will have big losses.
price
of
165
2.
FV
of
land
at
15% return
on
after
equity
2
years
=
3,174,000
Total Sales = 3,174,000 + 4,678,261 = 7,852,261
Sales Price
per Apartment = Bs 163,588
Category C
Sales Price per Sq. m = 2,517 Bs/Sq. m
3.
Cutting construction and land costs
in half and with 25%
return on equity.
Land Cost = 1,200,000; FV = 1,875,000
Loan Repayment = 2,339,131
Total Sales = 1,875,000 + 2,339,131 = 4,214,131
Sales
Price per Apartment = Bs 87,795 - we reach Category A
Sales
Price per Sq. m = 1,320 Bs/Sq. m
4.
Cutting
construction
and
land
costs
25%
and
with
15%
return on equity.
Land Cost = 1,800,000; FV = 2,380,000
Loan Repayment = 3,508,696
Total Sales =
Sales
2,380,000 + 3,508,696 = 5,899,196
Price per Apartment = Bs 122,692
Sales Price per Sq. m =
5.
Cutting
Category B
1,888 Bs/Sq. m
construction and
land
cost
50%
return on equity.
Land Cost =
1,200,0007
FV = 1,587,000
Loan Repayment = 2,339,131
Total Sales = 1,587,000 + 2,339,131 = 3,926,131
and with
15%
166
Sales Price per Apartment = Bs 81,795 Sales Price per Sq. m
II.
Hypothetical Case
=
1,258 Bs/Sq. m
-
Units C and D
we reach Category A
(3 Bedroom Units)
Cost Estimates
It assumes a high rise of 12 floors, 4 apartments with 3
bedrooms per floor.
Total area of an Apartment is 70 sq. m.
Land Cost:
1,800 sq. m at 1,500 Bs/sq. m = 2,700,000
Hard Costs:
3,864 sq. m at 1,500 Bs/sq. m = 5,796,000
Bs 8,496,000
Land + Hard Costs = 69% of Total Construction Costs
Total Construction Cost = Bs 12,313,044
Soft Costs:
of TCC)
2,585,739
(5% of TCC)
615,652
(21%
Interest Financing
Promotion and Sales
Insurance and Municipal Taxes
Professional Fees
(1% of TCC)
(1.5% of TCC)
Management and Supervision
(2.5% of TCC)
123,131
184,696
307,826
3,817,044
Total
Cost:
Bs 12,313,044
Loan Amount 100% Construction Cost-Land = Bs 9,613,044
167
Average Total Construction Cost per Sq.
12,313,044 t 3,360 =
3,665 Bs/sq. m
This cost is approximately equal
price
for
a
unit
m of Apartment:
produced
by
to the average market sales
the
private
formal
in
sector
1978 in Caracas Metropolitan Area.
Estimation of Returns
Sales
2 years for construction
Land Price
=
(PV)
FV of Land
Bs 2,700,000
4,281,750
N
/ Loan
Repayment
9,613,044
1.
FV of land at 25%
return on equity = Bs 4,218,750
Total Sales = FV of Land + Loan Repayment
Total
Sales = 4,218,750 + 9,613,044 = 13.831.794
Sales
Price per Apartment = 288,163 Bs -
Sales Price per Sq. m =
2.
FV of land at 15%
Total Sales -
4,117 Bs/Sq. m
out of Category C
-
in Category E
return on equity = 3,570,750
3,570,750 + 9,613,044 = 13,183,794
168
Price per Apartment =
Sales
Category E
274,662 Bs
Sales Price per Sq. m = 3,924 Bs/Sq. m
3.
Cutting construction and land costs in half and with 25%
return on equity.
Land Cost =
1,350,000 Bs; FV = 1,785,375
Loan Repayment = 4,806,522
Total
Sales = 1,785,375 + 4,806,522 = 6,591,897
Category B
Sales Price per Apartment = 137,331 Bs
Sales
4.
Price per Sq. m = 1,962 Bs/Sq. m
construction
Cutting
return of
15%
and
land
25%
costs
and with
a
on equity.
Land Cost = 2,025,000;
FV = 2,678,062
Loan Repayment = 7,209,783
Total
Sales = 2,678,062 + 7,209,783 = 9,887,845
Category C
Sales Price per Apartment = 205,997 Bs
Sales per Sq. m = 2,943 Bs/Sq. m
Hypothetical Case - Units E
III.
(4 Bedroom Unit)
Cost Estimates
It assumes a high rise with
floor.
95
sq.
12 floors, 4 apartments per
Apartments with 4 bedrooms and an apartment
m.
unitarian
48
apartments
per building.
It
land costs and construction costs.
keeps
area of
constant
S
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( p. 169 )
170
Land Cost:
2,112 sq. m at 1,500 Bs/sq. m = Bs 3,168,000
Hard Costs:
5,244 sq. m at 1,500 Bs/sq. m = Bs 7,866,000
11,034,000
Land + Hard Costs = 69%
of Total Construction Costs
Total Construction Cost = 15,991,304
Soft Costs:
of TCC)
=
3,358,174
(5% of TCC)
=
799,565
=
159,913
=
239,870
=
399,783
(21%
Interest Financing
Promotion and Sales
Insurance and Municipal Taxes
Professional Fees
(1.5%
(1% of TCC)
of TCC)
Management and Supervision
(2.5% of TCC)
4,957,304
Bs 15,991,304
Total Cost:
Loan Amount
100% Construction Cost-Land = Bs 12,823,304
Average Total Construction Cost per Sq. m of Apartment:
Bs 15,991,304 t 4,560 Apartments = 3,507 Bs/sq. m.
This cost
ter
in
represents
1978
in
the
the average sales
Caracas
price per square me-
Metropolitan Area.
We
realize
the average price per sq. m starts reducing when we increase
the size of the apartment.
171
Estimation of Returns and Apartment Market Sales Price
Sales
2 years
,FV
Land Cost
of Land
(PV)
4,950,000
Bs 3,168,000
Loan Repayment
12,823,304
1.
FV of Land at 25%
return on equity = Bs 4,950,000
Total Sales = 4,950,000 + 12,823,304 = 17,773,304
Sales Price per Apartment = 370,277 Bs -
out of Category E
in the Non-Regulated Market
Sales Price per Sq. m = 3,898 Bs/Sq. m
2.
FV of land at 15%
return on equity = Bs.
Total Sales = 4,189,680 + 12,823,304 =
Sales
3.
4,189,680
17,012,984
Price per Apartment = 354,437 Bs -
Category E
Cutting construction and land costs in half and with 25%
of return on equity.
Land Cost = 1,584,000;
FV = 2,475,000
Loan Repayment = 6,411,652
Total Sales = 2,475,000 + 6,411,652 = 8,886,652
Sales Price per Apartment = 185,139 Bs
Sales Price per Sq. m =
1,949 Bs/Sq. m
Category C
172
4.
and
25%
costs
land
and
construction
Cutting
with
15%
return on equity.
2,376,0007 FV = 3,142,260
Land Cost =
Loan Repayment = 9,617,478
Total Sales = 3,142,260 + 9,617,478 = 12,759,738
Sales Price per Apartment =
Sales Price per Sq. m =
Category E
265,827 Bs
2,799 Bs/Sq. m
Conclusions
From the evaluation of the former cases, we concluded it
was very unlikely to expect developers to be able to produce
number of bedrooms.
The market costs were too high to allow
the developers to earn attractive
No.
Charts
ments.
in sales price and
the restrictions
the cheaper units given
33
34
and
returns from those invest-
illustrate
the
maximum price
per square meter allowed to qualify for the benefits of Proof the hypothetical buil-
gram 4 and the maximum sales price
struction
of
the units within
possibilities
pers
few
Even
though
the
is
area
as
units
sold
at
a
given
"B"
and
lower price.
the
the develoinvestment.
profitable
maximum
sales
price
is significant for all the units,
units
"D"
We
"A"
"C".
This
is a
required
the
same
"A" and
for units
dramatic
outcome
logical
a
between
difference
especially
the program, gave
make
to
and the market sales price
it
that the con-
From their comparison, we realize
ding cases.
and
"C"
respectively,
realize that
but
high
to
be
reductions
in
they
had
173
Chart No. 33
Maximum Sales Price Allowed
According to Parameters of Program 4
(Bs/Sq. m)
A
100,000
56
1,786
Difference
Between Sales
Price and Maximum Price
(Sq. m)
916
B
150,000
56
2,678
24
C
200,000
70
2,857
1,620
D
250,000
70
3,571
546
E
350,000
95
3,684
Housing
Category
Maximum
Sales Price
(Bs)
Maximum
Feasible
Area
(Sq. m)
Maximum
Sales Price
Bs/Sq. m
214
Chart No. 34
Maximum Sales Price of
Hypothetical Buildings
(Bs/Sq. m)
Housing
Category
Minimum
Feasible
Areas
Sales Price
(1)
Sales Price
(2)
Sales Price
(3)
-
A & B
56
2,702
1,320
1,888
C & D
70
4,117
1,962
2,943
E
95
3,898
1,949
2,799
Sales Price at Market Construction Costs with 25% Return
1.
on Equity (Bs/Sq. m).
Sales Price Cutting Construction
2.
Return on Equity (Bs/Sq. m).
Costs
50% and with
Sales Price Cutting Construction Costs 25%
3.
Return on Equity (Bs/Sq. m).
25%
and with 15%
174
necessary to reach the
are
cost
For a developer to be able to build units A,
Program 4.
have to be
land costs would
construction and
example,
level of prices required by
for
redu-
ced 50% and the potential level of return on equity would be
to be
land costs would have
construction and
sible,
1,500 Bs/sq.
even more serious when we consider that land at
piece
a
would
prefer
on
risks.
argument
also
is
the
last
in
make
construction
cause it
years
of
program
the
cheaper
the
of
the
period
also
more
units
cheaper
1981
ones.
16%
annu-
contributed
difficult
increased construction and land costs.
tion of the interest rates in
which
decisions based
Inflation, which averaged
construction costs.
ally
not
investment
for
valid
the
he
less construction and mar-
units were
Those
developer
low-cost housing,
within
units
the
build
to
could give him higher returns and
ketability
for
land appropriate
of
that if a
is obvious
It
easy to obtain.
owned
That
1,500 Bs/sq. m
not abundant and construction costs at
were not
reduced
This conclusion becomes
25%, also assuming a return of 15%.
m was
to be pos-
units B
Similarly, for the construction of
15%.
to
be-
The libera-
is likely to have
increa-
sed the proportion of construction financing to at least 25%
of construction
pared
tive
to
real
the
costs .
average
estate
of
Returns of
25%
decleared
investments.
For
en
Financiamiento
Factor
El
1.
Mercancia Vivienda en Venezuela.
IDEC, Caracas 1981, p. 26.
are also
15%
earnings
all
these
lower comin alternareasons,
we
la
de
Produccion
la
UCV,
Sardi,
Cilento
A.
175
of
increases
in
confirms the
1979, to
in
25%
from
dropped
"B"
and
"A"
units
produced and
the proportion
how
realized
we
4 where
Chapter
in
findings
This conclusion
prices.
of
level
general
the
with
reduced
further
be
production will
their
rarely be
cheaper units would
the
could expect
1%
in
1983, considering only private production within the regulated
even
market.
The
though
more
level
the
for category
that qualify
bedrooms
with
3
cost
reductions of
25%
of
vative estimate
to
order
In
returns.
and
costs
of
some
required
also
feasible,
the more expensive
of
construction
units,
reduction
build
in
units
for example,
"C",
would be necessary using the conser-
15%
reductions were
similar
returns,
necessary to obtain units "E".
regardless
However,
categories
all
got
produced
restrictions,
cost
the
of
during
the
have
some
to be aware
are
profits
higher when we
in
participates
tion
process.
that in
already
of
can
First of all,
the distribution of soft costs,
built
the earnings
developer
These
in.
consider in most of
The
We
period.
speculate about the reasons for that outcome.
we
units
profits
the developer
the cases,
throughout
become
the whole
construc-
land
owner, he
is usually the
has connections with the construction materials industry, he
owns or belongs to an architectural
manages
and
supervises
the
and engineering
construction,
advertizes and sells his own building.
and
firm, he
moreover,
he
Some developers, re-
gardless of regulations, are also connected to the financing
176
quality
the
found a way of cutting costs down by reducing
had
developer
the
likely
is
it
Second,
higher.
is much
return
real
the
of return,
15%
talk about
Therefore, when we
institutions.
construction
of
or
This
location.
argument
could be supported by evaluating the quality of the inventocities
smaller
in
built
developers
that
argument
The
ry.
where land costs or construction costs could be lower is not
most of the production and inventory con-
that
likely given
the
biggest and
centrated
in
country.
Third, the
the
of
cities
growing
fastest
for private pro-
statistics accounting
duction included units built with public-private partnership
schemes and with government
El
the
Aragua
in
Bosque
State,
developer
at
below
rate
in
a
interest
It
backed
lengthy
up
Therefore,
is
also
true
expensive
to
9%
financed
it
at
rates
on
short
interest
the
in public-private
Also,
18% or more.
and building
stan-
construction costs can be re-
those
given
projects,
they are
institutions, can avoid some of the
by government
and
when
and
price
land
the
sold
INAVI
which
some changes in urbanization
dards are allowed.
duced.
market
time
term mortgages was at
partnership
in
the case of
This is
subsidies.
processes
of
approvals
and
permits.
Finally, most of the units built with the public-private approach
were
categories,
"B",
and "C"
likely
thus
to
concentrate
contributing
to
in
the
the
middle
share
of
and
units
in the production of the regulated market.
lower
"A",
177
There are many factors that contributed to the high con-
is
land
target
goals.
amount
to
land
by
INAVI
and
costs
could argue
the
have
contributed
to
represented
21%
of
in
1981,
1980
in
Financing
the
norms
make
using
row house
prices also
most
duplex
or
contribute
of
not
in demand
for
in
and
developments.
Urbanization
areas
very expensive.
Land
to making high rise developments
responsible
system
to
for
requires
compete
technology
technology
The
also
the
at
higher
are
used
in
costs
because
of
steel
and
the
cement,
international
requires
a
the
greater
market
use
of
the
the struc-
for
construction
high
lot
a
stan-
residental
low-rise
requirements
equipment
to. higher
unrealistic
produced.
more
even
became
contributed
approaches
prices.
construction
likely approach, regardless of the fact that
tural
have
development
the
total
require
units
the
of
prices
for
does
increase
the
also
they
because
costs
dards
codes
building
The
construction
liberation
the
after
expensive.
increases
we
much,
of
policy
the
below
assembled
land
the
though
Even
been
has
period
every
in
purchased
amount
the
development,
housing
low-cost
for
land
urban
assembling
of
task
the
undertaken
has
1975,
since
FONDUR,
though
Even
investments.
profitable
most
the
for
used
In
is scarce and when available, it
land
urban areas,
the main
has been men-
availability.
land
is
key elements
the
of
one
tioned,
As it
land costs in Venezuela.
and
struction
vertical
also
is
concrete
frame
materials which
prices.
machinery
That
and
178
the
construction and increasing
into
input
imported
tion of
Reducing the propor-
that affects costs.
labor
specialized
amount of labor, some cost reductions could be achieved.
An interesting question is,
have allowed
the
racteristics
to
ced
the
by
of units with equivalent cha-
construction
encouraged
those
in
cheaper prices
what are the mechanisms that
the
Program
and by
the
but
4,
Govern-
sector.
informal
at
indeed produ-
knowing they are
Venezuela7
government
by
ment production of the cheaper units is carried out by INAVI
and
rage
For
price
the
of
subsidized
in
subsidies
the
market prices.
of
sale
the
units,
subsidizes material
build
system.
faster.
is
land
even
Both
selling
of
institutions
them at below
Vivienda Rural has a very interesting mecha-
paid by weekly valuations.
family units
without
construction.
nism for construction, based on small
are
land.
excluding
Bs/sq. m,
average price
an ave-
INAVI have
These costs are attainable because
600 Bs/sq. m.
level
1,200
900 and
Rural,
Vivienda
lower,
the
between
by
The units built
Rural.
Vivienda
using
and
a
its
very
Besides
local contractors, who
In addition,
construction
is based on
traditional,
being
Vivienda Rural
effective,
single
easy
to
construction
is
but
very
In general, both institutions bear the cost of land
development and land price.
179
make
not
does
other
the
On
strong
all
In
costs.
hard
reducing
though it
the beginning
of
later without the users
come
practically
by
costs
construction
formal
incurred by
costs
soft
at
subsidies
construction
reduce
can
it
eliminating
and
of
use
(public facilities
the process
paying),
the
even
sector,
informal
hand,
addition,
land
eliminates
it
costs given that units are developed, in most cases, on land
holding
without
legal
producers
The
ownership.
the
in
in-
formal sector do not pay interest on financing, because conis done
struction
Thus,
financing.
informal
or
rowing,
out of
incrementally
savings,
the
family bor-
financing
adapts very well to the family budget constraints.
system
Informal
developers do not pay municipal income taxes, or any kind of
they
insurance,
do
use
make
not
sion, or promotion and sales.
and
of management
supervi-
These expenses are not neces-
sary simply because the building process is carried out on a
small
and
scale
in most cases,
For all
itself.
of the owner
they can reduce
prising
under the direct supervision
these reasons,
the costs
it
by more than
is not
50%
sur-
compared
to the formal construction.
The government
trate
if
it
some
wants
and
mechanisms
to
the
that
encourage
informal
could
the
be
prices
is going
to
and
be the
conditions,
used
construction
sing for moderate income households.
market
sector approach
if
the
illus-
by the government
of
low-cost hou-
Undoubtedly, given the
formal
private
sector
targeted developer, higher and different
180
kinds of
gram.
codes
the
subsidies will have
included within the pro-
to be
Moreover, the government will have
and
urbanization
returns
earned
housing market.
norms
from
and
to review building
increase
building
outside
the
controls
the
on
regulated
181
CHAPTER
AND RECOMMENDATIONS
CONCLUSIONS
From
the
analysis
6
carried
out
in
Chapters 4
and
5,
we
concluded that drastic changes are needed in the design of a
program of
incentives
production
of
changes
for
low-cost
the
formal
housing
must be oriented
is
private
to
be
sector
if
achieved.
toward restricting
the
These
the comparative
benefits from producing the higher cost units within the regulated
market
comparative
units.
and
outside
it,
profitability
Those
changes
that
from building
the
increase
less
the
costly
changes must be carefully related among them-
selves and
must be consistent with the overall state of the
economy
we want to avoid
well
if
aware of
the
negative
side effects.
important connections
We are
formal housing pro-
duction has with the financing sector, the employment level,
and
the
know
growth
the
of
strong
the welfare
the
other
dependence
related
industries.
the demand
of the country.
for
We
also
housing has
from
Thus, different kinds and lev-
els of changes are necessary.
Some of them require underta-
king some macro-economic measures, others imply the enforcement
of
the
judicial
changes
are
related
government
vior.
to
those
to
encourage
We will talk
changes,
and
taxation
the
and
mechanisms
regulate
mainly about
concerned
system.
with
the
the
Still
available
modifying
to
producers'
most detailed
the
other
the
beha-
level of
variables
to
182
with the more general level of
connections
though the
those
even
to the private sector;
incentives
the
to
modifications
and
units,
cheaper
of
construction
the
feasible
make
to
reductions
cost
and
subsidies
complementary
of
tation
implemen-
the
to
related
those
produced,
units
the
qualify
chan-
ges will be discussed.
The Recommended Changes to the Program
inadequacy
group
We
sales
and the
price
the
in
Chapter
in
left out around
the overall
2 how
price
categories.
housing
policy only
sales
proposed
5% of the total households of the country in
and we discussed the unrealistic nature of that goal,
1979,
given the limited resources of the country.
Chapter
"D"
Bs
7,000
and
group
household
earning
"D"
in
"E"
level,
household
income
of monthly
level
the
3
categories
unit
the
without
stated
protected.
in
the
We
7,000 Bs/month
1981, an average of 4%
required
subsidy
was
Program
also
in
We estimated in
4
analyzed
income
9).
The
corresponding
to purchase
well
as
above
the
that
wanted
top
if
a
to buy a
interest would have to be
paid by the government to the bank during 6 years
No.
bed-
of
household
target
the
of
definition
the
to
relation
in
argued
the
number
We have explored along the development of this paper
rooms.
the
units'
the
being
categories,
units by
housing
that
variables
the
to
refer
changes
production of
the
regulate
those
group of
first
The
(see Chart
average subsidized interest
rate
183
affordable by 67%1 of the target households;
households
in
Bs/month
We
also
the units
pro-
just at levels un-
"E",
"D" and
duced belonged to categories
5,000
considered
40% which is
majority of
in Chapter 4 that a great
sented
estimates
These
the priorities of other expenses.
high given
showed
"C".
unit
a
buy
income ratio of
consider an expense
to be
to
wanted
income
monthly
Bs of
if a household earning 3,000
over 8 years
6%
would be
with
monthly
1983.
The
3,000
and
households with
in-
between
earnings
number of
repre-
that 67%
comes between 3,000 and 5,000 Bs/month was about 886,813 for
We also explored the reasons behind the con-
the same year.
centration
of
the
From the
production.
analysis we
conclu-
ded it is imperative to reduce the range of households under
policy
the
4,
categories
"D" and
it was
as
If,
protection.
"E" are
the ones
in
discussed
Chapter
that seem to be att-
ractive to the developers and having argued the subsidy pronot
gram did
the
cheaper
initiate a
production,
in
switch
concluded
we
categories will not be produced unless the most
of the program of incen-
expensive categories are taken out
tives and additional subsidies are allowed for the construction
"D"
of
the
cheaper
and
"E"
will
categories.
be
still
We
produced,
can
and
expect
very
categories
possibly
in
more appropriate amounts, if they are excluded from the program
protection
because
their
production
is
likely
to
be
profitable without the program incentives.
OCEI.
1.
1983.
Encuesta
de
Hogares por
Muestreo.
1er
Semestre
184
Consequently, it seems reasonable to think only the con-
the
thly
earnings
the
belief
should cover those families with mon-
target group
that
encouraged
be
reflects
also
proposition
This
subsidized.
and
should
"C"
and
"B"
"A",
categories
struction
3,000
between
Bs.
5,000
and
general,
In
households with incomes of 5,000 Bs could afford units up to
housing
and
rate
would
but
loan
85%
term
standard
a
and
13%.
Under
interest
mortgage
same
terms,
consumption,
housing
on
20 year
a
affordable
the
the
for
income
of
25%
only
using
ratio,
spent
is
with
mortgage
rate
value
to
around
be
fixed
income
of
40%
assuming
instance,
For
sidies.
unexaggerated level of sub-
200,000 Bs with some
a price of
the
affordable interest rate will be around 6%, which undoubtedly
will
require
a
and 35% will result in interest
expense income ratios of 30%
rates
of
again
for
example
be
addition,
at
the
14%,
so high as
innovative
rates
interest
of
level
it was
in
the
households
sions
must
be
and
made
at
the
to
in
take
into
order
to
the government
reasonable
direct
subsidy
levels,
required
1979-1983 period.
mortgage mechanisms1
ted by the government to increase
if
Thus,
respectively.
11%
regulate
to
was
wouldn't
and
9%
realistic
More
subsidy.
of
higher level
should be
In
evalua-
the affordability level of
account
avoid
inflation.
tying
the
Provi-
government
Proof Mortgage," by
"The Inflation
For references see,
1.
Stable
for
Designs
Mortgage
"New
and
Franco Modigliani
by
edited
Environment,"
Inflationary
an
in
Housing
Modigliani and Lessard.
185
in
subsidies
concentrating
reduction
of
construc-
lower-middle
goal
the
units, will make
the
for
production
the
the
implementation
the
target
for the
households,
target
and
costs,
construction
tion
of
range
the
in
reduction
sum
In
considered.
the period
in
ones experienced
the
like
in the interest rates,
to fluctuations
subsidy program
of
income
group
the
units
more attainable.
relation
In
areas
of
variable
the
built,
bedrooms.
riable as
an additional
study
be
must
of
an
will
acceptable
area
variable
the
want
to
avoid
are
materials,
this va-
terms
and
labor,
with
a marcapital
considerations
Even though
profits.
that study
of
if
we
in
the
program
is
effects
shrinkage
very
important
observed
in
the
period
cost estimation study, the establishment
and
the
also paramount.
consideration
The standards
of
inflation
considered would
refer not only to building codes and land occupation, but
standards
for
the
level of generalization, the inclusion
standards
realistic
effects
the
In this
analyzed.
of
some
involve
of
level
of
that
accompany
to qualify the units
realistic
in
carried out
feature
land,
of
costs
of
should
of
quality
For the government to include
number of
ket
of
control
the
to
infrastructure,
public
services,
to
and communal
186
recently
the
Areas"
Residential
of
Design
the
for
regard
this
In
facilities.
"Guide
introduced
very
should
prove
could
look at
helpful1 .
Cost Reduction Strategies
reductions
cost
fact
some
ment
implemented
but
communal
changes.
First, a
revision
and norms pertaining not only to the building
of ordinances
itself,
necessary
the
if the govern-
obtained
could be
the
that in
informal developers to realize
the
example given by
we
cost reductions
relationto
In
to
requirements
the
services
is
of
public
That
necessary.
facilities
and
should
in-
revision
clude the regulations concerning the ratio of built up area/
land
be
area
and
the
oriented toward
developments which
required set
encouraging
backs.
The
revision
of
the production
offer potential
should
lower rise
for high density of
land
occupation and allow cost reductions, because they eliminate
the expensive structural supports and
construction
the use of complicated
Second, an evaluation
equipment.
of the buil-
ding system and building technology should be carried out to
evaluate
substitution
of
the
traditionally
expensive
crete frame high rise system with low-rise structures
to 4
floors which allow reductions
con-
from 1
in the proportion of in-
"Guia
Caminos,
Goethert,
See Caminos,
1.
Urbano para Nuevos Projectos de Vivienda,"
1982.
de Desarrollo
Noviembre
30,
187
ternationally traded materials such as cement and steel.
proportion
the
Reducing
into
inputs
those
of
construction
like
and basing the construction on cheaper materials
could
we
bricks,
obtain
high
reductions
production by Vivienda Rural has proved that a
sense,
costs to be obtained and can easily be carried out
truction
to mention the
between labor
need for an evaluation
capital
and
is also conveni-
Here, it
by non-sophisticated contractors.
tensive
rela-
indeed allow low cons-
tively simple construction system can
ent
this
In
in costs.
While
construction.
intensive
it
inis
true that capital intensive construction frees the construction process from union claims and increases in wages, capital
intensive
requiring
construction
high initial
Venezuela
in
capital
has
investments
the problem of
and labor exper-
A more labor intensive approach also generates higher
tise.
employment
levels, so necessary to the country.
Complementary Construction Subsidies
From the
financial evaluation carried
we concluded complementary
out in
Chapter 5,
construction subsidies are
sary in order for the developers
neces-
to build the cheaper units.
Those subsidies would have to be higher, the lower the sales
prices of the unit be produced.
ment
additional
within
the
subsidies
Program
provide construction
4.
from
For
The government could implethe
ones
example,
materials and
the
could
already
contained
government
could
lease equipment at
188
The government could also allow reduc-
below market prices.
These elements combined would undoubt-
issuance of permits.
over,
the
built
into
could
government
the program,
in
reductions
to considerable
edly contribute
the
facilitate
and
projects
certain
for
standards
tions of
the
reinforce
More-
costs.
subsidies already
like making land available at below
market prices, refinancing construction loans with high loan
to value ratio, and reducing the marketability risks for the
However, all those subsidies should be careful-
developers.
ly
for
specific
being
outlined,
order to control speculation.
need to be
in
category
housing
every
Control mechanisms would also
included.
in
subsidy element which seems to have been effective
A
orienting
toward
production
the
supply of land by the government.
lower
cost
units
the
is
This practice included in
the overall housing policy and in the Program 4 gave in some
positive
cases
successfully
sells
market
sells
the
though
even
and speculation
ment
Some
results.
land
to
After,
price.
and
FONDUR or INAVI,
with
subject
others were
the
the
them at market prices.
developer
were built
to
sold
and
corruption
The procedures had been that the govern-
.
the
projects
the
developer,
developer
usually
builds
A contract is
government,
usually
the
well
below
units
and
signed between
represented
by
in which the developer compromises to build
the
characteristics
of
prices,
areas,
and
the
units
1.
See the case of the project La Chamarreta in Chapter 1.
189
is
obtai
The
first
Financing
institution.
the
from a bank.
ned
on the social
touches
one
government
public
lop
been
the
pursue
not
has
because
mainly
of
Thus, there is relatively little urban land
by the government
owned
land to deve-
speculation
goals
assigned
the
institu-
FONDUR, the
land
control
and
achieve
lack of funds1 .
Land owned by the
issue.
justice
to assemble and purchase
1975
projects
to
able
procedure.
this
a scarce resource.
is also
created in
tion
with
arise
questions
Three
2,
by
specified
services
in relation
public
required
to the amount needed to
As we
projects.
in Chapter
saw
the government is directly carrying out projects of sites
and services and finished units
for a strata of the popula-
tion with even lower incomes than the one attended to by the
private
Supplying
sector.
too
much
land
the
for
private
sector programs will reduce the land available for the development
of
However, developing public/private partner-
monthly income.
where
ships
targeted to the group below 3,000 Bs of
projects
the
government
acted
as
an equity
investor,
could be a way of orienting the production of housing for
the low-middle income groups and at the same time generating
more
resources
jects.
These
attractive
to
carry
kinds
for big
of
out
the
housing
arrangements, although
developers,
See Declarations
1.
1980.
Universal
El
lowest-cost
of Victor
who
own
Fossi,
perhaps
land, are
President
pro-
likely
of
not
to
FONDUR.
190
be
scale contractors who
medium
to
small
for
attractive
don't own land and who could be willing to share in some
the evaluation
development of
the
for
land
supply
to
finished units, requires
taking
trade-offs,
of
not
whether or
of
decisions
the
any case,
In
profits.
into account the time,
effort, and money invested by the government in the assembly
of
reduction of
land and the
urban
land available
to under-
take other public projects.
The
land benefits
of
sale
and
that
possibility
same
or
group
room
must
The
of
the
to the
on con-
though restrictions
Even
speculation.
for
be aware
from and sold
be bought
land could
developer.
We
few.
a
there would always
contained within the policy,
tracts were
be
to the chances the purchase
second question relates
refers
third question
to the
effectiveness of the controls on the units' characteristics.
Check ups are always difficult to carry out and
time
money.
and
and carried out.
contracts
However,
In
included.
expenses
within
order to minimize
evaluate
to
the project
this way, we
prove
the
the
possibility of
does not sell,
will
quality
use
of
the
the
the
government,
the
institution could carry out the supervision.
portant
outlined
carefully
be
In addition, penalties for failures of the
should be
ministrative
must
they
they consume
the ad-
financing
It is also im-
laying
penalties
if
for an unjustifiable reason.
In
to
im-
market
units
control
produced.
mechanisms
Those
penalties
191
the
received
they have
if
the banks
also
include
should
refinancing.
availability
the
to
refers
element
subsidy
Another
they chose to build the more costly units
tegories,
to
the developers exca-
financing was available for all
100%
given
that
In
financing.
this variable was critical
In the interviews,
orienting investment.
the program
into
construction
of
it was demonstrated
Chapter 4
pressed
already built
because
the households who could afford them have higher potentialithe
could
units
be
the regulated prices given construction costs, and
built at
still
mortgages,
term
long
getting
for
ties
fair amount
them with a
left
Land was
of profit.
their equity, so they would try to maximize its utility.
the preceding reasons, we conclude the availability
For
of
construction
In
must
financing
"C".
The
expect
can
lopers
benefits
credit
for
the
production
will
occur
resources.
scarce
A
the policy was to tie the deve-
the
of
long
them getting
by
terms expressed
and
speeds
up
the
process
involved
in
the
obtaining
measure
getting
the
condition
the buyers with
This
government
to
their
spending
positive measure included in
gram.
for units
200,000 Bs should be left to market condi-
government
the
and
"B",
"A",
availablility of construction financing
because we
without
construction
effects,
the categories
graded among
be
costing more than
tions
be used to orient production.
can
distributional
achieve
to
order
financing
of
term
the pro-
avoids
long
the
term
192
it
Consequently,
expenses.
reducing bureaucratic
thus
credit,
is suggested that condition be kept.
Modification to the Incentives
first modification related
The
developers
is
the tax exemption.
4;
the
and
ters
3
lure
because
exemptions
we
for
higher
graduated
were
the
comparative
cheaper or
the
more expensive
order
In
rent.
carry
to
need
a
to
even though the
the
lower
tax
units,
cost
units were not
argument
analysis
comparative
tax
of
diffe-
so
we
will
savings.
The
better,
for that kind of analysis
required
information
this
support
fai-
been a
tax savings between building
could argue
the
have
could
First,
reasons.
three
of
It was mentioned in Chap-
incentives
fiscal
to the
to the incentives
is very dif-
ficult to obtain because we need to obtain the earnings from
financing charges
sale, the incurred construction costs, and
able to apply the corresponding
to be
tax rate.
Developers
More
are in general unwilling to provide that information.
in the
over,
cases the
inaccurate
pect
data.
information was obtained, we may exHowever,
regardless
of
this
limita-
tion, we know that even though tax exemptions are higher for
the
cost
lower
smaller7
on
emptions
are
cond,
and it
the
units,
comparative
the
earnings are
the contrary for the higher cost units,
lower,
taxation
but
the
system
in
earnings
are much
Venezuela
is
is plagued with evasions and bribes.
very
also
tax ex-
higher.
Se-
inefficient
Third, tax pay-
193
ments
are
money
argue
the
tax
did
not
due
the
regulations
contribute
cost units.
in
to
future.
For
these
only complicated the
orient
production
reasons,
we
program, but
toward
the
lower
They generated additional red tape and bureauc-
ratic expenses and they increased the potential for corrupin
tion
the
encouraging
nobody
The
country.
the
pays
required
taxation
lation
implemented
production.
in
of
but
we
contributed
Venezuela
a
serious
of,
to
"If
should
why
taxes,
system needs
implementation,
housing
attitude
amount
design and
is
they
addition,
generalized
the
Venezuelan
In
I?"
revision
in
until a more effective regu-
should
not
Another argument
rely
on
it
to
orient
to support the elimi-
nation of the tax shelters is that in the years to come, the
Venezuelan government will need to rely more on the internal
sources
of
revenues
ception
of
oil
given
exports.
the
The
reduction
knowledge
revenues
from
vernment
to plan better for the future.
concept of
be
better
construction
fiscal
to
activities
incentives
simplify
the
of
of
income
the expected
would
allow
The tax
until
it
the
tax
go-
losses for
can be estimated, but
system
for con-
it would
functions
pro-
perly.
Another important variable
critical
in
influencing
the
that our analysis revealed as
characteristics
supplied, and one that could be reinforced,
marketability
of
the
units.
This
variable
of
the
units
is the perceived
is
linked
with
the state of the economy and with the willingness or ability
194
of
of
higher
A
credit.
acquires
the
the
the units built after
units will
be purchased
the
that
happen
could
It
examination.
close
require
will
under which
conditions
the government
if
up
built
be
However, the definition of that period
a reasonable period.
and
in the marketability
confidence
of purchasing
compromise
the
of
could
units
cost
low
the
level
term mortgage
to provide long
institutions
financing
the
developers might prefer to make a single and simplified sale
to the government which would generate a
time
consumed
also
could
units
the
by the government
overlooked
reduction
the
advantages
likely
the
marketing
in
developers
given
produced
Thus,
risks.
the
happen
lot of expenses and
and
the units.
It
the quality
of
of marketability
disadvantages
of
this measure should be weighed.
measures
Complementary
have to do with strengthening
the
for
should
be
more
should be
specific
issued per category.
the
marketing
risks
the regulations and incentives
institutions.
financing
restrictions
folio
reduce
to
A
outlined.
the
about
for port-
new regulation
That new
proportion
regulation
of
mortgages
the last
Lumping the categories, as in
regulation, should be avoided in order to better control the
distribution
be
backed
ance
of
should
works.
up
of
by
higher
also
be
prices.
tax
risk
The
portfolio
exemptions
loans.
to
Here,
enforced, given
regulations
compensate
controls
the way
the
for
on tax
need
the
to
issu-
payments
taxation system
Similarly, it is very important to keep the refinan-
195
cing program
housing
to
assure
financing
continued
system.
Given
influx
that
of
we
funds
are
to
the
proposing
to
restrict the range of beneficiaries, the amount of resources
needed
by the
would be
are
government
more attainable.
necessary as well,
terms
rate
loans.
paid
Those
by
counts and
loans.
the
Given the
a
effective
because
and
Nevertheless,
reduces
the
to
funds
invest
However,
measures
mainly
to
deposits
time
funds
for the
paper,
but
we
sions
are
the
degree
the
with
the
discussion
capital market
should
be
features
the
system
interest
because
most
is out of the
the
rates
re-
rates
savers
international mar-
the
that
housing
the
interest
of
about
conscious
of
ac-
rates is more
over
the more competitive
the
savings
short and long term
control
regulation
in
interest
last period, it seems in
speculation
circulating
in
of
for long
the
and
system of control of the interest
increases
kets.
for
to have
relate
results from the
duces.
prefer
the banks
measures
the
task
However, macro-economic measures
for
banks
the refinancing
the interest rate charges on
Venezuela
market
to accomplish
appropriate
scope of this
whatever
housing
the
program
deci-
must
be
coordinated with them.
Assuming there were no major inconveniences in the mortgage
banks
issuing
long
term
the portfolio restrictions,
loans,
to
evaluate
the
controls
on
tax payment, and illegal invest-
ment banking would be necessary.
us
effective
feasibility
These
of
considerations lead
implementing
such
cont-
196
In
structure.
tical
controls,
strict
profound
Thus, we could assume
only
holds,
increase
to
depends
long
term
needs
of
on
providing
institutions
the
that were not an obstacle, we
measure.
However, the subsidy program
be
to
difficult
differences
feasibility
evaluated in depth to determine the
bear
between
As
mechanisms
it
Currently,
changes.
rates.
mortgage
this pro-
Of course,
units.
house-
loans, but assuming
positive
sidized
of the
perceived higher
developers'
the
financing
the
as a positive
to
level
the affordability
marketing the cheaper
gram
it
irregular behavior will take place.
decrease
to
but
risks in
see
made.
be
to
need
would
changes
more
to achieve
order
in
cases,
subsidy program seems to be an appropriate measure,
The
not
many
socio-poli-
the Venezuelan
in
strongest elements
the
of
one
the financing sector represents
We must keep in mind
rols.
the
with
market
it
was
should
the
enormous
rates
and
the
interest
mentioned
be
very
given
government
the
to be
proved
has
before,
to
analyzed
sub-
alternative
come
up
with
a
more realistic approach.
Summary of Modifications to the Program 4
In
of
sum,
private
housing
the
recommendations
developers
units
and
to
undertaking
responding
objectives, are as follows.
increase
the
better
the
supply
to
of
likelihood
low
cost
the government's
First, a reduction in the range
197
households
target
of
proposed,
is
most
the
of
production
on
tration
the concen-
and we will avoid
better distributional effects
achieve
can
we
because
More-
units.
expensive
over, the limited resources would be channelled to the population
that
wise.
In
regarding
variable
pretends
mendation
reducing
actions
tion
of
urbanization
development
rise
of
lower-cost
development
the
norms
alternative
of
areas of
Second,
among
those
This
recomout
carried
the units.
by
Third, com-
cost reductions for the producmust
units
the government.
by
raged
sion
the
of
to allow
the units.
the
of
out
"E".
included
be
speculation
the
to avoid
exaggeratedly the
plementary
should
areas
take
"D" and
units
the
of
to
other-
to
attend
not
proposing
regulate the quality of
to
designed
are
we
sense,
the construction
program
a
this
sector would
private
the
Those
be
actions
and building
design
encou-
undertaken and
codes
approaches
that could reduce costs
revi-
involved the
and
to allow the
to
the
high
the evaluation
building system and building technology currently in
use by private developers in order to search for alternative
cost-effective
solutions.
Fourth, a higher
level of
subsi-
dies is necessary in order for the developers to produce the
and get a reasonable
cheaper units
sense,
it
has
been
recommended
to
profit from
evaluate
the
it.
In this
possibility
of making government owned land available to the developers,
but
including
government.
construction
a
proposal
for
equity
participation
by
the
It is also recommended that the availability of
financing
be
kept
within
the
program
and
be
198
eliminated
be
to
but
production,
regulate
and
administrative expenses
are
cost
the
to
benefits
instruments
to
increasing
room for violations.
Sixth, we
contribute
they
necessary
in
exemptions
tax
been effective
the
to keep the
confi-
the
increase
to
marketability
are advising
and we
units,
is
developers
the
of
dence
it
that
proposing
of
of
to the
relation
Fifth,
package
they have not
because
developers
the
from
proportion
the
inverse
produced.
units
the
of
price
should
recommended
financing be graded in
construction
sales
is
it
However,
users.
the
the long term financing for
developer's getting
the
to
tied
of
the
lower
of the
concept
subsidy program for the buyer, but re-evaluating it.
In
ferent
the
order to increase the marketability confidence, dif-
incentives
tions.
Others
and
refer
Still
out itself.
sures that make
regulations
to actions
tied to
Some of them are
measures have to be taken.
for
the
financing
institu-
the government could
carry
others are related to macro-economic mea-
it feasible for the banks to issue long term
This last refers mainly to the regulation of the
mortgages.
Among the regulations for the financing in-
interest rates.
stitutions, one
of the most
portfolio composition.
important
is the control
is also recommended that
It
of
the
tax ex-
emptions be kept as a counterpart for the issuance of higher
risk loans.
to
guarantee
addition,
it
The
refinancing program is
the
flow
of
funds
is recommended
to
the
considered critical
housing
the government
market.
In
examine the pos-
199
outcome
the
be
rate
interest
to
look
to the proprogram
the
make
that
fluctuations
could un
government
the
the government input
and to avoid tying
dertake
gram
of subsidies
level
the
at
taken
the
to correct
is recommended that a
it
this sense,
In
shortcomings.
in depth
to evaluate
experience
years
3
past
the
of
marketability expecta-
is made
However, a proposition
tions.
and
group
target
the
of
the
improving
to
contribute
to
also
level
affordability
the
increase
to
subsidy program should be maintained
the
Lastly,
units.
the
for the developers, the purchase of
securing
siblity of
unmanageable.
the developers' con-
We must be aware from our analysis,
fidence depends much more on expectations, than on promises
in
implied
They
regulations.
are
they know of its failures and weaknesses.
some
in
of
run,
remain
we
However,
tive.
for
think
level of
Some
residential
be
one
of
of
extent we
the
building
increase
of
least
at
in
units
cheaper
for
the
more
stringent
desired
the
cost
units.
of
subsi-
would be
effec-
level
expensive
It
short
improve
can
in private
units
regulations,
outcomes.
occur.
the
in
lower
the
changes
to
need
"disinvestment" could occur
the more
the
system would
to what
the
construction
consequence
would
that
Consequently, for
effective_,-profound
likely,
toward
construction
the
more
not
are
uncertain
attitude
we
to be
socio-economic
changes
these
developers'
dies
measures
overall
the
Since
the
and
system,
the
within
is
but
as
a
that
difficult
to
200
estimate
can get
how
a
much
the
disinvestment
will
be.
However,
we
first approximation of the problem by recognizing
those developers who have a stake in residental construction
construction
or
in
is
because
they
in
have
This
likely to remain.
general,
are
already
built
up
the
organizational
infrastructure, such as personnel and offices, and they have
capital
invested
in materials and equipment.
Also,
in most
cases, these developers are part of the construction materials
industry and are owners of
land.
Therefore,
hard for them, at least in the short run,
investments.
On
the
other
hand,
other
it will be
to switch to other
investors, who have
not built up a stake yet, and who entered the market recently because of the potential benefits, are
alternative
investments
offer
them
likely to leave if
higher
expectations
for
profits, with less risk.
In
order to evaluate the consequences
of a reduction in
the level of private residential construction, an input-output
be
analysis would
carried
out
could evaluate
industries.
prove
on
the
two
very
helpful.
levels.
An
impact
Similarly,
The
interindustry
on directly or
it
could
could
give
us
more
construction
industry.
outcomes, we
should be aware
detailed
However,
in
analysis
estimations
allow
of
im-
An intraindustry
insights
the
could
indirectly related
pacts on the GNP, employment, and incomes.
analysis
analysis
within
evaluation
of
the
the
that decisions are a matter of
trading off potential outcomes.
In this case, we are balan-
201
cing the benefits from keeping the private sector working at
the
more
invested
appropriate
outcomes.
previously
in
In
that
units
promote
any
residential
could
suppliers,
private
to
do
or reducing the level of production, but trying to
not sell;
get
but helping
levels,
preceding
kinds
other
to
as
the
by
construction
channelled
be
resources
case,
of
construction activities.
The Search for Alternative Developers
producer
approach
oriented
some
explored
now, we
Until
for
bility
although
private
land,
and
firms.
This
out
could
be
the
scheme
resources,
financial
the
carried
is
the
and
one currently
Governmental
project, but
responsibility
rather,
will
out
by
owning the
marketing
followed by
The third alternative, a
approach, requires the participation
buyers.
the project,
This approach has the government
Vivienda Rural.
ented
design
and
construction
take the responsi-
and developing
financing,
planning,
obtaining
units.
the government will
it,
In
as producer.
housing
the government
second approach considers
A
remain.
the
At least two other alter-
for the low-middle income groups.
natives
low-cost
producing
for
improve
to
measures
the
INAVI
consumer ori-
of the potential
not
be
to
carry
to facilitate its development.
The responsibility of planning, financing and developing the
project would
societies.
be
Those
in
the
hands
associations
of cooperatives
could
contract
and civil
out
specific
202
stages
of
Government
the process,
support
as
such
could
be
design and
making
land
construction.
financing more
and
accessible, providing materials and equipment, or backing up
their
gerial
and
or
purchase
or
be
and
administrative
evaluated
for
assistance
providing
tasks.
recommended
subsidies
could
rent,
before
its
The
for
scheme
of
in
mana-
incentives
producer approach
the
applicability
to
the
consumer
approach.
out
The
producer
in
Venezuela.
been
mentioned
and
in
government
The
the
consumer
last
two
approaches
approach,
housing
had
been
although
policies,
tried
it
has
has
not
been really implemented, mostly because resources and effort
have not been channelled to it.
cooperatives
and associations
included in the
The scheme of incentives to
has been briefly mentioned as
incentives for the private sector, but there
has not been a particular program or regulation to allow its
development.
ela
with
this
from starting
There
are
the
approach,
Metropolitan
Similar
approaches
the
Area,
that
coming
efforts
professionals.
Caracas
subsidies, are
some private experiences in
Examples
Ciudad
were
upgrading
out,
projects for
the majority
are built
Guayana
carried
in
and
but
Venezu-
in the
Maracaibo.
with
public
the squatter set-
tlement areas implemented by FUNDACOMUN.
There
these
are
advantages
approaches.
The
and
disadvantages
producer
approach
in
makes
each
use
one
of
of
the
203
suppliers who have access to the resources and know
existing
The likelihood of faster and
how to move within the system.
greater
production
sector.
When we
the
found
we
period,
1983
evaluated
production during
the
sector
private
public
the
to
compared
higher
also
is
the
produced
197936,000
However, this comparison
units more than the public sector.
without taking into account the amount of resources invested
the quality of the units produced, gives us only an
and
We know the units built by the public sector in-
dication.
low-cost
cluded
being
solutions",
units,
multifamily
and
and
units,
improvement.
for home
loans
core
those
of private production by the government
planning
The
single
services projects and
and
sites
finished
"housing
so-called
the
in-
is ba-
sed on estimates from the amount of resources available, but
gislating an
effective policy
adequacy
units
produced will
mers,
and
in
units
the
of
greater
because
high degree
of sophistication
all potential loopholes.
were
Thus,
to
the
check
up
resources
on
and
le-
designing
to
are
related
it
was
mentioned,
As
the needs
of the consu-
too expensive,
too small, or
addition,
is
the
approach
produced.
deformities
we
this
they will tend to be
In
of
task of
to orient the private produc-
respond less to
locations.
bad
The
lower.
is
consists
disadvantages with
The
tion.
production
the
this approach,
in
government
the
of
control
real
legislation
the
that
potential
the
could never
for
market
requires
a
take care of
The degree of control required, if
every
targeted
item,
by
would
the
be unmanageable.
government
have
no
204
guarantee of being used in the intended manner, and there is
a
more
the desired outcomes.
get
we will
measures,
strict
introducing
by
whether
about
uncertainty
of
degree
high
Another disadvantage is that this approach tends to generate
gigantic
projects
that
the
issue
aside
Leaving
for
financing
of
single
projects
increases
risk
of
fai-
to the portfolio balances of
threat
This is exacerbated when we
the banks.
the
can
we
construction
large
such
issuance
represents a
and
lures,
quality,
environmental
the
whether
question
of
capital.
of
sums
huge
require
recall the low level
of feasibility studies carried out by the developers and the
institutions.
financing
addtional
Finally, an
drawback
of
this approach is that it incites the concentration of wealth
in powerful
groups,
the
ones who currently enjoy the access
to resources.
The
the
advantage
main
degree
of
approach
government
the
what
over
gets
produced
is
that
will
be
This approach will be easier to program and will be
higher.
the
country's
convenient,
very
politically,
inforce
control
of
in
the sense
government
of a paternalistic
image
problems.
On
that
the other hand,
it
will
it will rethe
solving
face poli-
tical opposition from the industrialists, who will claim too
much
interference.
have high
of
the
approach,
produced
and
production
performance
units
We will
performances,
it
seems
in
the
speed.
inadvisable
to
the
uncertainty about
sense
of
However,
increase
quantity
given
of
past
the produc-
205
the government were
If
government.
the
load of
tion
to un-
dertake the direct production of housing units for the lower
last
housing
program.
the additio-
of the fact
resources
some
In addition,
expensive.
more
are
units
nal
the
be a direct consequence
This would
lowest
resources needed would at
for
estimated
those
double
the
for
programs
the
the country, the
income groups of
least
to
addition
in
class,
middle
like land, are simply not available in the amounts required,
If the go-
unless they were taken away from other programs.
because
of
cally
expect
the
approach,
housing
proach
this
and undertake
projects,
would
sense,
housing
effort
be
much
the
one
which
producer
from
requires
zation
will
and we
also
not
this
sense,
so badly needed
potential
for
encourage
the
up
put
Thus,
the public apapproach
the
in
is
government
a
The pub-
development
of
the
the bureaucratic structure.
we would not stimulate
the entrepreneuership
in the country.
We would also increase the
at
the end, the responsibility
for corruption and
failures
public
increase the degree of bureaucrati-
human resources existing outside
In
in-
financial
risks.
lesser amount of direct resources and less equity.
lic approach would
will
to
required
the marketing
The
higher.
realisti-
the
to acquire the
from the government with
required
the equity
have
and
time
the
invest
not
In addition, with
amount.
the government will
compromise,
to
allocated
pro-
other
for
goals
funding, we can
of
resources
such an
by
the
achieving
lack
the
grams
crease
in
failed
has
vernment
would
be
left
entirely
with
the
government.
206
to
Overall,
magnitude,
that
to
program
the public
increase
would make it administratively very difficult to handle.
the
units
produced
will
be greater with the consumer approach.
Since
the ini-
which
will
tract
the
ables
__-
that
financing
will
be
sized
to
contractors
will
not
less
room
the
planning
difficult
the
will
for
design
a
lesser amount
of
reduced
so
of
administration
the
be
will
have
will
users.
unknown
Wealth
better.
to
small
opportunity
the
of
government,
medium
projects
the
there will
be
However,
bureaucratization
and
corruption.
of
this
approach will
be more
it will
require
and
because
of
the
the hands
in
be
the producer
distributed
developers
and
be
of
for
scale
to
appropriated.
evenly because
more
Given
participate.
be
could
risks
distributed
the
Vari-
more
that
require
also
because
project
per
resources
be
built
are
projects
approach will
consumer
The
the
where
approach
contrast with
in
is
mechanism
This
will
outcome
the
and
better
likely
are
ref-
contacts
program.
the
in
location
and
size,
prices,
like
weighed
involved
different actors
the
among
con-
greater.
personal
stimulate
will
procedure
will
units
the
of the buyers is
the needs and desires
this
Besides,
and
financing,
possibility
the
constructor-
associations
civil
or
and
land
the
find
organize,
better
lect
cooperatives
from
come
will
tiative
of
adequacy
the
for
potential
The
programming
it
is
special
a new approach
legislation.
It
and
is
also
likely
it
find political opposition because to introduce it would
207
is
important consideration
that alternative uses
learning
a
rhythm
the
to maintain
difficulty
be
there will
and
stage,
need
will
for
This
planned.
to be
approach
this
because
necessary
is
concerns aloud.
their
resources, mainly labor, will have
the
Construccion
de la
Camara
voice
will
Construction)
(Chamber of
La
and
Fedecamaras
velopers.
A very
the formal private de-
reduction of the benefits to
imply a
of production at the same level as the one with the producer
this effect can be achieved by
approach.
A minimization of
combining
the two approaches.
be
production
system is
Therefore,
the
argue
to
need
the
of
housing
the
producer approach.
produc-
facilitate
evaluation, we
former
viable alternative
most
the
the
given
momentum has built up in the process.
consequence
a
As
will
government
needed
to
now adapted
at least until
tion,
is
support
public
implemented,
For the consumer approach to
could
approach which
is a mixed
combines the producer oriented approach and the consumer orThat combination will allow the making use
iented approach.
of the existing resources and expertise, while
new alternative
the
producing
any
case,
for
any
the
market
units
with the
additional
kind
but
characteristics.
In
the
combination
a
for
be
will
to build
of developer
costs,
required
subsidies
potential
greater
the system with
into
introducing a
of
necessary
in
order
cheaper units given
the
aforementioned
strategies to cut down the costs with a redesign of the program
of
incentives
and
an
increase
in
the
level
of
subsi-
208
likely
is
dies,
increase
to
production
the
of
the
cheaper
A mixed approach will not face such strong political
units.
opposition because the formal private sector will still parMoreover,
ticipate.
not
it will
cause a drastic
reduction
in residential construction activity that could have serious
consequences
in economic
leave
will
approach
mixed
growth
to
the
carrying
This
out
the
strata but it will not assign
unrealistic
government
with this
government
the
programs for the lowest income
unemployment.
and
responsibilities.
Lastly,
mixed approach, we will create the incentives
for
a better distribution of wealth because another scale of developers now oppressed by the market, will have the opportunity
to
proach
for
will
have
obstacles
among
the
of
step
first
undertake
to
be
the development
Venezuela
will
The
participate.
an
pursuing
evaluation of
and
cooperatives
middle
in
civil
groups.
income
this
ap-
the potential
societies
That
in
analysis
to evaluate the past experiences and identify the
for
its
implementation.
Undoubtedly, experiences
from other countries will be helpful
reference purposes.
as a framework and
for
209
LIST OF CHARTS
Page
Chart No. 1:
Chart No.
2:
Chart No. 3:
Chart No. 4:
Distribution of Venezuelan
Households According to
Income Level.
First Semester
Chart No. 6:
Chart No. 7:
Chart No. 8:
47
Monthly Payments Required in 1979
to Acquire Units from the Private
Market . . . . . . . . . . . . . .
.
52
Estimated Investment in Land
Acquisition and Development.
.
64
.
67
Initial Government Regulations
Affecting the Private Housing Market
in Venezuela.
Period 1979-1983. . .
76
Levels of Income Required to Afford
Targeted Housing Units . . . . . . .
84
Government Regulations Affecting
the Private Housing Market in
Venezuela. Period 1974-1979 . . .
88
.
.
.
Programmed Housing Solutions and
Gross Investment:
National Housing
Program 1981-1985.
Chart No. 5:
1979.
.
.
.
.
.
.
.
.
.
Levels of Income Required to Purchase
Targeted Housing Units . . . . . . .
92
Variables to Regulate the
Subsidy Programs . . . . .
.
95
Chart No. 10: Levelsof Income Required to Purchase
Targeted Units (with subsidy of 1981)
96
Chart No. 9:
Chart No.
Chart No.
Chart No.
Chart No.
Chart No.
11:
12:
.
.
.
.
Representative Schedule of Payments
with the Subsidy for Units A . .
99
Representative Schedule of Payments
with the Subsidy for Units C . . . .
100
Representative Schedule of Payments
with the Subsidy for Units E . . . .
101
14: Modification of the Subsidy Program
and Monthly Income Required. . . . .
105
15: Variations in Production
Public and Private Sector.
112
13:
.
.
.
.
.
210
List of Charts
(cont'd)
Page
Chart No. 16:
Distribution of Units
Offered According to Price.
.
.
.
.
113
Chart No. 17:
Affordability of Units Produced .
.
.
.
116
Chart No. 18:
Average Price of Units Financed
.
.
.
.
117
Chart No.
Average Loan Amount of
Units Produced . . ..
. .
118
19:
Chart No. 20:
Chart No. 21:
Chart No. 22:
Chart No. 23:
Chart No.
24:
Chart No. 26:
Chart No. 27:
.
.
. . .
Granted Subsidies Channeled
Through the SNAP, Mortgage Banks
and Financing Societies . . . . .
.
. .
119
Distribution of Units According
to Area.
Period 1979-1983. . .
.
.
.
125
Evolution of the Supply of
Small Size Units.
Period 1979-1983
.
.
126
Evolution of the Supply of
Medium Size Units. Period 1979-1983
.
.
127
.
128
.
. .
135
Monthly Average of Units Finished,
New Starts and Units Sold . . . . .
. .
136
Evolution of the
.
Supply of
Period 1979-1983.
.
Evolution of the Units Produced
and Sold, and Inventory . . . .
.
Large Units.
Chart No. 25:
..
.
Multifamily Units, Monthly Evolution
of Sales and Average Sales Price. . .
.
138
Chart No. 28:
Average Sale Price of Units Sold.
.
.
140
Chart No. 29:
Apartments Sold Classified According
to Sales Price. . . . . . . . . . . .
.
141
Multifamily Housing.
Apartments
Unsold Classified by Price
and Time on the Market. . . . . .
.
142
Chart No. 30:
Chart No.
31:
Chart No. 32:
Chart No.
34:
Minimum Feasible Areas.
.
.
.
.
.
.
.
.
.
.
Maximum Sales Price Allowed According
to Parameters of Program 4. . . . . .
Maximum Sales Price of
Hypothetical Buildings.
.
.
.
.
.
.
.
160
.
173
173
211
LIST OF FIGURES
Page
Figure No.
Figure No.
Figure No.
Figure No.
Figure No.
Figure No.
Figure No.
Figure No.
Figure No.
1:
2:
3:
4:
5:
6:
7:
8:
9:
Distribution of Units
According to Price. .
.
.
.
.
.
.
.
114
Distribution of Units
According to Area . .
.
.
.
.
.
.
.
125
Evolution of the Supply
of Small Units. . . . .
.
.
.
.
.
.
126
Evolution of the Supply
of Medium Size Units. .
.
.
.
.
.
.
127
Evolution of the Supply
of Large Size Units . .
.
.
.
.
.
.
128
Evolution of New Units,
Sales and Stock . . . .
.
.
.
.
.
.
135
Monthly Average of Units Finished,
New Starts and Units Sold . . . . .
136
Multifamily Units
Monthly Evolution of Sales.
.
.
.
.
139
Monthly Evolution of
Average Sales Price .
.
.
.
.
139
.
.
.
212
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