HOUSING THE POOR IN VENEZUELA:
FROM GENERAL POLICY TO SPECIFIC TARGETS
by
GILBERTO ENRIQUE CHONA QUINONEZ
Urbanista
Universidad Simon Bolivar
Caracas, Venezuela
1986
Submitted to the Department of
Urban Studies and Planning in Partial Fulfillment of
the Requirements for the
Degree of
MASTER OF CITY PLANNING
at the
Massachusetts Institute of Technology
June 1991.
Gilberto Enrique Chona Quifnonez 1991. All rights reserved.
The author hereby grants to MIT permission to reproduce and to
distribute copies of this thesis document in whole 1or in part.
Signature of Author__________
Gilberto Enriqu~edhona Quifionez
Department of Urban Studies and Planning
May, 1991
Certified By
Paul Smoke
and
Planning
Economy
Political
of
Assistant Professor
Thesis Supervisor
Accepted By
j'hillip L. C y
Associate Professor, Chairman MCP Commit'ee
MASSACkU9ETTS NSi
OF TECHNOLOGY
JUN 05 1991
UBRARIES
E
RoAtch
HOUSING THE POOR IN VENEZUELA:
FROM GENERAL POLICY TO SPECIFIC TARGETS
by
GILBERTO ENRIQUE CHONA QUINONEZ
Submitted to the Department of Urban Studies and Planning
on May 22, 1991 in Partial Fulfillment of the
Requirements for the Degree of
Master of City Planning
ABSTRACT
This thesis explores the limitations of the programs defined
under the Venezuelan Housing Policy Law of 1989 to target the
shelter needs of the poorest families.
The thesis argues that inadequate consideration of the
economic and institutional restrictions of the Venezuelan
housing market limits the effective implementation of
generally defined shelter programs and creates a risk of
filtering out the poor from access to housing.
Through a detailed evaluation of the Minimum Housing Program
(MHP), this thesis found that: a) Shelter programs for the
poor will incur increasing subsidies in order to be
sustainable, due to inflation. This, in turn, will restrain
access of the poor to public housing programs, either through
reduction of units delivered or through pressure for
increasing target housing prices; and b) The current
institutional structure of the shelter sector is not able to
provide specialized financial services to the poorest
families--i.e. those families earning less than three minimum
wages.
The thesis calls for an explicit treatment of inflation
effects on sustainability of shelter programs through shelter
loans indexation. It also suggests that institutional
specialization in shelter financing will be necessary in the
near future to increase targeting of low-income families.
Thesis Supervisor: Dr. Paul Smoke
Title: Assistant Professor of Political Economy and Planning
TABLE OF CONTENTS
ACKNOWLEDGMENTS
INTRODUCTION
CHAPTER I.
THE CONTEXT OF THE PROBLEM
111
1
5
7
Housing Finance for The Poor in Venezuela
Financing
Shelter
The Current Restrictions on
10
How Do The Poor Afford Shelter in Venezuela?
How Does The Government Finance Shelter For The Poor? 12
CHAPTER II. BACKGROUND ON VENEZUELAN HOUSING POLICY
The Venezuelan Housing Market
Demand Issues
Supply Issues
The venezuelan Housing Finance Sector
Institutional Structure
Recent Role of the Private Housing Finance Sector
The Housing Policy Law of 1989
The HPL: Goal and Objectives
Definition of HPL Shelter Programs for The Poor
16
20
23
25
27
29
31
CHAPTER III. EVALUATION OF A HOUSING PROGRAM FOR THE
POOR: THE MINIMUM HOUSING PROGRAM (MHP)
The Terms of The Minimum Housing Program
Specific Goals
Affordability Criteria
Summary of Assumptions and Features
Economic Evaluation of The Minimum Housing Program
Housing Provision Costs
Financial Subsidies
Institutional Evaluation of the MHP
Lending Policy
Loan Recovery Policy
38
39
40
42
47
54
55
57
CHAPTER IV. CONCLUSION AND POLICY IMPLICATIONS
Subsidies and Sustainability
Targeting and Affordability
Shelter Finance Policy Implications
Institutional Policy Implications
Overall Summary
APPENDIX A: MHP. Construction Loan Amortization
Schedules
B: MHP. Mortgage Loan Amortization Schedules
60
62
63
64
67
BIBLIOGRAPHY
75
69
71
LIST OF TABLES
11.1 National Housing Plan 1991. Distribution of Housing
Investment by Housing Programs for the AAI Target Group
III.1
MHP. Family's income share in housing payments
Minimum Housing Program
111.2
Standard Housing Costs
111.3
(MHP) . Assumptions
and
MHP. Summarized Cost Structure
111.4 Minimum Housing Program. Nominal Subsidyto Private
Developers at Selected Interest Rates and Selected Loan
Maturities
MHP. Summary of per unit subsidies in 25-year
111.5
mortgage loans
LIST OF FIGURES
II.1
Venezuela. Housing Finance System
LIST OF GRAPHS
Real Housing Price and Real Wage
Formal Sector Housing Production
Housing Prices and Inflation
Nominal and Real Mortgage Interest Rate
Value of Housing Construction
Venezuela. Housing Prices 1985-1990. Apartments up
to 50 square meters
111.2 Minimum Housing Program. Subsidies to developers @
6.25%.
111.3 MHP. Mortgage Payment Schedule. Market (30%) vs.
Subsidized Rate (6.25%)
II.1
11.2
11.3
11.4
11.5
III.1
ACKNOWLEDGMENTS
I am indebted to people who supported me to finish my
graduate studies. I thank Liliana Schilling and Nelson
Ortiz of CORDIPLAN, for their endeavors to provide me with
funding to afford my studies at MIT.
I am grateful to the Organization of American States
de Ayacucho for their
and Fundacion Gran Mariscal
institutional and monetary support during the last two
years.
I am especially grateful to Rened Okamura and Jeanne
Washington for helping me to keep my human edge at times
when school work occupied all my time and threatened my
peace of mind.
I thank my MCP fellows Christina Chiu, Toru Maruyama,
Hendi Sukarman, Farooq Afzal, Hector Merced-Delgado, Tubal
Padilla-Galiano, and Marybeth Shaw for their friendship and
the many hours of lively and fruitful conversation.
I thank Carlos Sosa for providing me with extensive
information on the Venezuelan Housing Policy Law. I wish to
thank Beatriz Sornes, Head of the Planning Division at the
Venezuelan National Housing Council, for sharing with me
her insights and information on Venezuelan housing policy.
I thank Urb. Maria Isabel Lopez for her assistance in
collecting and processing data during my stay in Caracas in
January 1991.
I am grateful to Paul Smoke, my academic advisor and
thesis supervisor, for his careful reading and his
insightful counseling meeting after meeting. I also thank
Professor Ralph Gakenheimer for his scholarship, his
respect for foreign students, and his useful academic
advice.
Finally, I dedicate this thesis to my wife Belkis and
my mother Gladis for all their love and patience.
iii
INTRODUCTION
Venezuela provides an interesting case of government
housing policy. Venezuela is
a middle-income oil exporting
country with access to substantial levels of oil revenue to
fund low-income housing programs.
After
1989,
as
a
result
of
a
economic
structural
adjustment program, the Venezuelan government developed and
began to implement an explicit long-term low-income housing
policy. The core of this housing policy until the year 2000
will
be
the
Housing
Policy
Law
(HPL)
of
1989.
The
Venezuelan HPL incorporates most of the features considered
"state
of
the
art"
in
low-income
housing
policy
in
developing countries. First, it acknowledges the need for
active participation of private developers in low-income
housing
construction.
Second,
it
embraces
sites
services, slum upgrading, incremental housing, and
housing programs
as policy alternatives.
Third,
and
rural
the HPL
recognizes the importance of informal sector developers and
cooperative housing development in squatter areas.
The objective of this thesis is to analyze the factors
constraining the ability of these HPL housing programs to
target
the
shelter
needs
of
the
poorest
families
in
Venezuela. Two themes are recurrent in this thesis. First,
I argue that subsidies to tackle the affordability gap of
the poor have to be explicitly related to the issue of
sustainability of shelter programs. Second, there is a need
for
institutional
innovation
in
shelter
financing
to
respond to the characteristics of the poor that restrict
their access to housing programs.
This thesis is neither a feasibility analysis nor a
in this
formal policy evaluation. The methodology used
paper is heterodox. I evaluate the effectiveness of HPL
through
a detailed
housing program:
evaluation
of
a representative
HPL
(MHP) .
The
The Minimum Housing Program
evaluation
is
heterodox
currently
in
its
in
early
the
sense
stage
of
that
the MHP
implementation.
is
A
conventional approach to ex-post evaluation suggests that
I should wait until statistical data on program performance
is
available
to
assess
the
effectiveness
of
the
MHP.
Instead, I chose to scrutinize specific aspects of the MHP
to assess its ability to target the poorest families--a
feasibility issue that should have been evaluated in both
economic and financial terms before the MHP was adopted and
implemented.
The structure of the thesis is as follows:
Chapter I establishes the context of the problem. In
this chapter I discuss the different approaches to housing
policy,
especially
housing
finance,
undertaken
Venezuelan government in the last three decades.
by
the
Throughout
the chapter I outline the principles and criticisms of each
housing
policy
approach
as
a
way
to
introduce
the
outstanding issues of this thesis regarding the delivery of
shelter
services
financing
to
poor
the
in
Venezuela:
subsidies, sustainability, affordability, and shelter loans
design.
examine
I
the
of
evolution
financing
shelter
approaches with regard to the characteristics of the demand
for housing of the poorest families, and I outline the
of the poor to afford
factors constraining the ability
shelter in Venezuela. I emphasize two major restrictions:
the high cost of informal shelter financing used by the
poor
and
the
institutional
inability
of
government
to
provide the poor with adequate shelter financing.
Chapter
II
summarizes
the main
demand
and
supply
features of the Venezuelan housing market and how they
shape housing policy options. On the demand side, I stress
the issue of affordability in relation to income and the
labor characteristics of poor families. On the supply side,
I examine
urban land prices,
supply, and the
institutional
the
structure
of housing
structure of the housing
finance sector. The last section of the chapter reviews in
detail the Venezuelan housing policy for the 1990s, as
embodied
in
the
Housing
Policy
Law
(HPL)
of
1989.
I
summarize the HPL programs directed to the poorest families
and discuss their general assumptions about targeting the
poorest families.
Chapter
III
evaluates
in
detail
one
of
the
HPL
programs: the Minimum Housing Program (MHP) . The evaluation
is
based
economic
price,
on
criteria
test
construction
against the
developed
and
economic
the MHP
costs,
and
assumptions
overall restrictions
in chapter
II.
about
housing
target
The
criteria.
institutional
land
prices
of the housing market
I also evaluate the
level
of
subsidies to both beneficiaries and developers and how they
affect
the
assumptions
about
affordability
and
replicability of the MHP. The institutional criteria look
at
the
suitability
implementation
of
(INAVI)
the
to
agency
reach
in
the
charge
target
of
MHP
families
effectively.
In chapter IV, I set forth the main
conclusions of
the preliminary MHP evaluation and their implications for
the design of shelter programs in Venezuela.
I suggest that
government should consider indexing shelter loan contracts
to inflation and nominal wages, as a partial solution to
improve the sustainability of HPL programs to the poorest
families and reduce the financial burden of those programs
on the government's budget. This, in turn, will guarantee
a sustained delivery of shelter financing to the poorest
families.
The
institutional
conclusions
streamlining
strongly
in
suggest
a need
governmental
financing to improve targeting of the poor.
for
shelter
CHAPTER I
THE CONTEXT OF THE PROBLEM
In
policy
this
I review how Venezuelan
chapter
approaches
have
evolved
in
relation to
housing
housing
I will refer to changes in housing policy approaches
needs.
from the perspective of shelter finance.
The way in which the Venezuelan government finances
public housing has changed through the last three decades.
In
the 1960s,
it
was thought that the poor could afford
market interest mortgages to purchase housing. Mortgage
banking was effective in providing housing finance in a
stable economy with moderate single-digit inflation.
Subsidized
housing
programs
included
approaches
ranging from mortgage subsidies for middle and low-income
housing to direct money transfers for the poorest families.
In the mid-1980s,
initial
housing
policy goals,
as
subsidies
steady
fell
short
double-digit
of
the
inflation
proved to be a permanent feature in the Venezuelan economy.
Government faced a dilemma in providing housing to the
poor:
increased housing needs and accelerated erosion of
money allocated to low-income housing programs.
In
the
private
sector,
new
mortgage
instruments
appeared in the 1980s to insure real cost recovery of money
to mortgage banks. These innovations led to the issuance of
variable
mortgage
rate
loans
for
housing.
The
most
sophisticated of a series of new mortgages was the Adjusted
Rate Mortgage (ARM)1 . The ARM incorporated interest rates
adjustments to match loan terms with inflation
1989).
(Renaud,
This indexing mechanism was expected to guarantee
the availability of housing financing for middle and low
income families.
There are two major assumptions underlying mortgage
indexing. First, households are able to afford the high upfront costs (down-payment, insurance, administrative fees)
required by mortgage banks. Second, household income will
grow in line with inflation during the amortization period.
In Venezuela these assumptions do not hold for most of the
population. As a result, a new phenomenon appeared: the
mortgage tilt,
through which mortgage monthly payments grow
faster than household income. The mortgage tilt is more
intense in the early years of the amortization schedule
(Sandilands,1980;
Kaufman and Erdevig,
1981)
because the
outstanding balance is larger and household income does not
grow in the short run relative to inflation.
Mortgage loans thus became unaffordable to low-income
1 An ARM is a mortgage with an interest rate that is adjusted
to changes in a selected price index (usually the Consumer Price
Index). The adjustment of interest rate takes place periodically
and is applied to the outstanding balance. Under this mortgage
schedule monthly payments increase substantially in nominal terms
during the initial years of the amortization period. This feature
is referred as the "up front loading" problem (Sandilands, 1980;
Renaud, 1989).
families. As a consequence, the housing deficit of middle
and low-income families increased substantially during the
1980s.
the
At
essentially
same
time,
excluded
from
the
the
formal
were
families
poorest
housing
finance
market, and left to settle for sub-standard housing using
informal financing.
Housing Finance for the Poor in Venezuela.
In the mid 1980s the government realized the financial
bottlenecks to providing housing finance for the poorest
families, and underwent a shift to a piecemeal approach in
low-income housing. The new approach called for incremental
shelter solutions as a means to achieve affordability for
the poorest families. Sites and services, slum upgrading,
and incremental housing appeared for the first time. These
programs provided low cost shelter alternatives and were
implemented along with subsidized credit for acquisition.
This thesis argues that the conventional
services
approach
applied
in
Venezuela,
sites and
even
though
adequate in many respects, gives little attention to the
specific demand characteristics of the poorest families.
The conventional sites and services approach assumes that
demand
characteristics
of
households,
such
as
income,
ability to pay, and household size, are not very relevant
for improving the financial design of shelter programs.
For
example, most sites and services projects assume, as a rule
of thumb, that households are willing to devote 25% of
income to regular monthly housing payments. Poor
their
households with fluctuating income 2 , however, might not be
willing or able to pay 25% of their income on a month-bymonth basis, but they might be willing to pay even more
25%
than
on
a
semi-annual
a payment
household,
basis.
schedule
For
including
this
type
lump-sum
of
semi-
annual payments, combined with a low monthly income (share)
payment, might be a better financial arrangement to match
income
cycle
with
payment
requirements.
This
type
of
adaptation also improves the cost recovery of a housing
loan.
In her
discussion
Pearlman
(1987)
approach
to
of
suggests
low-income
squatter
that
shelter
the
upgrading programs,
conventional
financing--and
supply
shelter
policy as a whole--is rooted in basic misconceptions about
the urban poor. Two of those misconceptions relate directly
to the problem of financing shelter for the poor:
(1) The
identification of the urban poor, and (2) the nature and
range of low income settlements. First, the urban poor in
squatter
areas
are
conventionally
conceived
as
underachievers. From this view stems the housing policy
approach assumes the urban poor require assistance for
all
2 This is the case of head of households working in the
informal sector. In Venezuela about 40% of the labor force is selfemployed in informal activities. Not surprisingly, their average
wages levels are not below the minimum legal wage (CORDIPLAN,
1988).
of
their
housing-related needs--provision
of
services,
credit, construction materials, technical assistance, etc.
The physical evolution of squatter areas in most Venezuelan
urban areas, with or without government's help, challenges
urban planners' imaginations and shows that the urban poor
have a high ability to improve their living
conditions
(Lovera, 1983; Chona, 1985).
Second,
there
is
heterogeneity
within
squatter
settlements in terms of employment, education, and skills.
The combination of these factors provides a wide range of
income levels that most shelter programs do not incorporate
in their financial design. A conventional policy approach
assumes that poverty and income restrictions are permanent
and homogeneous rather than temporary and heterogeneous
characteristics of squatter dwellers.
Pearlman (1987) summarizes her view of conventional
shelter programs in the following terms:
...
"
even
though
upgrading
and
serviced lots have become, in many
circles,
the
current conventional
wisdom, the vast majority of housing
institutions -at both national and
city
levels-are
ill
equipped
to
implement them. These institutions
were established to deal with largescale standardized construction, to
finance
conventional
loans,
to
purchase
of
building
facilitate
supplies and materials and to make
top-down
a
through
decisions
hierarchical structure -all of which
are antithetical to the implementation
of the new policies. Asking these
large bureaucracies to deal with the
individualized needs of the self-help
builders, small suppliers, precarious
borrowers, and protracted time frames
is akin to expecting an elephant to
thread a needle. And, after all that
time and effort, the results are not
"photo
opportunity"
for
a
politician."
The
conclusion
is
drastically reform their
that
institutions
need
to
standard lending policies
for
shelter financing to meet the income characteristics of the
poor.
In
order
to
design
better
programs,
government
housing agencies need a better understanding of the demand
characteristics of poor households and their relevance for
shelter financing policy (Rodwin, 1987).
The Current Restrictions on Shelter Financing:
How Do The Poor Afford Shelter in Venezuela ?
The Venezuelan government faces two major obstacles in
financing shelter for the poor: steady inflation and little
development in the financial market (Buckley, 1989; Renaud,
1989).
Inflation undermines the real value of money and
interest rates
become negative
in real
terms.
inflationary environment, long term financing
In
this
(including
mortgages) is replaced by short term lending. To offset the
negative effects of inflation on banking transactions, the
Venezuelan government liberalized interest rates in 1988.
High nominal interest rates combined with decreasing
3 Pearlman (1987). p.193
real
wages
seriously
constrain
housing
affordability,
especially to the poorest households. In the Venezuelan
inflationary environment the poor, behaving wisely, do not
save money in banks. Instead they purchase durable goods
they can easily trade, such as TVs, cars, and jewels which
provide an adequate hedge against inflation and maintain
liquidity
(Struyk et. al.,
1990).
At the same time, they
are unable to take advantage of traditional housing finance
mechanisms.
for
an alternative
As
financing shelter,
the poor
participate in different kinds of financial arrangements
provided by the informal sector (Cuenco,
1989).
Usually the
terms of informal arrangements are tailored to the income
restrictions of the poor. Informal lenders do not require
complicated application procedures and can accept different
categories of collateral usually not acceptable by banks,
such as furniture, work tools, small working capital in
and personal guarantees from third
kind, family jewels,
parties.
Loans
from
the
informal
sector
are
almost
perfectly indexed with the short term cost of money in the
economy. Therefore, they become very expensive when applied
to
long-term
(1989)
loans
describes
for
the
consumption
informal
of
finance
housing.
sector
following terms:
and
irrational
being
from
"Far
predatory, informal financing services
financial
basic
exhibit
usually
genuine
and
provide
soundness
Renaud
in
the
services. What differentiates informal
from formal services is that the value
of the claims is small, the frequency
of transactions is much higher, their
unit
cost
is
very
low,
their
geographical coverage is confined to a
small area and their availability
often limited to well defined social
groups. Monopolistic situations can
arise,
but
the
notoriously
high
interest rates of the informal urban
sector normally tend to be in line
with the current opportunity cost of
capital
in
the
economy
...
Informal
finance is costly because of the
inability to diversify risks and the
lack of standardization which can
often come with a sufficient scale of
operation. ,4
For the poor, the informal finance sector is,
at most,
a "second best" alternative to obtain funds for financing
shelter
(Rodwin,
1987).
Nevertheless,
This thesis argues
that a better understanding of informal financing and its
adaptability to the income restrictions of the poor, can
improve the design of public housing programs.
Flexible and
specialized financial arrangements patterned after those
used
in
the
informal
sector
are
more
critical
than
subsidies in designing a more coherent approach to shelter
policy for the poor.
How Does The Government Finance Shelter For The Poor?
To overcome the reduced provision of housing loans
through
the
formal
financial
market,
the
Venezuelan
4 Renaud (1989). p.22-23
12
government allocates significant shares of its budget to
subsidized shelter programs. Given foreseeable budgetary
cutbacks and government attempts to reduce dependence on
revenue
from
oil
exports,
however,
is
there
a need
to
create new mechanisms for resource mobilization.
The most recent institutional response to the question
of shelter finance for the poor is the National Housing
Savings Fund
(NHSF). The NHSF is funded through payroll
taxes and a 5 percent share of the total government budget.
The NHSF provides shelter financing that otherwise would
not be provided by the private financial market. Payroll
are
taxes
allocated
to
low
and
middle
income
housing
programs5 . The 5 percent share of the government's total
budget is exclusively directed to the poorest families.
The initial aim of the NHSF is to lend money to the
poorest
households
6
at
subsidized
interest
rates.
This
thesis argues that the real value of recovered money in
such programs will be eroded by inflation. Cost recovery in
real terms, however, is a necessary condition to allow the
HPL programs to establish sustainable revolving funds. This
obstacle in the design of the financial programs for the
poor
leads to two basic choices. Either the Venezuelan
5 Low-to-middle income target families are arbitrarily
defined by the Housing Policy Law of 1989 as those families
earning more than 3 legal minimum salaries.
6 The poorest households for housing financing
purposes are defined in Venezuela as those whose income is
below 3 minimum legal wages.
government
revenue
the
increases
or it
charges
of money
supply
from general
indexed "near to market"
interest
rates in housing loans to the poor.
From a practical perspective, the reinforcement of
loan
collection
repayments
is
also
a prerequisite
success in shelter financing programs.
It
for
is a common claim
in the literature on shelter projects that effective loan
payments collection
Barriers to loan collection
Sanyal, 1980; Cheema, 1987).
include
political
inadequate
to
unwillingness
assumptions
inappropriate
(Turok and
is difficult to achieve
about
institutional
recover
household
setting,
loans,
income,
inappropriate
collection procedures, poorly informed beneficiaries, and
lack of community
participation in loan collection.
Sustainability
and
adequate
loan
collection
are
possible only when shelter programs are affordable (Keare
and
Jimenez,
measurement
affordable
1983;
Cheema,
of a family's
programs.
1987).
income
I argue
is
that
The
appropriate
crucial to
loan
design
collection
and
sustainablity in shelter financing programs can be improved
by modifying assumptions about the poor's ability to assume
loan
responsibilities
for
housing
consumption.
These
modifications include (but are not limited to): adaptation
of loan terms to variability of income, flexible collateral
requirements--as in the informal sector--, and community
participation.
As discussed above, affordability of shelter projects
is normally defined in terms of a fixed percentage share of
monthly
income
distinction
devoted
between
seldom
made.
income
and
to
regular
Even the
salaries
housing
and
fluctuating
difference
is
not
consumption.
between
clear.
income
total
Shelter
programs exclude, by definition, alternative
The
is
family
financing
sources of
income other than main job in affordability calculations.
The
lack
of
arrangements,
flexibility
restricts
in
shelter
designing
financial
affordability
for
the
poorest families.
In the next chapter I provide a description of demand
and
supply
issues
the
Venezuelan
housing
market,
the
housing finance sector, and the policy response of the
Venezuelan
government
to
overcome
the
restrictions
on
increasing the delivery of financial services for the poor.
CHAPTER II
BACKGROUND ON VENEZUELAN HOUSING POLICY.
In this chapter I analyze the main demand and supply
constraints in the housing market and the restrictions on
the private housing finance sector's ability to target the
shelter needs of the poor. In the final part I outline the
policy
response
structural
of
obstacles
the Venezuelan
in
housing
to
government
policy.
The
these
housing
policies for all income levels are specified in the Housing
Policy Law
of
(HPL)
1989.
I describe
its
economic
and
institutional dimensions, as they relate to the targeting
of low-income families. Finally, I explain in detail the
shelter financing programs designed to target the poorest
households at the "Priority I" (AAI) level.
The Venezuelan Housing Market
Demand Issues
Venezuelan
population grew at an annual rate of 2.7
percent between 1980 and 1990--31.1 percent in a decade.
7
Total population is currently estimated to be 20 million
Nearly 80% of the population lives in 7 major metropolitan
areas:
Caracas,
Cruz-Barcelona,
Maracaibo,
Maracay,
Ciudad Guayana,
Valencia,
Puerto La
and Barquisimeto.
These
7 Of icina Central de Estadistica e Informatica (OCEI).
Indicadores de la Fuerza de Trabajo. Segundo Semestre 1990.
16
cities house most of the new urban population from both
natural
growth
and
immigration
inflows,
from
mainly
Colombia, South America, and the Caribbean.
Household formation is relatively high in urban areas.
Recent
figures
reveal
created nationally
that
150,000
every year
new households
(World Bank,
1988).
are
Under
conservative assumptions the World Bank estimated a housing
8
deficit of 800,000 to 950,000 housing units
Housing
affordability--for
all
income
groups--is
limited by a sharp decrease in real wages since 1979. Low
real wages make it almost impossible for households with
mean income to afford housing units produced in the formal
private
housing
market.
Steady
inflation,
restrictive
monetary policy, and increasing interest rates are the main
reasons for the affordability downturn
(Palacios, et al
1990).
During the 1980s, average real wages decreased faster
than real prices of formal sector housing units (see Graph
11.1).
This situation created a structural affordability
gap which is not bridged through public housing programs.
In the early 1980s, households with a median income could
only afford subsidized public housing.
8 These figures refer to accumulated deficit of new
housing units needed. They include need for housing
upgrading in squatter areas and replacement of other urban
and rural housing stock. (The World Bank, 1988,chapter 18).
17
Real
Wage
Housing Price and Real
Mean Values,
Index 1981=100.
120
110 -
100 -
90
c
-
0n0
-
M80
x
a>
c
70
60 -
50 -
1981
1982
I
1984
Y
0
I
I
1988
1989
I
I
1983
4 0
Mean Housing
1906
1985
E
A
Price
R
+
1987
1990
S
Mean Real
Wage
GRAPH II.1
Source: BCV, FUNDACONSTRUCCION, OCEI.
Another
factor
affecting
housing
demand
is
the
segmentation of the labor market. The informal labor sector
in Venezuela has grown to account for a stable share of
about 40% of the total labor force (OCEI,
1990).
This large
share of informal employment is important to understand
housing demand for two reasons. First, self-employment is
a way to overcome the low legal wages paid in formal sector
jobs
(manufacturing,
government).
rather
than
construction,
Second, the
regular
personal
services,
self-employed have fluctuating
income.
Variable
income
does
not
directly imply low-income, as was found by an extensive
study of the Venezuelan informal sector9 . Unstable income
only implies that the urban poor earn their wages in a
different time cycle
than that assumed by conventional
financial arrangements, such as mortgages.
Most demand for shelter in Venezuela is not channeled
through the formal housing market but through the informal
construction market.
real wages,
Rapid urban population
and variable
income together
growth,
low
stimulate the
construction of informal housing in squatter settlements.
Squatting by low-income families is a realistic outcome
that reflects the structural inability of the Venezuelan
housing market to satisfy the housing demand of the poor.
Given the demand restrictions, it is understandable
that most urban housing in squatter settlements evolve in
time to become stabilized slum areas. Self-construction is
the answer of the poor to economic uncertainty
(Lovera,
incremental
housing,
1984;
Chona,
contracting
1985).
of
Land invasion,
informal
construction
workers,
informal
financing, and sweat equity are the only real options of
squatter dwellers to become homeowners. This incremental
process is a "second best" solution.
9 CORDIPLAN (the Venezuelan national planning office)
conducted a systematic study, well known as the SIU paper
(17 volumes) from 1982 trough 1984. It was found
series
that self-employed construction workers, taxi drivers,
informal repairmen, street vendors, and personal services
workers, among others, earned wages well above the minimum
legal wage.
Demand
restrictions
also
clear
make
public
that
housing programs have to be mainly directed to incremental
solutions, such as sites and services, slum upgrading, and
incremental housing, to somehow rationalize the growth of
urban squatter areas.
Supply Issues
The Venezuelan housing market has not been able to
deliver enough output to meet increasing housing needs.
Population pressures, scarcity of urban land (both serviced
and not serviced),
and conventional approaches to public
housing limit housing output to a small percentage of new
households (see Graph 11.2).
Housing supply in Venezuela is delivered through four
major sub-markets (Palacios et al, 1990):
(PDC): Sites and
a) Public Direct Construction
services, slum upgrading, and rural housing.
b) Squatting(SQT): Self-development in squatter
settlements. It involves public land invasion,
purchasing construction materials,
informal
under
developers
arrangements,
and
contracting
payment
flexible
incremental
housing
self-
construction.
c) Public
Subsidized
Housing
(PSH):
Standard
housing built by private developers and financed
with government assistance.
d) Market
Priced Housing
(MPH): High
quality
FORMAL SECTOR HOUSING PRODUCTION
Public and Private Sector.
1980-1990
100.000
90.000 -
80 000O
70.000
-
7 0.000 D C
40.000
-
30.000
0,000
1
-
20.000 -
19180
10,00
1981
1992
1983
1984
Y
O
E
PUBLIC HOUSING
1985
R
A
+
1986
1987
1988
19139
199D
S
PRIVATE HOUSING
GRAPH II.2
Source: Annual Address of the President to Congress
(Mensaje
Presidencial).
housing built by private developers to address
the demand of middle to high-income families.
Government expenditure and investment is by far the
major source of economic activity in the housing sector. In
the mid 1980s,
as government reduced investment in housing
programs, the housing construction industry fell into a
recession.
The main restriction on housing supply is the steady
increase in construction costs induced by recent inflation.
These costs include land, construction materials, labor,
and construction financing. High prices of urban land are
driven by land scarcity and speculation. owning land is a
21
HOUSING PRICES AND
INFLATION
Caracas Metropolitan Area. 1980-1990.
900.0
800.0
-
700.0
-
600.0 0
0
0
500.0 -
01
X
400.0
C
300,0
200.0 -
100,0
-
I
0.0
1980
1981
1982
Y
C
CPI
+
E
1986
1985
1984
1983
A
R
1987
1988
I
I
1989
1990
S
Mean Housing Price
GRAPH 11.3
Source: BCV, FUNDACONSTRUCCION.
hedge against inflation. Inflation expectations make urban
land an asset with increasing value. Therefore, land rents
and sales prices of urban land tend to be very high in most
Venezuelan cities. Speculation in land makes housing very
expensive for all income levels.
Housing prices in Venezuela are unambiguously affected
by
inflation
in
other
markets.
The
close
relationship
between housing as a long-term asset, its financing, and
the prices of other assets in the economy makes it a very
desirable consumption good and the most valuable asset.
Graph 11.3 shows that, during the 1980s, nominal prices of
housing produced in the modern sector grew in line with
inflation.
Restrictions
bottleneck
that
housing
on
induced
the
supply
restructuring
represent
a
national
of
public housing policy in 1989, as I will discuss later in
this chapter.
The Venezuelan Housing Finance Sector
Institutional Structure
The housing finance sector in Venezuela has two major
branches--public and private. The public housing finance
sector is led by the Instituto Nacional de
created
(INAVI)
lending
money
in
Its
197510.
to
la Vivienda
role
financial
main
and
clients--developers
beneficiaries--in sites and services and
is
final
slum upgrading
(PDC sub-market), public subsidized housing projects (PSH
sub-market), and special rural housing programs (PSH submarket).
In the private sector there are
financial
institutions:
savings
and
two kinds
loans
of
(S&Ls)
associations and mortgage banks (SBH).
Several government agencies monitor and regulate the
private housing institutions
implemented
in
Prestamo (BANAP)
1966).
The
(following the USAID model
Banco
Nacional
de
Ahorro
y
operates as a Central Bank for savings and
10 INAVI was created in 1975, as a result
of the
had
which
Obrero),
(Banco
Bank
Workers
foreclosure of the
housing
public
for
agency
been the building and lending
main
INAVI's
years,
initial
its
In
1928.
since
programs-responsibility was to transfer--through housing
the increasing amounts of government revenue from oil
exports.
associations
loans
Entidades
de
Ahorro
The
(S&Ls).
y
Prestamo
Superintendencia
de
controls
the
(SEAP)
technical operations of S&Ls. Figure 11.1 shows the overall
1
institutional structure of the housing finance sectori .
The main instruments of the housing finance regulatory
system,
which
is
tightly
controlled
by
government
intervention, are mortgage interest ceilings and mortgage
portfolio restrictions (quotas)
on mortgage bank lending.
These two mechanisms ensure provision
of subsidies
and
mortgage financing--especially to middle income families-that otherwise would not be provided by mortgage banks.
Another relevant issue
is that the housing finance
system is not fully developed. The secondary market for
mortgages is weak and is supported by substantial transfers
from the Central Bank of Venezuela. As of 1988, there were
twenty S&Ls with 282 offices throughout the country. There
were only sixteen mortgage banks with
103 offices
(The
World Bank, 1988).
11 Additionally to INAVI there is the Banco de los
Trabajadores de Venezuela (BTV) and the Fondo de Desarrollo
Urbano (FONDUR). BTV is government funded but privately run
by the Confederacion de Trabajadores de Venezuela (CTV).
FONDUR (land bank) provides working capital financing for
construction of low to middle-income housing. BTV and
FONDUR financing is not significant compared to the bulk of
subsidies offered by INAVI.
Fiqure 11.1
Venezuela
Housing Finance Sector
PRIVATE SECTOR
PUBLIC SECTOR
Source: Ramirez (1984); World Bank (1988).
The Recent Role of the Private Housing Finance Sector.
Until the late 1980s high inflation and interest rate
ceilings
(imposed by the government) generated negative
yields to deposits in mortgage banks (see graph 11.4). As
a result, depositors canceled their accounts in mortgage
banks.
funds
Liquid asset accounts, and more recently mutual
and
alternatives
zero-coupon
to
the
bonds,
inflation
became
induced
better
financial
highly
negative
interest rates on savings accounts. Due to this move of
savers to other financial instruments, mortgage banks are
unable to sustain large scale lending operations.
In 1989 deregulation of interest rates allowed more
INTEREST RATE
NOMINAL AND REAL MORTGAGE
Lending and Borrowing Rate. 1982-1990.
40.00%
30.00%
20.00%
10. 00%-
-20.00%
LU
-10.00%
LU
z
<
z
U
cc
-20.00%
-30.00%
0-
-40,00%
-50. 00%
-60.00%
I
I
I
1988
1989
1990
-70.00%
1983
1982
1984
Y
o
+
SAVINGS RATE CSRD
E
1987
1986
1985
A
R
S
LENDING RATE CLR)
o
A
REAL SR
REAL LP
GRAPH 11.4
Source: BCV.
yields
attractive
on
saving accounts.
However, savings
accounts deposits did not increase significantly. At the
time,
same
adjusted
rate
mortgages
created
serious
affordability problems to first-time homeowners.
In 1991, mortgage banks face sluggish operations--even
after
interest
rates
deregulation.
On the demand
side,
mortgages are a luxury for most households with an average
income
(Cilento,
financial
1989b).
On
the
supply
side,
other
instruments continue to offer more attractive
deposits12 . The
to
yields
severe
lack
of
deposits
in
mortgage banks creates a scarcity of funds for private
lending for housing and precludes mortgage financing for
low-income families.
structure
The
Venezuela
specialized
is
of
the
particularly
finance
shelter
housing
sector
finance
for
services
providing
in
deficient
in
the
poorest
families. In the current situation, neither INAVI nor the
S&Ls have an adequate institutional structure to meet the
sophisticated
more
requirements
of
low-income
housing
policy.
The Housing Policy Law of 1989
In 1989, the housing sector was going through a deep
crisis. Although the Venezuelan government views public
housing as a social priority that provides a mechanism for
wealth
transfer
to
the
disadvantaged
poor
families,
government investment in housing was erratic in the late
1980s (see graph 11.5).
In the private sector, the on-going
recession in housing construction limited production to
high-income housing units, and kept a low level of overall
13
investment in housing compared to the public sector.
12 Mutual funds, zero-coupon bonds, and hard currency
accounts in Venezuela provide returns that offset doubledigit inflation. Liquid asset accounts offer slightly
negative real interest rates.
13 Palacios et al,(1990),
discuss the role of
as a driving force
resorts
and
housing
production of luxury
They isolate two
1980s.
late
in the housing market in the
has a
production
housing
1) Luxury
issues:
major
27
VALUE OF HOUSING CONSTRUCTION
In Real Terms C1980 Constant Prices)
13.0
12.0
11. 0
10 0
O
9.0
8.0
7. 0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1980
1982
1981
Y
5
1985
1984
1983
E
Public Housing
A
R
+
1986
1987
1988
1989
S
Private Housing
GRAPH 11.5
Source: BCV
A new social-democrat administration came into office
under
the
political
(Concertacion Nacional)
slogan
in
1988.
of
"national
consensus"
The new policy required
all parties involved in the housing sector to sit at the
bargaining table to produce a "consensus" national housing
policy.
Government
officials,
private
developers,
S&L
bankers, academics and NGOs engaged in the drafting of a
"new" housing policy for the 1990s. The Housing Policy Law
(HPL) of 1989 was enacted as a result of this political
"demonstration effect" that pushes up prices of other types
of housing. 2) Luxury housing is traded in US$ terms, so it
targets wealthy families and foreign real estate investors.
28
process14.
The Housing Policy Law: Goals and Objectives.
The housing policy goals and objectives included in
the legal act
(decree) of the HPL, can be summarized as
follows:
1) To supply 3 million housing units by the year
2004.
This
goal
will
be
achieved
through
both
public
programs and privately produced housing.
2)
To
synchronize
the
five-year
national
development plan with a five-year national housing plan for
new administrations to come.
3) To create the National Housing Savings Fund
(NHSF) funded by a tax on wages and a fixed 5 percent of
total government general revenue. The NHSF will be the main
source of housing financing for low-income groups in the
1990s.
4) To create the National Housing Council (NHC)
to manage the NHSF, monitoring the HPL, and issue one-year
and five-year housing plans.
5) To target the poorest families (earning up to
3 minimum legal wages) through special government assisted
housing programs;
the
five percent share
of government
general revenue will be devoted exclusively to programs for
the poorest families--labeled as "Priority I" area (AAI).
time in the
14 The HPL was published for the first
4153 (Special
Government Journal (Gaceta Oficial) No.
Issue) of September 27, 1989.
6)
financial
To
housing
determine
policy
targets
for
assistance:
Priority I (Area de Asistencia I, AAI): loans up
to
65 minimum legal wages to
services,
slum
upgrading,
finance sites
low-price
&
housing
purchase and renovation, and rent deposits.
Priority II (Area de Asistencia II, AAII): up to
180 minimum legal wage loans. These loans are
funded
by
the
NHSF.
Loans
are
directed
to
finance low-price housing purchase up to the 180
minimum wages price ceiling.
Priority III
(Area
de Asistencia
III,
AAIII),:
subsidized mortgages for purchase and renovation
of housing up to a 300 minimum legal wage price
ceiling. These loans will be funded through a
mutual fund scheme managed by the Central Bank of
Venezuela (BCV)15
Priority IV (Area de Asistencia IV, AAIV) : market
priced mortgages for housing purchases above 300
and under 720 minimum legal wage price ceiling.
No subsidies are provided for these loans.
15 BCV is entitled to hold 10 percent of total NSHF
deposits (encaje). BCV is allowed to speculate in the
financial market to achieve competitive returns (between 26
and 42 percent) using these deposits. The returns of BCV
operations would then be available to finance subsidized
mortgage loans up to the 300 minimum wage price ceiling.
Overall, the HPL intends to tackle the main obstacles
to
housing
restrictions, and
from
S&Ls
affordability,
delivery:
supply
land
(most of all) lack of housing finance
banks.
and mortgage
Given
its
comprehensive
approach, the HPL act is fairly complex. The HPL is also
innovative. It introduces the use of minimum wages as a
benchmark for housing price targets.
In
spite
mobilization,
misconceptions
of
its
the
HPL
about
positive
is
based
targeting
on
resource
several
economic
effects
on
the
poor.
define
I
misconceptions as those features that are inconsistent with
the characteristics of the Venezuelan economy and housing
market.
For instance, subsidies to housing under steady
inflation and rapidly increasing housing prices are likely
to fall short of their goal unless available funds also
increase rapidly. Subsidies will not significantly increase
the
delivery
of
public
housing,
since
not
do
they
facilitate financial self-sustainability.
Definition of HPL Shelter Programs for the Poor.
The HPL proclaims that 5 percent of the government's
total budget will be targeted exclusively to housing the
poorest families. Theses funds will be devoted to finance
ten programs for the AAI target group--households earning
less than 3 minimum legal wages. The programs are:
1) squatter
Upgrading:
construction
of
trunk
infrastructure (water, sewer, roads) in squatter
31
settlements located on stable soils.
2)
Housing
in
Upgrading
Areas:
Squatters
incremental replacement of shanties for finished
housing units as a second stage after a squatter
upgrading program.
up
Loans
soils.
stable
Squatter
to
legal
20
be
must
areas
on
minimum
salaries.
3)
Sub-standard
of
Replacement
Incremental
Housing: incremental replacement of shanties in
stable squatter settlements where basic services
exist.
already
up
Loans
30
to
legal
minimum
wages.
provision of core housing
4) Minimum Housing:
unit
dwelling)
built on
unit
sanitary
or
(sanitary
an already
basic
plus
serviced plot.
Loans up to 50 legal minimum salaries (core),
or
up to 90% financing of fully built units.
5) Sites and services: servicing of undeveloped
land
to
provide
construction
loans
in
prorated
plots
future
beneficiaries.
by the
variable
for
amount,
development
costs
Subsidized
depending
and
the
housing
on
level
the
of
subsidy established by the public housing agency.
6) Self-Help Housing:
housing upgrading under
self-help or mutual-help schemes. These projects
can be promoted by either individuals or non-
governmental organizations (NGOs). The amount of
financing depends on the size and characteristics
of the project proposal.
7) Basic Housing with Small Business Extension:
provides a basic housing unit with additional
allow development
space to
workshop
enterprises.
Loans
legal
65
to
up
of
micro
minimum
salaries.
financing of
8) Rental Housing and Tenements:
private rental housing projects affordable to
families
low-income
amounts
Loan
(AAI).
vary
depending on the characteristics of the project
proposal.
9) Rural Housing: small housing projects in rural
than
towns--less
fully built
include
amount
15,000
financing
of
inhabitants.
basic
housing
depends
on
Projects
units.
The
size
and
the
characteristics of specific projects.
10) Technical Assistance Networking for Self-Help
and Cooperative Housing: provision of technical
assistance to self-help, mutual-help, cooperative
housing and other organized alternative projects
in
squatter
registry
(design
of
areas.
technical
consultants,
suppliers),
Creation
of
a
national
assistance
providers
construction
materials
NGOs, and other organizations
and
33
individuals interested in the development of lowincome housing alternatives for squatter areas.
These programs will provide two kinds of financing:
(a) Long-term financing, equivalent to 65 minimum legal
wages or less, to families, and (b) Construction loans to
developers committed to build housing units with a target
65 minimum legal wages
price of
current
(April
minimum
1991)
or
wage
less. Assuming
of
financing in the AAI represents housing
4,000
Bs,
the
total
(or loans) units
with prices up to Bs 260,000. This implies a price (loan)
equivalent to
1.8
annual family
incomes. By developing
countries market standards, this ratio indicates a good
potential for affordability16 . The interest rate for AAI
loans is currently 6.25 percent a year.
The NHC's Annual Housing Plan for 199117 establishes
a distribution of expenditures for the AAI target group. As
shown in TABLE II.1. Land acquisition, sites and services
projects,
and
slum
upgrading
will
comprise
89%
of
governmental investment in low-income housing. It is not
clear from this table
,however, the exact proportion of
subsidized credit directed specifically to low-income
16 Renaud (1989) reports that, for a sample of 12
developing countries, the ratio of housing price to income
ranges between 2.5 (Thailand) and 6.2 (India).
17 Consejo Nacional de la Vivienda (NHC) . Lineamientos
del Plan Nacional de Vivienda 1991. Caracas, September
1990.
34
Table 11.1
National
Housing
Plan
Housing
of
Distribution
1991.
Investment by Housing Programs for the AAI Target Group.
%
INVESTMENT
(Billion Bs)
PROGRAM
7.5
8.6
3.8
1.4
0.3
0.7
33.5
38.7
17.2
6.2
1.2
3.2
22.3
100.0
Land Acquisition & Servicing
Sites & Services and Rural Housing
Slum Upgrading Loans to Squatters
Incentives to Private Developers & NGOs
community organization Programs
Technical Assistance Networking
Total
Source: Venezuelan National Housing Council.
families and the proportion that goes to low-income housing
developers--as financial incentives.
Having
a
clear
distinction
between
financing
to
developers and loans to families is important to determine
the distributional impact of HPL shelter programs (Vetter,
1977).
If housing prices are fixed at a maximum of Bs
260,000 , most developers will build housing and sell units
at this highest price to maximize their profit. This is a
foreseeable outcome of price controls (Cilento,1989a) . AAI
families
that
do
not receive
a direct
loan
for
self-
construction will pay the maximum target price possible for
a housing unit. This price includes the private developer's
mark up. On the other hand, providing direct subsidized
shelter
loans
distributional
to
the
poorest
impact--i.e.
it
families
increases
a
higher
their
income
has
level. From the information currently available on the HPL
35
is not possible to assess if the emphasis is
programs it
to
subsidize the demand side (families) or to subsidize the
(developers). The explicit definition of the
supply side
an important
is
subsidies
purpose of
issue
in housing
two
additional
policy design.
The
design
constraints
on
of
HPL programs
the
poorest
places
families.
First,
the
HPL
requires that beneficiaries of AAI loans have regular land
tenure. For most of the squatter areas, this is not the
and
case
it
is not
likely to
be
easily
accomplished.
Second, AAI borrowers have to declare a stable source of
income, such as a regular job. In this target group there
is
very
likely
one
or
more
self-employed
household
member(s) working in the informal sector. For this type of
family, income is fluctuating, but not necessarily low.
Under conventional income surveying, household income of
the
poor
is
typically
underestimated,
diminishing
the
chance of these families being targeted (Keare and Jimenez,
1983).
Lack of land tenure and fluctuating income limit the
possibilities of the poorest families to afford housing
under the HPL.
I argue that targeting the poorest
families
(AAI)
requires more specific terms than those given in the HPL.
This hypothesis relies on the idea that characteristics of
the housing market and the current institutional structure
of the public housing sector limit the access of the poor
36
to shelter. In Chapter III, I will test my hypothesis by
evaluating
in depth
an HPL program directed to the AAI
families: The Minimum Housing Program (MHP).
CHAPTER III
EVALUATION OF A HOUSING PROGRAM FOR THE POOR: THE MINIMUM
HOUSING PROGRAM
In the previous chapter I proposed that the HPL is
likely to filter out AAI families from access to housing.
This chapter evaluates this hypothesis with respect to the
economic and institutional aspects of the Minimum Housing
Program (MHP). The purpose of the evaluation is to reveal
the pitfalls of the MHP in targeting the poorest families.
The economic evaluation will discuss how housing provision
costs tend to shift MHP unit prices to a level out of reach
to the target families. It will also show how substantial
subsidies--to developers and beneficiaries-- are required
to
achieve affordability
in the MHP. The
institutional
evaluation will reveal how the lending policy and loan
recovery policy may limit the targeting of the poorest
families. I conclude that failure to recognize and act on
economic and institutional restrictions will lead the MHP
to replicability problems in the medium run.
The Terms of the Minimum Housing Program (MHP)
Specific Goals. The Minimum Housing Program (MHP) in
the HPL provides low-cost housing to families in the AAI
level. The target price of individual units is fixed at 65
minimum wages
(Bs 260,000
as of 1991).
The MHP provides
short term construction loans to private developers with a
commitment to achieve the target unit price. Under this
scheme, developers obtain up to 3-year financing of 90% of
total construction costs. The interest rate for short term
loans to developers is 6.25 percent plus one percent (one
point) loan fee.
Units
are
sold
to
beneficiaries
a
under
25-year
mortgage loan. The loan-to-value ratio on these mortgages
is 90%, meaning that a 10 percent down-payment is required.
The National Housing Council decides what interest rate is
charged in the MHP.
The current ( April 1991) interest rate
is 6.25 percent.
Affordability
Criteria. The MHP requires
a family
income not greater than 3 minimum wages (Bs 12,000, as of
April 1991). The maximum monthly payment is limited to 25%
of family income
(Bs 3,000
per month).
For 1990,
this
target group represents families under the 53rd percentile
of the income distribution. Table III.1 shows affordability
under current MHP terms. From this table it is clear that
at a subsidized interest rate, MHP units are affordable to
families
earning
3
minimum
wages18 .
Given
the
13.2%
maximum income share I can assume that some target families
earning
less
than
3 minimum wages--exactly
down to
Bs
18 The reader should note that I refer to affordability
to families "at the top" of the income target. For families
earning less than 3 minimum salaries, the income share is
greater than 13.2 percent.
Table 111.2 Minimum Housing Program (MHP). Assumptions and Standard Housing Costs,
ASSUMPTIONS
UNIT
5,300.00
Bs
Minimum Wage (KW)
344,500.00
Bs
Target Price (65 x MW)
8.70
Hectares
Total Land Plot Area
40.00
Bs/m2
Price
Unit
Land
3,478,261.00
Bs
Price of Total Plot
57.50%
%
Net Area/ Gross Area Ratio
100.00
m2
Individual Plot Size
500.00
Units
Total Housing Units
40.00
m2
Housing Unit Area
400.00
Bs/m2
Individual Plot Development Cost
3,500.00
Bs/m2
Housing Construction Cost
40,000.00
Bs/Ha
Design and Engineering (Land) Cost
100,000.00
Design and Engineering (House) Cost (One House Design no unit)
Standards Adequacy Supervision Fee (0.2% .2,200 Bs/m2 house)
Municipal Engineering Inspection Fee (0.2% x 2,200 Bs/m2 house)
Engineering Standards Final Aproval Fee (0.3% x 2,200 Bs/i2 house)
2.50
Reserve Fund for School Construction
25.00%
Annual Construction Costs Inflation
UNIT
AMOUNT UNIT PRICE TOTAL(Bs)
*** Housing Unit Costs ***
6,956
173.91
40.00
.2/housing unit
Raw Land
696
173.91
4.00
22/housing unit
Design and Engineering (Land)
no unit
Design and Engineering (House)
2,720
0.0116
235,000
liter/second
Water Conection Rights
Municipal Engineering Fees
69,565
400.00
173.91
m2/housing unit
Land Development Cost
140,000
roofed m2
40.00 3,500.00
Housing Construction Cost
20,244
9.66%
209,565
Costs Inflation (Land & Housing)
2,202
1.03%
213,797
% of loan
Insurance Fund Fee (1.03%)
% Const. Cost
Construction Loan Financial Cost
13,250
5,300
2.5
Contribution to School Contsruction (Clause 111 Law of Educati
3,299
1.00%
329,922
% of price
Legal Cost
8,248
2.50%
% of price
329,922
Sales Commission
3,299
1.00%
329,922
% of price
Advertisement
12,329
3,74%
%of price
329,922
Other Purchase Fees
2,000
no unit
Public Registrar
Profit Margin to Developer
*** Sales Price (SP) ***
Down-payment
Outstanding Balance (OB)
Monthly Payment @ 6.25%
Loan Insurance (1.43% x 0B)
TOTAL MONTHLY PAYMENT (TMP)
Minimum Wage required (TMP < 25% x Wage)
Maximum family wage allowed (3x MW)
Source:See Footnote 19.
% of price
roofed n2
% of price
% of price
329,922
40.00
326,864
326,864
12.50%
8172
10.00%
90.00%
2,150
351
41,240
326,864
32,686
294,178
2,501
10,003
15,900
under the MHP's unit
MHP units,
also afford
6,336--can
price assumption.
Table III.1
MHP. Family's income share in housing payments.
----------------------------------------------------
(Bs)
(Bs)
(%)
Income
Payment
Income
Rate
Price
of
Share
Monthly
Interest
Housing
(%)
(Bs)
----------------------------------------6.25
260,000
30.00
260,000
25.0
5,942
93.8
if
families
target
the
to
unaffordable
at
financed
were
they
be
would
units
MHP
price,
low
of
regardless
that,
suggests
This
wages.
minimum
less
earning
those
for
higher
or
income
end
top
the
of
50%
around
be
rate
interest
market
would
monthly
of
level
fixed
a
to
sensitive
very
is
share
conservative
share
monthly
3
a
At
income
the
family's
market"
to
"near
rates.
interest
of
Summary
40
at
land
connections
direct
water,
include
sewer,
to
electricity,
unit
are
Projects
cost.
low
MHP
The
Features.
housing
square-meter
Projects
land.
undeveloped
and
Assumptions
two-bedroom
serviced
include
1,584
6,336
assuming
12,000).
(Bs
income
with
6,336
income
increases,
rate
interest
a
49.5
that
observe
also
I
their
13.2
5,942
30.00
260,000
than
1,584
12,000
6.25
260,000
(30%),
12,000
individual
public
trunk
infrastructure
plots.
Basic
lighting,
delivers
on
built
on
built
services
and
40
1990).
(INAVI,
paved streets
Individual plot size in
MHP
projects is 100 square meters. Table 111.2 summarizes the
basic assumptions and features expected from a MHP standard
project 1 9 .
Economic Evaluation of the Minimum Housing Program.
Housing Provision Costs. I will analyze the MHP in
three steps.
First,
I
will discuss the assumption about
land prices and their impact on MHP costs. Second, I will
discuss how MHP housing prices--as a proxy for construction
costs--compare to market prices for units of similar size.
Third, I discuss the issue of economies of scale in the
MHP. The cost structure of the MHP is summarized in Table
111.3. From this table, I will analyze the major items to
reveal the implications of the MHP cost assumptions in the
context of the Venezuelan housing market.
Land Prices. The MHP assumes a unit land price of Bs
40 per square meter. At this price, the cost share of land
amounts to just 2.1 percent of the standard MHP unit price.
Given the Venezuelan market outlook provided in chapter II,
this
assumption
statistics
on
is
land
unrealistic.
prices
are
not
Although
systematic
available
for
the
19
Area
de
Asistencia
I
de Ley de
Politica
a
baratas
viviendas
a
definitiva
Habitacional: Solucion
EL
in
Published
financiamiento.
de
trav6s del plan especial
UNIVERSAL (a major national newspaper) 4/1/91. Information
was obtained from the National Fund for Urban Development
(FONDUR).
42
Venezuelan market, some qualitative considerations allow an
evaluation of the probably increasing gap between
land
price assumed in the MHP and market land prices.
Table 111.3
MHP. Summarized Cost Structure
----------------------------------%COST
ITEM
----------------------------- ------2.1
Land
Hard Costs
Land Development
Housing Construction
Inflation Contingency
Soft Costs
Administrative & Legal
Profit to Developer
22.5
42.8
6.1
13.6
12.6
Source: Table 111.2
Evidence
available
property
at
suggests
rural
(municipal)
that
locations
lands.
low
and
The
land
for
prices
are
suburban
relatively
low
only
public
price
assigned to the land stock reveals a policy of providing
low-cost land for low-income housing projects, regardless
of the future replacement cost of stock units. Furthermore,
it is easy to underprice public land but not private land.
Most likely, MHP projects will be feasible only in suburban
areas and rural settlements. The MHP is not a suitable
program for urban areas, where it is likely that few low
cost units can be produced, due to the higher cost of
private land for development and the unrealistic assumption
about land costs in Table 111.3.
Housing Prices. The target housing price in the MHP is
Bs 260,000, meaning Bs 6,500 per square meter of housing
construction.
with
For housing units
similar
size--but
higher quality--the average market price was about Bs 1
Prices
Housing
VENEZUELA.
Apartments
1985
1990
up to 50 m2.
1. 10
I 00
0.90
0
0.80
-
0.70
L
0
S
0.
0.50
0.60
-
0.30
-
0 20
Y
5
Nominal
1988
1987
1986
1985
E
Price CNP)
A
R
+
1990
1989
S
Real
Price CNP/CPI)
GRAPH III.1
Source: FUNDACONSTRUCCION.
million2 0
in
1990
(see
Graph
111.1),
or
Bs
20,256
per
20 FUNDACONSTRUCCION records sales of apartments built
in the 16 main urban markets. Between 1985 and 1990 the
average price of an apartment sized up to 50 square meters
increased nearly four times from Bs 281.6 to 1.012 million
Bs. At the same time, the number of apartments sold in this
category fell from 505 units in 1988 to only 236 units in
1990. The small number of apartments sold illustrate the
general affordability problem in Venezuela.
square
meter
of
housing
construction.
At
the
average
nominal market price, the required subsidy to move private
developers to build a Bs 260,000 housing unit, would be
roughly Bs
producers
subsidy
750,000.
In
other
(at 1990 prices)
words,
a
290% subsidy
would be necessary.
developers receive
is
a low
of
The only
interest rate
for
construction loans. Since market housing prices grow in
line
with
inflation,
keeping
artificially
low
housing
prices for MHP units will create pressure for increasing
subsidies to private developers if a meaningful amount of
housing
is
to
be delivered
through the
MHP.
The
only
alternative is to raise the ceiling price of MHP units to
reduce the amount of additional subsidies required.
Just
recently21
the
National
Housing
Council
did
announce a new ceiling price for MHP units of Bs 344,000.
Calculations in Table 111.2 (assuming a Bs 326,864 price)
are based on this new price. This increase reflects the
pressure of increasing construction costs on the controlled
prices of MHP units. Given the restriction of 65 minimum
wages as the MHP ceiling price, the price increase should
only have occurred if the minimum wage increased 32%--from
Bs 4,000 to Bs 5,295.
The increase
in
minimum wage,
in
fact, never occurred. It follows that affordability of the
MHP
to
target
families
earning up
to
3 minimum wages
diminished. A ceiling price of Bs 344,000 assumes that the
21 El Nacional 2/1/91.
45
target families are actually earning 4 minimum wages22.
The growing disparity between construction costs and the
controlled prices will continue to increase pressure to
raise the MHP ceiling price.
Economies of Scale. From Table 111.2 it is clear that
the MHP requires a minimum scale of 500 units on a 8.7
hectares parcel to achieve the target unit price (See Table
111.2). Technically, it is possible to build 500 housing
units
at
cost2 3 . The
low
hectare plots of
question
arises
whether
8.7
land are available in most Venezuelan
cities. This plot size is characteristic of suburban or
rural areas,
so that MHP projects are more feasible in
those areas. In urban areas the target MHP unit price is
not
likely
to
be feasible.
If
big
land plots
are
not
available at low cost, then smaller projects at higher
prices
that violate HPL
guidelines will
outcome of urban MHP--unless
still higher
be
the
likely
subsidies
be
provided.
22 At the new Bs 344,000 ceiling price (equivalent to
65 minimum wages), the implicit minimum wage is Bs 5,293.
A family earning 3 minimum wages should earn Bs 15,877.
Since the minimum wage is still
Bs 4,000 (as of 4/91),
implicitly the new target families are those earning about
4 minimum wages (15,874/4,000).
23 Specifically referring to latin american standards,
Goethert and Caminos (1978) suggest that a 100 square meter
individual parcel (6.03 x 16.66) is an optimum standard to
minimize
layout
and
services
an efficient
provide
development costs in sites and services projects.
Financial Subsidies. An evaluation--in nominal terms-of the MHP will reveal financial costs (benefits) involved
in the MHP and to whom they accrue. The basic financial
provisions of the MHP are:
1) Low financial cost to private developers of
MHP
expressed
is
This
projects.
in
90%
a
construction financing at a 6.25 percent interest
rate--30 or so points below market.
(see Graph
111.2)
2) Subsidy to home buyers through a 25-year 6.25%
percent interest rate mortgage.
Income
3)
ceiling
for
target
of
families
3
minimum wages (Bs 12,000).
to
Subsidy
assumption
I
private
will
measure
For
developers.
the
amount
of
first
the
money
the
government is implicitly transferring to private developers
by providing subsidized construction loans. Table 111.4 and
Graph 111.2 summarize this measurement. Assuming a minimum
one-year construction loan to private developers
and a
conservative market interest rate of 30%, a 500-unit MHP
project implies a transfer of 18.1 million Bs. This means
a Bs 36,260 per unit subsidy--in nominal terms. Should the
be
construction
loan
corresponding
subsidy
extended
would be
up
Bs
to
3
years,
63.6 million--or
the
Bs
2 4 of the later
127,230 per housing unit. The present value
is Bs 77,021. The present value of the subsidy to
Table 111.4
Minimum Housing Program. Nominal Subsidy
to Private Developers at Selected Interest
Rates and Selected Loan Maturities. 25
-------------------------------------INTEREST
RATE
1-YEAR
LOAN
25.00
30.00
35.00
40.00
14.1
18.1
22.3
26.6
2-YEAR
LOAN
3-YEAR
LOAN
( Million Bs )
(%)
-----------------------------------29.1
38.2
47.9
58.3
47.5
63.6
81.4
101.2
Source: See Appendix A.
developers from the MHP ranges between 13.9 percent and
29.6 percent of the housing price--assuming a Bs 260,000
target price. Thus, if the large differential between
market rates for construction loans and the MHP rate of
6.25
percent
implicitly
order to
is
maintained,
the
government
incurring a substantial
stimulate
the construction
opportunity
would
be
cost
in
of MHP units.
The
economic cost of a MHP unit is approximately 1.3 times its
24 Assuming a discount rate of 30 percent. This rate
is a conservative assumption given the current nominal
market interest rates which fluctuate between 30 percent
and 40 percent.
25 This table shows the difference between the final
outstanding balance of a construction loan at a theoretical
higher interest rate compared to the 6.25 percent MHP rate.
Three loan draw schedules are considered: 1, 2, and 3
years.
MINIMUM HOUSING PROGRAM
Subsidies to Developers @6.25%
110
100 -
go
C
0
90 -
-80
C)
70
(n
060
W
-
50
50
a
a
LL
40
0
C
D1
30
4
20
25.00%
31.00%
29 00%
27.00%
MARKET
0
1-YEAR LOAN
+
33.00%
35.00%
37.00%
39.00%
INTEREST RATES C%)
2-YEAR LOAN
o
3-YEAR LOAN
GRAPH 111.2
Source: Table 111.2 and Appendix A
target price, when the subsidy for a 3-year loan to private
developers is added.
At first glance this does not seem to be a problem
since the government is not actually spending extra money
to subsidize private developers
economic
logic,
the
26 .
government
However,
is
under strict
giving
away
the
opportunity cost of investing the funds provided to finance
private developers. A political question arises:
should
government incur high subsidies to induce developers to
26 Lartitegui (1989) pp. 10-11 argues that providing
subsidized credit will not a be a problem for the period
1990-2004, since increasing nominal amounts of money can be
obtained from government's general revenue.
deliver
MHP units
rather
than
directly
target
housing
subsidies to squatter dwellers?
I think that the government should not provide such
big share of unit price as a subsidy. A better option for
allocating housing investment resources would be to reduce
the subsidy and re-allocate investment to other housing
programs,
such as squatter upgrading.
Two effective ways of
reducing the subsidy are either restricting amortization
period
of
construction
loans
to a one-year maximum
or
increasing the interest rate to private developers to "near
to market" levels. As for re-allocating housing investment
to
squatter
upgrading
or
sites
and
services
programs,
subsidies in these programs directly increase the housing
consumption of slum dwellers, as was pointed out before.
Subsidies to developers are an expensive solution to
keep MHP units affordable to target families. In the medium
term this kind of subsidy restricts the possibilities of
creating a revolving fund to support the MHP.
The declining
value of funds recovered from construction loans at a 6.25
percent interest rate after three years, compared to market
rates in the 30-40 percent range, will reduce the possible
number of new MHP loans, even if construction costs remain
constant.
If
increase, the
increase
construction
costs
of
MHP
units
tend
required subsidy to developers will
because
larger
construction
loans
required, thereby reducing the number of loans still
will
to
also
be
further.
Subsidy to Beneficiaries. The second financial aspect
is the issuance of subsidized mortgages to beneficiaries of
the MHP. Tables III.5A through III.5D in Appendix B show
the amortization schedules for a 25-year mortgage at a 30%
market interest rate as compared to the 6.25 percent in the
MHP mortgage. Using these two interest rates, and holding
other things constant, two different amortization schedules
(subsidized and non-subsidized) were estimated for two MHP
unit prices ( the old and new ceiling price of Bs 260,000
and Bs 326,864). Table 111.5 summarizes the results.
Table 111.5
MHP. Summary of per unit subsidies in 25-year
mortgage loans.
Price
(Bs)
260,000
260,000
326,864
326,864
Interest
Rate (%)
6.25
30.00
6.25
30.00
Graph 111.3
Annual
Annual Subsidy Present Value of %of
Price
Subsidy(@30%)
Payment (Bs)
19,010
71,305
23,899
89,642
174,170
218,833
52,295
65,743
--
67.0
66.9
-
shows the two payment schedules--in nominal
terms--assuming the Bs 260,000 MHP unit price. The exact
measurement of the subsidy to beneficiaries is determined
by the present value of the stream of annual subsidies over
the life of the loan. In simple terms, if the beneficiary
had to pay a market interest rate, he would have to make a
deposit
of
Bs
174,170
the
first
year
(at closing)
in
MHP. MORTGAGE PAYMENT SCHEDULE
MarketC30%)
vs. Subsidized Rate C6.25%)
80.000
70.000
60. 000
50.000
40.000
30.000
20.000
10.000
0.000
7
10
16
13
25
22
19
Y E A R S
0
+
TOT PYMNT @30%
0
TOT PYMNT @6.25%
AMORT @ 30%
A
AMORT @6. 25%
GRAPH 111.3
Source: Tables 111.4 through III.4C (See Appendix B)
addition to an annual payment of Bs 19,010. As can be seen
from Table 111.5 the value of the subsidy at a 6.25 percent
interest
rate
the
subsidy
given
to
MHP
clients
is
equivalent to 67% of the housing price. In other words, MHP
beneficiaries acquire a housing unit which has a financial
cost
of
1.67
Affordability
times
is
the
achieved
price
they
actually
a
high
price
at
pay.
to
the
government.
Up front financial costs. In Venezuela (Ramirez,
it
1984)
is customary for market mortgage loans to require a
minimum 25%
down-payment. Down-payment
to access
a MHP
housing unit is 10 percent. Under two price assumptions (Bs
260,000 and Bs 326,864) the down-payment represents 2.2 to
2.7 monthly family incomes. Loan insurance established by
the MHP accounts 1.43% of initial outstanding balance, or
between
0.28
and 0.35 monthly family
incomes. Thus, up
front financial costs do not seem to be a roadblock to MHP
loan applicants.
A caveat, however, is that what is affordable to low
income families is much more affordable to higher income
families. Failure to reinforce eligibility criteria can
exclude the very poor from access to MHP credit. Since MHP
are
units
adequate
very
affordable--under
selection
of
the
beneficiaries
current
terms--
deserves
special
reinforcement.
At this point, a second policy question arises: what
should
be
the
desired
level
of
financial
subsidy
to
beneficiaries? This question has to be answered in two
aspects. First, certain level of subsidy is necessary to
guarantee affordability to families below 3 minimum wages.
Second, the nominal interest rate charged has to be large
enough to allow cost recovery in real terms--i.e. to reduce
the need for additional government funds, which might not
be available
in the
future.
These
two concerns
can be
theoretically addressed through loans dually indexed to
inflation and wages, which I discuss in detail in chapter
IV.
Summarizing the financial analysis, I argue that the
government's financial costs 27 of delivering a
range between 1.8 and 1.928 times its
MHP unit
official price, when
subsidies to developers and households are accounted for.
This
result
clearly implies
that the MHP
as
currently
structured is not a sustainable operation.
Institutional Evaluation of the MHP.
Starting in 1991, the HPL entitles INAVI to manage a
2.6 %29 share of the government budget directed to the AAI
families30 . This is a major shift in Venezuelan housing
policy,
which
provides
INAVI
with
a
Bs
11.8
billion
investment portfolio. The MHP accounts for Bs 1.6 billion
(13.5 percent) of this portfolio. This endowment is the
highest budget ever assigned to INAVI. As a consequence,
INAVI will restructure itself from a multipurpose housing
agency to a housing corporation. As a corporation INAVI
will
have
a
decentralized
structure
with
regional
27 Measured as opportunity cost that government is
giving away through financial subsidies to both developers
and MHP beneficiaries.
28 That is, a 30% subsidy to developers and 50% to 60%
subsidy to MHP beneficiaries.
29 The remaining 2.4 percent of general revenue is
distributed among other 7 institutions in charge of
complementary shelter programs, lad acquisition, research
in housing, and technical assistance for self-help.
30 Consejo Nacional de la Vivienda. Lineamientos del
Plan Nacional de Vivienda 1991.
autonomous offices.31
I will evaluate INAVI's ability to manage the MHP
under
the
proposed
new
and
structure
its
effects
on
targeting the poorest families. The two basic aspects of
lending policy and
the analysis will be:
loan recovery
policy. About the former, I will focus on how INAVI adjusts
its
lending
policy
to
income
the
and
collateral
restrictions of the poorest families. For loan recovery
policy, I will assess the flexibility of the loan recovery
mechanisms to incorporate the income restrictions of the
poor in order to guarantee adequate recovery.
This
institutional
qualitative
evaluation
in nature and
of
the
requires better
MHP
is
quantitative
support in order to assess the effects of loan recovery
mechanisms
on
recognizes
that
the
targeting
of
the
figures on INAVI's
poor.
The
author
loan operations are
needed to better support the conclusions.
Lending
INAVI's
Policy.
lending
The board
policy
of
guidelines
directors
for
determines
all
low-income
housing programs, including the MHP. The implementation of
lending
policy
is
then
institutional structure
levels:
offices,
management
and
carried
out
that involves
units,
implementing
31 INAVI. Bases para la
Programacion de Obras 1990.
by
vertical
four hierarchical
departments,
offices.
a
coordinating
INAVI's
Reorganizaci6n
lending
1990-1994.
operations are only one of its many responsibilities. The
two major areas of intervention are housing production and
housing
administration. In housing production
for:
responsible
program
design,
INAVI
project
bidding,
procurement, project financing, and project
is
inspection.
Under housing administration INAVI deals with the following
issues:
ownership,
project
housing
unit
assignments,
housing finance, project maintenance, housing rentals, loan
collection, portfolio management, and cost recovery.
All these activities are administered at the regional
level according to centrally established guidelines. Due to
INAVI's vertical structure, lending policy is based on two
pragmatic
approaches:
provide incentives
to
("to build more")
developers
and to deplete
to
private
the
annual
budget ("to exhaust the budget"). These two approaches are
rooted in the tradition of public expenditure originated
with
the
tradition
1970's
is
subsidizing
oil
boom32 . A
a general
of
lending
housing programs
clear
policy
as
outcome
of
this
that emphasizes
a principal
social
policy. 33
Lending policies with little supervision have led to
selection of
inappropriate beneficiaries. Higher
income
families aware of the subsidized distribution of INAVI's
funds have been able to benefit from its programs because
32 World Bank (1988), pp. 18.10
33 INAVI. Ibid, pp. 5.
56
the mechanisms for selection of beneficiaries are limited
to
general
statements
about
minimum
requirements.
Inadequate client selection procedures, in turn, have led
to inaccurate targeting of the poorest families. An example
of the lack of specificity of eligibility requirements is
the HPL statement on how to determine a family's income for
loan assistance purposes. Clause 3.06 of the HPL operating
criteria establishes that monthly household income can be
determined
"by
any
means"
considered
adequate
by
the
lending agency (INAVI). Given its overwhelming duties and
conflicting goals INAVI, has been unable to define specific
lending schemes to target the poor effectively.
INAVI's restructuring plan proposes transfer of its
loan
operations
to
S&L
associations
to
improve
loan
portfolio management 34 . S&Ls are supposed to be efficient
at
selecting
low-income
housing
clients,
since
they
specialize in housing finance. I argue that this approach
limits targeting the poorest families. The S&Ls lending
policy is likely to select low-risk borrowers, possibly
excluding the poor from the MHP because they are perceived
by the S&Ls as high-risk borrowers.
Loan Recovery Policy. As
of
1990,
INAVI had Bs
3
billion in arrears from bad loans. The restructuring plan
proposed to recover 1.4 billion Bs in 199035 alone. At the
34 INAVI. Ibid pp. 14
35 INAVI. Ibid pp. 14
moment of this writing, it
this goal has been
is unknown if
achieved. INAVI's restructuring policy paper proposes four
basic actions to increase loan collection:
a) To apply payroll deductions
to clients
in
arrears at the work place.
b) To implement loan recovery through contracting
out with the private banking system--i.e. S&Ls.
c) To update individual accounts, since record
keeping has been deficient in the past.
d)
To
consolidate
diverse
individual
payment
(housing, service charges, land rents) vouchers.
Two main issues arise from INAVI's new loan recovery
policy. First, loan recovery mechanisms relying on INAVI's
own institutional structure do not seem to be effective in
getting loans repaid. Second, there seems to be a tendency
to rely on formal private external agents, such as S&Ls and
private firms, to perform loan collection.
The qualitative evaluation of INAVI's policy suggests
that if S&Ls are in charge of both lending policy and loan
recovery, the MHP will select "top income range" families
to ensure high loan collection. Also, if payroll deductions
are established as a customary mechanism, then (low-income)
self-employed workers
in
the
informal
sector
would
be
likely excluded from the MHP due to low expectations of
S&Ls about secure loan recovery from them.
In
the
conclusions
next
chapter
and
policy
I will
summarize
implications
of
a
the
set
of
HPL's
limitations for targeting the poor through shelter policy.
These
conclusions
will
be
drawn
from
the
analyses
in
chapters I and II and the more specific evaluation of the
MHP in this chapter.
CHAPTER IV
CONCLUSION AND POLICY IMPLICATIONS
This
analysis of
the Housing Policy
Law
(HPL) in
Venezuela reveals a failure on the part of the government
to
understand
institutional
fully
factors
some
critical
important
for
economic
design
of
and
shelter
programs that effectively target the poorest families. This
final chapter suggests some preliminary conclusions and
their
policy
implications
tentative recommendations
for
shelter
financing.
The
set forth are aimed to guide
future discussion and should not be considered as a rigid
recipe for reform.
Subsidies
and
Sustainability.
A
major
economic
shortcoming of the HPL stems from the relationship between
subsidies provided and the medium run sustainability of
shelter programs for the poor. Providing heavy subsidies
leads to low real cost recovery, which is exacerbated by
inflation. This thesis found that, when the opportunity
costs of subsidies are considered, delivering a housing
unit under the Minimum Housing Program
(MHP)
costs INAVI
between 1.8 and 1.9 times its target price.
The results from the evaluation of the MHP can be
extended to sites and services programs and slum upgrading
programs in the HPL. The only difference between these two
60
kinds of projects and the MHP is the provision of a basic
housing unit. However, in all three cases, shelter to the
poor is provided through a similar subsidized scheme.
Another
point
of
significant
concern
is
that
the
purpose and distribution of subsidies in the HPL is not
fully clear, although it is evident that the poor are not
being well served. I argue that if the policy goal is to
increase housing consumption by the poorest families, more
families could benefit by only providing direct lending to
them and no direct subsidies to developers exist--at least
while double-digit inflation lasts.
I conclude that, if appropriate measures are not taken
in the near future, HPL programs for the AAI target group
will confront liquidity problems. These problems will arise
from the low real cost recovery due to inflation and the
low interest rate charged on loans. A key issue in handling
real cost recovery is the gap between nominal
rates
(6.25 percent)
interest rates
charged by HPL programs
(30-40 percent).
interest
and market
The government will find
increasing fiscal pressure to cover this gap in years to
come.
If
delivery of the same number of housing units is
be maintained,
private
to
I argue that subsidies, to both families and
developers
should
be
reduced,
while
nominal
interest rates remain high.
61
Targeting
manifested
and
in
Affordability.
broad
guidelines
HPL
that
limitations
overlook
are
relevant
affordability issues. A major issue is the definition of
target
families
considering
in
terms
explicitly
the
of
minimum
relationship
wages
without
between
wages,
housing prices, and inflation.
Failure to
consider
inflation
in MHP
construction
costs leads to diminishing affordability for the target
families. It was found that MHP housing units, given the
recent
shift
in ceiling price, are
affordable only to
families with 4 minimum salaries and not to the originally
targeted families earning 3 minimum salaries or less.
In
order
to
improve
targeting,
more
governmental
institutional specialization in shelter financing for the
poor is required. The evaluation of the MHP suggested that
INAVI's multiple duties limit its ability to provide the
poorest families with shelter financing. I also argue that
overly flexible rules for eligibility and client selection,
if
left under control of the private banking system (S&Ls),
could result in a bias towards filtering out the poorest
families from shelter programs due to their bank-perceived
high financial risk. This conclusion is supported by (Keare
and Jimenez, 1983) who argue that inadequate affordability
definitions in sites and services projects financed by the
World
Bank
limited
during the 1970s.
the
participation of
poor
families
Shelter Finance Policy Implications. In addition to
reducing subsidies and improving targeting, another major
policy recommendation is that a feasibility study should be
initiated to examine the potential effectiveness of Dual
Indexed Mortgages (DIM)
or a similar indexing mechanism for
shelter loans. Under the DIM (Buckley, et al 1989a) scheme,
shelter
loans
are
indexed
to
both
nominal
wages
and
inflation. Dual indexation would imply charging a "near to
market" nominal interest rate but limiting monthly payments
to a ceiling percentage share of family's income--e.g.,
30%.
If
surcharges
in payments arise, depending on the
behavior of wages and inflation, the outstanding balance of
borrowers will increase. At the end of the amortization
period--i.e.,
could
be
25 years or less--a mortgage rescheduling
negotiated.
alternative
amortization
actions
period;
At
that
in
point
could
be
ii)
offer
taken:
a
time,
i)
several
extend
the
of
the
"buy-back"
outstanding balance with a discount--e.g., at 60% of its
nominal
value;
iii)
government
amortization
of
the
outstanding balance--i.e. an ex-post subsidy. These options
are just basic alternatives that can be combined with nonconventional amortization schedules and cash incentives to
speed up amortization by beneficiaries.
Theoretically, the DIM guarantees high cost recovery
with
1989).
minimum
affordability
constraints
(Buckley
et
al,
DIM schemes have been effective in Colombia (Renaud,
1989) and, to a lesser extent, in Mexico (Shidlo,1990) in
overcoming
the
restrictions
imposed
and
affordability
by
inflation.
In
sustainability
economies
with
expectations of moderate inflation, such as Venezuela, the
DIM might be a reasonable financial solution for the poor
and the government.
However,
the DIM is
not a feasible
solution under high double-digit inflation, as shown by the
experience of Brazil and Argentina.
Institutional
approach to
Policy
Implications.
shelter financing
for
A
realistic
the poorest families
requires a specialized shelter finance institution. This
thesis suggests that shelter
families
should
be
financing for the poorest
isolated as
a special component
of
housing programs. Shelter finance specialization does not
necessarily imply the need to create a new public agency.
INAVI
could
perform
this
task
if
a
significant
decentralization of its structure occurred. The performance
of shelter finance institutions in Latin America--and more
recently in
financial
increase
1989).
South East Asia--show that a more flexible
approach
shelter
This
toward
delivery
thesis
the
in
suggests
poor
public
that
can
significantly
programs
issues
such
(Renaud,
as
the
definition of total family income, client selection, design
of flexible financial arrangements tailored to the needs of
the poor, and community participation cannot be dealt with
in INAVI's current structure.
I conclude that institutional reform of the shelter
sector is necessary. This reform can take 3 basic options:
(1) Strengthening INAVI's financial branch to perform more
effective shelter financing activities; (2) Creating a new
shelter financing agency devoted exclusively to shelter
financing
services;
or
(3)
Re-shaping
an
existing
institution--preferably a private non-profit institution-to perform shelter financing. In any of these scenarios,
INAVI
should play
the role of
a public trust fund,
or
second-tier financing agency for other specialized shelter
finance suppliers. Particular shelter credit suppliers can
be
private
institutions
or
parastatals
agencies--i.a.
FUNDACOMUN--that have greater flexibility to manage lowincome clients' loan portfolios and are better able to
screen beneficiaries adequately.
A review of the latin american experience in shelter
financing
(Tucillo,
tentative list
1983;
Shidlo,
suggests
1990),
a
of specific recommendations to improve the
institutional effectiveness of shelter financing programs
in
the
HPL.
These
recommendations
are
forwarded
as
a
starting point for more detailed consideration of policy
design:
(a) INAVI, acting as the main public housing trust
fund,
should
elaborate
a clear
set
of
procedural
manuals on relevant shelter financing issues to guide
the
on-lending
operations
of
particular
shelter
finance
among
institutions.
others,
selection,
These
issues
project
manuals
like
should
appropriate
feasibility
cover,
client
analysis,
and
appropriate loan collection techniques.
(b) INAVI should establish a network of sub-borrower
shelter
financing
agencies.
Sub-borrowers
would
acquire a financial commitment with INAVI and would
design specific programs to target poor families. Such
agencies would be effective intermediaries between
INAVI and ultimate beneficiaries.
(c) INAVI should provide training opportunities for
personnel
of
local--public
and
private--shelter
financing agencies in order to enable these agencies
to perform independent operations.
(d) INAVI should consolidate and computerize its loan
portfolio
immediate
operations
correction
to
allow
of
for
monitoring
financial
and
management
shortcomings.
(e) INAVI should create compensatory mechanisms other
than subsidies for the poorest families. Tentative
schemes would include a two-year grace period and/or
10% "cash back" incentive to beneficiaries who repay
shelter
loans
before
the
end
of
the
amortization
period.
66
Overall
following
Summary.
actions
In
be
summary,
I
undertaken
recommend
by
the
that
the
Venezuelan
government:
(a) Define target families more specifically in
terms
of
their
total
income,
including
all
possible sources of income.
(b)
Establish
specific
eligibility
and
client
selection criteria in shelter programs in the AAI.
(c) Advance the institutional reform of the shelter
sector,
with
increased
emphasis
on
specialized
financial arrangements for the poorest families.
(d) Increase interest rates to "near to market" levels
to guarantee a positive real return to INAVI and other
shelter financing agencies.
(e)
Consider
developers
and
agreements
is
instituting
HPL
indexed
beneficiaries.
equivalent
to
an
loans
to
both
Indexing
loan
insurance
against inflation (Sandilands, 1980).
premium
A feasibility
study of the DIM scheme explained above should be
conducted.
These policy actions have to be taken at the same time
to guarantee access to a more significant number of poor
families. The recognition that shelter finance for the poor
is
a major
housing policy responsibility of Venezuelan
government should go in hand with a better understanding of
the
specific
restrictions,
set
of
shelter
needs
of
the
poor,
affordability
and financial possibilities. A more coherent
programs
and
institutions
with
a
fuller
understanding of the economic and social implications of
shelter policy will certainly help to transform Venezuelan
squatter settlements
into better
with a higher quality of life.
serviced neighborhoods
MINIMUM HOUSING PROGRAM. CONSTRUCTION LOANS TO PRIVATE DEVELOPERS
------------------------------ ------------
CONSTRUCTION COST PER UNIT (SOFT & HARD):
NUMBER OF HOUSING UNITS:
TOTAL CONSTRUCTION COSTS (TCC) (Million Bs):
MHP FINANCING @90% OF TCC (Million Bs):
LOAN FEE POINTS 11% OF FINANCING (Killion Bs):
TOTAL LOAN AKOUNT (Killion Bs)
INTEREST RATE #:
KONTHLY INTEREST RATE:
MONTHS:
MONTH
CLOSING
Bs256,449 (From Table III.1)
500 (From Table 11.1)
Bs128,225
Bs115,402
Bs1,154
Bs116,556
6.25%
0.52%
36 (36 months maximum)
BEGINNING
BALANCE
2
3
4
5
6
7
8
9
BsO
Bs3,238
Bs6,501
Bs9 ,781
Bs13,078
Bs16,392
Bs9 ,723
Bs23,072
Bs26,438
Bs29,822
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Bs75,449
879,088
Bs82,746
Bs86,423
Bs9O, 120
Bs93,835
Bs97,570
Bsl1 ,324
Bs1O5,098
Bs108,892
Bs112, 705
Bs116 ,538
Bs120, 391
Bs124,264
Bs128,157
Appendix A
-----------
ACCRUED
DRAW
INTEREST
In
Tho us and
BsO
Bs3,238
Bs25
Bs3,238
Bs42
Bs3,238
Bs59
Bs3 ,238
Bs??
Bs3,238
Bs94
Bs3,238
Bs111
Bs3,238
Bs129
Bs3,238
Bs146
Bs3,238
Bs164
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs3,238
Bs116,556
Page I
ENDING
BALANCE
Bs
Bs3,238
Bs6,501
Bs9,781
Bs13,078
Bs16,392
Bs19,723
Bs23,072
Bs26,438
Bs29,822
Bs33,224
Bs401 Bs79,088
Bs420 Bs82,746
Bs439 Bs86,423
Bs459 Bs90,120
Bs478 Bs93,835
Bs497 Bs97,570
Besi? Bs101,324
88517
Bs536 Bs1O5,098
Bs556 Bs108,892
Bs576 Bs112,705
Bs595 Bs116,538
Bs615 Bs120,391
Bs635 Bs124,264
Bs656 Bs128,157
Bs667 Bs128,825
Bs12,269
---------------------------------------------------------------------------------------
69
Appendix A
Page 2
NHP. Construction Loan to Developers
-----------------------------------------------------------*** FINAL OUTSTANDING BALANCE ***
----------------------------------------------------------------
INTEREST RATE 1-YEAR LOAN 2-YEAR LOAN 3-YEAR LOAN
6.25% Bs130,604
Bs129,635 Bs128,825
25.00% Bs144,687
Bs158,776 Bs176,378
26.00% Bs145,486
Bsl60,543 Bs179,459
27.00% Bs146,290
Bs162,334 Bs182,605
28.00% Bs147,100
Bs164,148 Bs185,816
29.00% Bs147,914
Bs165,987 Bs189,094
30.00% Bs148,734
Bs167,851 Bs192,440
31.00% Bs149,559
Bs169,740 Bs195,855
32.00% Bs150,389
Bsl71,654 Bs199,343
33.00% Bs151,225
Bs173,594 Bs202,903
34.00% Bs152,066
Bsl75,560 Bs206,537
35.00% Bs152,912
Bs177,553 Bs210,248
36.00% Bs153,763
Bs179,572 Bs214,037
37.00% Bs154,620
Bsl81,619 Bs217,905
38.00% Bs155,483
Bs183,694 Bs221,855
39.00% Bs156,351
Bs185,796 Bs225,888
40.00% Bs157,224
Bs187,927 Bs230,006
*** SUBSIDY TABLE *** (1)
INTEREST RATE
25.00%
26.00%
27.00%
28.00%
29.00%
30.00%
31.00%
32.00%
33.00%
34.00%
35.00%
36.00%
37.00%
38.00%
39.00%
40.00%
Bs14,083
Bs14,882
Bs15,687
Bs16,496
Bs17,311
Bs18,130
Bsl8,955
BsI9,786
Bs2O,621
Bs21,462
Bs22,308
Bs23,160
Bs24,017
Bs24,879
Bs25,747
Bs26,621
Bs29,141
Bs3O,908
Bs32,699
Bs34,513
Bs36,352
Bs38,216
Bs4O,105
Bs42,019
Bs43,959
Bs45,925
Bs47,918
Bs49,937
Bs5l,984
Bs54,059
Bs56t161
Bs58,292
Bs47,553
Bs5O,634
Bs53,780
Bs56,991
Bs6O,269
Bs63,615
Bs67,031
Bs7O,518
Bs74,078
Bs77,713
Bs8l,423
Bs85,212
Bs89t080
Bs93,030
Bs97,063
BslOl,181
70
(1)Obtained substracting the outstanding balance at different market interest rates
froa the subsidized interest rate (6.25%),
III.5A. MINIMUM HOUSING PROGRAM
Appendix B
AFFORDABILITY ASSUKTIONS AND MORTGAGE PAYMENT SCHEDULE
Page 1
SCENARIO I:PRICE: Bs 260,000; SUBSIDIZED INTEREST RATE AT 6.25%.
HOUSING UNIT SALES PRICE (SP)
DOWN-PAYMENT (DP)
OUTSTANDING BALANCE (OB)
BASE MONTHLY PAYMENT (BMP) @:
LOAN INSURANCE @1.43% X OH.
TOTAL MONTHLY PAYMENT (TKP)
Bs260,000
Bs26,000
Bs234,000
6.25% Bsl,562
Bs22
Bsl, 584
LOAN AMORTIZATION TABLE: PERMANENT FINANCING
MORTAGE PRINCIPAL
INTEREST RATE
AMORTIZATION TERM (INYEARS)
ANNUAL "KORTAGE CONSTANT'
ANNUAL PAYMENT
YEAR
BEGINNING
BALANCE
ANNUAL
PAYMENT
Bs237,346
Bs233,170
Bs228,733
Bs224,019
Bs219,010
Bs213,688
BsZO8,033
Bs202,025
Bs195,641
Bs188,859
Bsl8l,652
Bs173,996
Bs165,860
Bs157,216
Bs19,010
Bsl9, 010
Bs19,010
Bsl9,010
Bs19,010
Bsl9,010
Bs19,010
Bs19,010
Bs19,10
Bsl9,010
Bsl9,010
Bsl9,010
Bs19,010
Bsl9,010
Bs148,032
Bs19, 010
Bs138,274
Bs127,906
Bs116,890
Bs105,185
Bs92,749
Bs79,536
Bs65,497
Bs5O,580
Bs34,731
Bs17,892
Bsl9,010
Bsl9, 010
Bs19,010
Bs19,010
Bsl9,010
Bsl9,010
Bsl9,010
Bs19,010
Bs19,010
Bs19,010
TOTAL
Bs475,254
Bs237,346 <----ENTER VALUE
6.25%(----ENTER VALUE
25 (----ENTER VALUE
8.01%
Bs19,010
ANNUAL
INTEREST
Bsl4 ,834
Bsl4,573
Bs14,296
Bsl4,001
Bsl3,688
Bsl3,355
Bs13,002
Bsl2, 627
Bs12,228
Bsll, 804
Bsll, 353
BslO,875
Bs1O, 366
Bs9,826
Bs9,252
Bs8,642
Bs7,994
Bs7,306
Bs6,574
Bs5,797
Bs4,971
Bs4,094
Bs3, 161
Bs2,171
Bsl,118
ANNUAL
ANORT'N
ENDING
BALANCE
Bs4,176
Bs4,437
Bs4,714
Bs5,009
Bs5,322
Bs5,655
Bs6,008
Bs6,384
Bs6,783
Bs7,206
Bs7,657
Bs8,135
Bs8,644
Bs9,184
Bs9, 758
Bs1O,368
Bs11, 016
Bsl1,705
Bsl2,436
Bs13,213
Bsl4,039
Bsl4 ,917
Bsl5,849
Bsl6,839
Bs17,892
Bs233,170
Bs228,733
Bs224,019
Bs219,010
Bs213,688
Bs208,033
Bs202,025
Bs195,641
Bs188,859
Bs181,652
Bs173,996
Bs165,860
Bs157,216
Bs148 ,032
Bs138,274
Bs127,906
Bs116,890
BslO5,185
Bs92,749
Bs?9,536
Bs65,497
Bs5O,580
Bs34,731
Bsl7,892
(BsO)
Bs237,908 Bs237,346
III.5, MINIMUM HOUSING PROGRAM
Appendix B
AFFORDABILITY ASSUMTIONS AND MORTGAGE PAYMENT SCHEDULE
Page 2
SCENARIO II: PRICE: Bs 326,864; SUBSIDIZED INTEREST RATE AT 6.25%.
HOUSING UNIT SALES PRICE (SP)
DOWN-PAYMENT (DP)
OUTSTANDING BALANCE (OB)
BASE MONTHLY PAYMENT (BMP) 9:
LOAN INSURANCE e1.43% X OB.
TOTAL MONTHLY PAYMENT (TMP)
Bs326,864
Bs32,686
Bs294,178
6.25% Bsl,964
Bs28
Bs1 ,992
LOAN AMORTIZATION TABLE: PERMANENT FINANCING
KORTAGE PRINCIPAL
INTEREST RATE
AMORTIZATION TERM (INYEARS)
ANNUAL "KORTAGE CONSTANT"
ANNUAL PAYMENT
YEAR
BEGINNING
BALANCE
ANNUAL
PAYMENT
Bs298,384 (----ENTER VALUE
6.25%(----ENTER VALUE
25 (----ENTER VALUE
8,01%
Bs23,899
ANNUAL
INTEREST
ANNUAL
AMORT'N
Bs298,384
Bs293,134
Bs287,556
Bs281,630
Bs275,332
Bs268,642
Bs261,533
Bs253,980
Bs245,954
Bs237,428
Bs228,368
Bs218,742
Bs208,514
Bsl97,64?
Bs186,101
Bs173,834
Bsl6O,799
Bs146,950
Bs132,236
Bs116,602
Bs99,990
Bs82,341
Bs63,588
Bs43,663
Bs22,493
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bs23,899
Bsl8,649
Bsl8,321
Bsl7,972
Bs17,602
Bsl7,208
Bsl6,790
Bsl6,346
Bsl5,874
Bsl5,372
Bs14,839
Bsl4,273
Bs13,671
Bsl3,032
Bsl2,353
Bsll,631
BslO,865
BslO,050
Bs9, 184
Bs8, 265
TOTAL
Bs597,475
Bs299,090 Bs298,384
Bs5,250
Bs5,578
Bs5,927
Bs6,297
Bs6,691
Bs7, 109
Bs?,553
Bs8,025
Bs8,527
Bs9, 060
Bs9,626
Bs10,228
Bsl0,86?
Bsll,546
Bs12,268
Bs13, 034
Bs13,849
Bs14,715
Bsl5,634
Bs?,288 Bs16,611
Bs6,249
Bs5,146
Bs3,974
Bs2,729
Bsl, 406
Bs17,650
Bs18, 753
Bs19,925
Bs2l,170
Bs22,493
ENDING
BALANCE
Bs293,134
Bs287,556
Bs281,630
Bs275,332
Bs268,642
Bs261,533
Bs253,980
Bs245,954
Bs237,428
Bs228,368
Bs218,742
Bs208,514
Bsl97,647
Bs186,101
Bsl?3,834
Bs160,799
Bs146,950
Bs132,236
Bsll6,602
Bs99,990
Bs82,341
Bs63,588
Bs43,663
Bs22,493
(Bs0)
III.5C. MINIMUM HOUSING PROGRAM
Appendix B
AFFORDABILITY ASSUKTIONS AND MORTGAGE PAYMENT SCHEDULE
Page 3
SCENARIO III: PRICE: Bs 260,000; MARKET INTEREST RATE AT 30.00%.
HOUSING UNIT SALES PRICE (SP)
DOVN-PAYKENT (DP)
OUTSTANDING BALANCE (OB)
BASE MONTHLY PAYMENT (BMP) 0:
LOAN INSURANCE #1.43% X OB.
TOTAL MONTHLY PAYMENT (TKP)
Bs260,000
Bs26,000
Bs234,000
30.00%
Bs3 ,346
Bs5,942
LOAN AMORTIZATION TABLE: PERMANENT FINANCING
MORTAGE PRINCIPAL
INTEREST RATE
AMORTIZATION TERM (INYEARS)
ANNUAL "NORTAGE CONSTANT'
ANNUAL PAYMENT
YEAR
BEGINNING
BALANCE
Bs237,346
Bs237,245
Bs237,114
Bs236,943
Bs236,721
Bs236,432
Bs236,057
Bs235,569
Bs234,935
Bs234,111
Bs233,040
BsZ31,646
Bs229,835
Bs227,481
Bs224,421
Bs220,442
Bs215,270
Bs208,546
Bs199,804
Bs188,441
Bs173,668
Bs154,464
Bs129,498
Bs97,042
Bs54,850
TOTAL
ANNUAL
PAYMENT
Bs7l,305
Bs7l,305
Bs7l,305
Bsl1,305
Bs7l,305
Bs7l,305
Bs7l,305
Bs7l,305
Bs7l,305
Bs7l,305
Bs7l ,305
Bs7l, 305
Bsl ,305
Bs7l, 305
Bsl ,305
Bs71,305
Bs7l,305
Bs7l,305
Bsl ,305
Bs7l,305
Bs7l,305
87l,305
Bs7l,305
Bs7l,305
Bs7l,305
Bs237,346 (----ENTER VALUE
30.00%(----ENTER VALUE
25 (----ENTER VALUE
30.04%
B7l,305
ANNUAL
INTEREST
Bs7l,204
Bs7l,174
Bs7l,134
Bs7l,083
Bs7l,016
87O,930
B7O,817
Bs70,671
Bs70,481
Bs7O,233
Bs69,912
Bs69,494
Bs68,951
Bs68,244
Bs67,326
Bs66,133
Be64 ,581
Bs62,564
Bs59,941
Bs56,532
Be52, 100
Bs46,339
Bs38,849
Bs29,113
Bs16,455
ANNUAL
AMORT'N
ENDING
BALANCE
Bs 101
Bs131
Bs171
Bs222
Bs289
Bs375
Bs488
Bs634
Bs824
Bsl,072
Bsl,393
Bsl, 811
Bs2,354
Bs3,061
Bs3,979
Bs5,172
Bs6,724
Bs8,741
Bsll,364
Bsl4,773
Bsl9,204
Bs24,966
Bs32,456
Bs42,192
Bs54,850
Bs237,245
Bs237,114
Bs236,943
Bs236,721
Bs236,432
Bs236,057
Bs235,569
Bs234,935
Bs234,111
Bs233,040
Bs231,646
Bs229,835
Bs227,481
Bs224,421
Bs220,442
Bs215,270
Bs208,546
Bs199,804
Bs188,441
Bsl73,668
Bs154,464
Bs129 ,498
Bs97,042
Bs54,850
Bs
Bsl,782,623 Bsl,545,277 Bs237,346
Appendix B
III.5D. MINIMUM HOUSING PROGRAM
Page 4
AFFORDABILITY ASSUMTIONS AND MORTGAGE PAYMENT SCHEDULE
SCENARIO IV: PRICE: Bs 326,864; MARKET INTEREST RATE AT 30.00%.
HOUSING UNIT SALES PRICE (SP)
DOWN-PAYMENT (DP)
OUTSTANDING BALANCE (OB)
BASE MONTHLY PAYMENT (BNP) @:
LOAN INSURANCE @1.43% X OH.
TOTAL MONTHLY PAYMENT (TKP)
Bs326,864
Bs32,686
Bs294,178
30.00% Bs7,365
BslO5
Bs7,470
LOAN AMORTIZATION TABLE: PERMANENT FINANCING
MORTAGE PRINCIPAL
INTEREST RATE
AMORTIZATION TERM (INYEARS)
ANNUAL 'NORTAGE CONSTANT'
ANNUAL PAYMENT
YEAR
BEGINNING
BALANCE
Bs298,384
Bs298,257
Bs298,092
Bs297,877
Bs297,598
Bs297,235
Bs296,764
Bs296,151
Bs295,353
Bs294,317
Bs292,970
Bs291,219
Bs288,942
Bs285,982
Bs282,135
Bs277,133
Bs270,630
Bs262,177
Bs251,188
Bs236,902
Bs218,330
Bs194, 187
Bs162,801
Bs121,998
Bs68,956
TOTAL
ANNUAL
PAYMENT
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs89,642
Bs298,384 (----ENTER VALUE
30.00%(----ENTER VALUE
25 (----ENTER VALUE
30.04%
Bs89,642
ANNUAL
INTEREST
Bs89,515
Bs89,477
Bs89,428
Bs89,363
Bs89,279
Bs89,171
Bs89,029
Bs88,845
Bs88,606
Bs88,295
Bs87,891
Bs87,366
Bs86,683
Bs85,795
Bs84,640
Bs83, 140
Bs8l, 189
Bs78,653
Bs75,356
Bs7l,071
Bs65,499
Bs58,256
Bs48,840
Bs36,600
Bs2O,687
ANNUAL
AMORT'N
Bsl27
Bs165
Bs215
Bs279
Bs363
Bs472
Bs613
Bs797
BsI ,036
Bs1,347
Bsl ,751
Bs2,277
Bs2,960
Bs3,848
Bs5,002
Bs6,502
Bs8,453
Bs10,989
Bsl4,286
Bsl8, 572
Bs24 ,143
Bs3l,386
Bs4O,802
Bs53,043
Bs68,956
Bs2,241,058 Bsl,942,674 Bs298,384
ENDING
BALANCE
Bs298,257
Bs298,092
Bs297,877
Bs297,598
Bs297,235
Bs296,764
Bs296,151
Bs295,353
Bs294,317
Bs292,970
Bs291,219
Bs288,942
Bs285,982
Bs282,135
Bs277,133
Bs270,630
Bs262,177
Bs251,188
Bs236,902
Bs218,330
Bs194,187
Bs162,801
Bsl2l,998
Bs68,956
BsO
74
BIBLIOGRAPHY .
Boletin de Indicadores
Central de Venezuela.
Banco
Semanales. Semana No. 2. 10 de Enero de 1991. Caracas.
Banco Central de Venezuela. Boletin Mensual. Agosto, 1989.
Caracas.
Banco Central de Venezuela. Informe
Years: 1980 through 1988. Caracas.
Econ6mico.
Several
Buckley, Robert M., and Ranjana G. Madhusudhan (1984). The
Macroeconomics of Housing's Role in the Economy: An
International Analysis. Occasional Paper No. 78. The
Maxwell School of Citizenship and Public Affairs. Syracuse
University. Syracuse, New York.
Mortgage design Under
Buckley, Robert M. et al (1989a).
Inflation and Real Wage Uncertainty: The use of a Dual
Index Instrument. The World Bank. Policy, Planning and
Research Staff. report INU 62.
Buckley, Robert M. and Stephen Mayo (1989b). Housing Policy
in Developing Economies: Evaluating The Macroeconomic
Impact. Review of Urban and Regional Development Studies.
Vol. 2. Washington, DC.
Cheema, Shabbir G (1987). Urban Shelter and Services:
Praeger
Approaches.
Management
and
Policies
Public
Publishers. New York.
Chona, Gilberto E. (1985). Micro-Empresas Informales en la
Area
en
el
Marginal
Vivienda
de
la
Construccion
Metropolitana de Caracas. Thesis City Planning, Universidad
Sim6n Bolivar. Caracas.
Cilento, Alfredo (1989a) "Sobre la Ley de Politica
Habitacional". Revista SIC. Afno LII, No. 518. pp.340-341.
Cilento, Alfredo (1989b) "Las Contradicciones del Subsidio
Habitacional y La Ley de Protecci6n al Deudor Hipotecario".
Revista SIC. Afno LII, No. 518. pp. 342-344.
CNV -Consejo Nacional de la Vivienda- (1990). Lineamientos
del Plan de Vivienda 1991 (Versifn Preliminar). Caracas.
Septiembre, 1990.
Cohen, Michael A. (1983). "The Challenge of Replicability:
Towards a New Paradigm for Urban Shelter in Developing
75
Countries". Regional Development Dialogue
Vol. 4, No.1. pp. 90-99.
(1983)
Spring,
CORDIPLAN (1988). Situacion del Salario Real en Venezuela:
1981-1987. (Elaborado por: Leonel Sdnchez). Caracas, June
1988. Mimeo
Cuenco, Evangeline Kim Leafno (1989) The Role of Mortgage
Finance vis-a-vis Other Programatic Interventions in Lowincome Housing in Developing Countries. Phd Thesis Urban
Studies, MIT. Cambridge.
El Nacional (2/1/91). "En Palacio" (Tips).
El Universal (4/1/91). "Area de Asistencia I de Ley de
Politica Habitacional: Soluci6n definitiva a viviendas
baratas a travis del plan especial de financiamiento".
de
Ventas
(1991).
C.A.
FUNDACONSTRUCCION/PROSIEM
Apartamentos Clasificados por Precios y Area. Periodo: 1985
Hasta 3er. Trimestre 1990. Caracas. January 1991. Mimeo.
"Planning, Invasions and Land
Gilbert, Alan (1984).
Speculation: The Role of the State in Venezuela". Third
World Planning Review. Vol. 6, No. 3. August. pp. 225-238.
Goethert, Reinhard and Horacio Caminos (1978).
Primer. The MIT Press. Cambridge.
Urbanization
Bases
INAVI--Instituto Nacional de la Vivienda--(1990).
Para la Reorganizacion 1990-1994. Programacifn de Obras.
Caracas. Mimeo
Kaufman, Gerorge G. , and Eleanor Erdevig (1981). "Improving
housing finance in an inflationary environment: alternative
residential mortgage instruments". Economic Perspectives.
Volume V. Issue 4. July/August. Chicago.
Keare, Douglas H. , and Emmanuel Jimenez (1983) . Progressive
Development and Affordability in the Design of Urban
Shelter Projects. World Bank Staff Working Papers No. 560.
Washington, DC.
"Inflation, Mortgage and Housing".
Kearl, J. R. (1979).
Journal of Political Economy. Volume 87. Number 5, Part 1.
Brigham Young University.
Lartitegui, Javier. (1989). Fundamentaci6n, Alcance y
Potencialidad de la Ley de Politica Habitacional. Foro: Ley
de Politica Habitacional. Cimara Inmobiliaria de Venezuela.
Puerto La Cruz, Venezuela.
76
"Institutional
Lee-Smith D. , and P. A. Memom (1988).
An
Housing:
Low-Income
for Delivery of
Development
in
Project
Development
Community
Evaluation of the Dandora
3.
pp.
No.
Vol.
10,
Nairobi". Third World Planning Review.
217-238.
"Indagaciones sobre la produccifn
Lovera, Alberto (1983).
de la vivienda en los barrios de ranchos: el caso de
Caracas". Revista Interamericana de Planificacion. Volume
XVII. No. 65. March. Mexico, DF.
Lovera, Alberto (1984). La Agonia de la Autoconstrucci6n.
Universidad Central de Venezuela. Instituto de Disento
Experimental de la Construccifn (IDEC). Caracas. Mimeo.
Oficina Central de Estadistica e Informitica, OCEI.
Encuesta de Hogares por Muestreo (Indicadores de la Fuerza
de Trabajo). Several years: 1980-1990. Caracas.
Palacios, Luis Carlos et al (1990). Vivienda, Estructura
Sectorial y Macroeconomia. Instituto de Urbanismo, FAO,UCV.
Caracas
Pearlman, Janice E. (1987). "Misconceptions About The Urban
Poor and The Dynamics of Housing Policy Evolution". Journal
of Planning Education and Research. Vol. 6, No. 3. pp. 187196
Ramirez, Beatriz C. (1984). The Venezuelan Housing Policy
of 1979-1983 and Its Effect on Formal Private Supply of
Housing. MCP Thesis Urban Studies, MIT. Cambridge.
Renaud, Bertrand (1989). The Role of Housing Finance in
Development: Issues and Policies. The World Bank. Policy,
Planning and Research Staff. Washington, DC.
Renaud, Bertrand (1983). Housing and Financial Institutions
in Developing Countries. World Bank Staff Working Papers
No. 658. Washington, DC.
de
Politica
Ley
(1989).
Venezuela
de
Repn-blica
Habitacional. Gaceta Oficial No. 4153 Extrordinario, de 28
de Diciembre de 1989. Caracas.
Repnblica de Venezuela--Ministerio de la Secretaria de la
Presidencia. Mensaje Presidencial al Congreso de la
Repfiblica. Statistical Appendix. Several Years.
Repnblica de Venezuela--Ministerio de Desarrollo Urbano,
Resolucifn No.
Consejo Nacional de la Vivienda. (1990).
317. Gaceta Oficial No. 34.604, de 28 de Noviembre de 1990.
Caracas.
Normas de Operacion del
Repnblica de Venezuela (1991).
Programa Nacional de Vivienda, previstas en la Ley de
4153
No.
Oficial
Gaceta
Habitacional.
Politica
Extrordinario, de 8 de Enero de 1991. Caracas.
Rodwin, Lloyd, Editor (1987). Shelter
Development. Allen and Unwin. London.
Settlement
and
Sandilands, Roger J. (1980). Monetary Correction and
Housing Finance in Colombia, Brazil and Chile. Gower
Publishing Co. Limited. Westmead, England.
Shidlo, Gil, Editor (1990). Housing Policy in Developing
Countries. Routledge. New York.
Sosa, Carlos (1989). Analysis of The Proposed National Law
for Housing Policy in Venezuela. MIT. Implementation of
Urban Planning in Developing Countries 11.468. Unpublished
Paper. Cambridge
Strassman, W. Paul (1982). The Transformation of Urban
Housing. (Published for the World Bank by) The John Hopkins
University Press. Baltimore & London.
Struyk, Raymond J., et al (1990). The Market for Shelter in
Indonesian Cities. The Urban Institute Press. Washington,
DC.
Mandatory
Sweet, Morris L and George S. Walters (1975).
Housing Finance Programs. A Comparative International
Analysis. Praeger Publishers. New York.
The World Bank (1988). Public Policy Options for Venezuela.
Sections: I,II,III,IV.
Tucillo, John (1983). The Housing Finance System of Brazil.
The World Bank. Discussion Paper UDD35. Washington, DC.
Mimeo
Lusaka Housing
Turok, Mary and Bishapriya Sanyal (1980).
Project: A Critical Overview of Low Cost Housing in Zambia.
World Employment Programme Research Working Papers. ILO.
Geneva.
United Nations (1988). Global Shelter Strategy to The Year
2000. Report of The Executive Director. Eleventh Session.
New Delhi. Commission on Human Settlements.
Vetter, David M. (1977). Low-Income Housing Policy for
Development: An Evaluation of the Brazilian Experience.
Ph.D Thesis Urban and Regional Planning, UCLA.