Affordable Housing Issues and
Answers:
Case of select countries in
Asia-Pacific Region
By: Zaigham M. Rizvi
Secretary General
Asia-Pacific Union for Housing Finance
Presented at: SBP Seminar on Housing
March 25, 2013
Country Info - I
Particulars
Indonesia
Population
Malaysia
Thailand
Philippines
Mongolia
248,216,193 29,179,952
67,091,089
103,775,002
3,179,997
Population Density
132.41
persons per
sq.km
86.44
persons per
sq. km
132.7 people 312.78
per sq.km
persons per
sq. km
1.76 persons
per km.
Per Capita Income
US $3,509
US $ 9,700
US $5394
US $3,042
[1] https://www.cia.gov/library/publications/the-world-factbook/geos/id.html
[2]
http://www.tradingeconomics.com/malaysia/population-density-people-per-sq-km-wb-data.html
[3] wikipedia
[4] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita
[5] ibid
US $2,223
Country Info - II
Particulars
Vietnam
Hong Kong
Singapore
Korea Rep.
Population
91,519,289
7,153,519
5,353,494
48,860,500
Population Density
263 person per
sq. km.
6,096 persons
per sq. km.
7,363 persons
per sq. km.
530 persons
per sq/ km
Per Capita Income
US $ 1,374
NA
US$ 49,271
US$ 22,278
[1] https://www.cia.gov/library/publications/the-world-factbook/geos/id.html
[2] Dynamic Impact of Land Supply on Population Mobility with Evidence from Hong Kong, by Eddie C.M. Hui and Francis K.W Wong
[3]
http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_population_density
[4] http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_population_density
[5] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita
[6]
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita
[7] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita
Overview of Affordable Housing Issues
and challenges: Global View
• In today’s world, affordability in context with housing and housing finance
is an emerging concern. Increasing number of countries are talking about
the shelterless poor from low-income segment in need of affordable
housing. In a world where in some countries mortgage debt to GDP ratios
are around or more than 100 percent, like in Scandinavian countries,
Europe and America with MD to GDP ratios above 50%, while others are
at the bottom like Pakistan at less than one percent.
• While in some countries the persons per room density is around one
person/room, and in some other countries like India and Pakistan it 3.5.
Hence the definition and terms of affordability should logically arise countrywise, or at best region-wise, in view of particular socio-economic and
demographic conditions prevailing in those countries, areas or regions.
Overview of Affordable Housing Issues
and challenges
Supply Side Challenges:
• Affordable Serviced Land
• Low-Cost Construction Technology
• Low-Cost Construction materials
• Manufacturing Scale Production
• Regulatory and Fiscal Support
Finance Side Challenges
• Long Term Finding
• Variable vs Fixed rate
• Affordable Mortgages
• Financial Inclusion
• Regulatory and Fiscal Support
Overview of Affordable Housing Issues
and challenges: Regional View
• In EA region select countries cover Indonesia, Malaysia, Thailand,
Philippines, Mongolia, Vietnam Hong Kong, Singapore and Korea.
• The countries range from high income countries (like Hong Kong,
Singapore and Korea) to middle income countries (like Indonesia,
Malaysia and Thailand) to low/lower-middle income countries (like
Philippines, Mongolia, Vietnam etc).
• A single term to describe affordability in every country is hard to
find. However countries of the region either in practice or in theory
have developed some definition of affordability which is suitable for
their own needs.
• Affordability is needed to be defined in terms of Housing Cost and
Mortgage Affordability.
Overview of Affordable Housing Issues
and challenges: Regional challenges
• First major mortgage challenge surfaced in the region when
the region plunged into financial crisis of 1997. These
countries however came out of this crisis in their own ways
within two/three years.
• Some countries, particularly the high income countries like
Hong Kong and Singapore, are since long working constantly
to officially provide affordable houses to their citizens.
• Some other governments like that of Thailand, Korea etc are
trying to meet challenges through using various models
including community housing, for which these countries are
providing appropriate community platforms.
Various Mortgage
Instruments/Products in East Asia:
 A cursory glance at mortgage market around the world tells about the following
types of instruments:
•
•
•
•
•
•
•
Fixed Rate Mortgage (FRM)
Adjustable Rate Mortgage (ARM)
Price Level Adjusted Mortgage (PLAM)
Dual Index Mortgage (DIM)
Interest Only Mortgage and
Flexible Mortgage
Step-Up Payments Mortgages
 However in East Asian housing markets, there is a very limited variety in
financing products. While in the past one could see the prevalence of fixed rate
mortgages in abundance, now after the financial crisis, one can see an obvious
shift towards flexible rates mortgages in these markets.
 HBFC moved from two products to eight during 2005-027, and now is literally
back to tow. No othe banks however worked on Product development.
Housing Finance Mechanism in East
Asia:
A housing finance system aims at providing:
• Funding support to producers/suppliers of housing as well as
• For purchase or construction finance,
• For Both rental and owner-occupied housing. The housing finance
mechanism, as seen in different countries of East Asia, presents a broad
array of informal or
• By making semi-formal institutional arrangements
–
–
–
–
Contractual saving schemes,
Community based housing finance,
Self-help and informal borrowings from friends
Formal institutions specializing in housing finance.
• The housing mechanism in East-Asia spreads over a wide spectrum,
ranging from different financing options through informal housing finance,
to housing finance from semi-formal and formal sources.
Definition of Affordability - I
Particulars
Any definition of affordability
Indonesia
Household income,
rather than individual
wages or per capita
income, is the relevant
base for the calculation
of housing afford-ability.
[1] The Housing Finance Sector in Indonesia, by Marja C. Hoek-Smit
[2]
Sustaining Housing Market, by University Teknoloji Malaysia (UTM)
Housing Finance Mechanism in Thailand, by UN-HABITAT
[4] Community Based Housing Finance Initiatives, by UN-Habitat
[3]
Malaysia
Affordable housing level is
the ratio of the monthly
loan payment on the
income, in which is at the
rate of 30 percent from
the household monthly
income. Thus, the
definition and concept of
the affordable housing is
measured by the income
and expenditures of a
household to pay for the
price or rental of a house.
The expenses allocated for
buying a house is 30
percent of the household
monthly income. (Ahmad
Ariffian Bujang, 2006).
It is also defined as a
house that can be
obtained without serious
financing risks which has
been set by most
countries worldwide as
30 percent income limit.
The 30 percent limit is the
basis to access the
financing for the
affordable housing and
thus becomes the
reference for serious
financing risk (Jose, 2002).
Thailand
If a household earn the
amount 25% of which can
be paid off for housing,
then the housing is said to
be affordable for that
household.
Philippines
Housing is considered to
be affordable if monthly
amortization/ rental is
PHP 264.78 (US$ 6.38) in
the first decile, PHP 388.71
(US$ 9.36) in second decile
and PHP 496.38 (US$
11.96) in third decile.
Mongolia
N.A.
Definition of Affordability - II
Particulars
Any definition of affordability
Vietnam
NA
Hong Kong
Like in the United States
and the United Kingdom,
Hong Kong uses the
median rent-to-income
ratio as an affordability
yardstick for rent setting.
Singapore
Singapore is often cited
as a successful example
of affordable housing
production in Asia. Some
85 per cent of
Singapore’s resident live
in public housing. The
poorest 20 per cent of
households in Singapore
have equal access to
housing resources, albeit
public housing, and many
are homeowners
Korea Rep.
Housing
Affordability
Index (HAI) is calculated,
and the formula of ‘HAI’
estimated is same as
those of USA and
Australia. The mean price
of raw data of the
national housing price
index of Kookmin Bank is
used
as
the
representative price of
standard house. The
mean income of working
class in urban area of
Korea is used as a
standard
income.
Mortgage payment is
calculated using Interest
rate quoted from the
weighted
average
mortgage rate of saving
banks published by the
BOK.
The ‘HAI’ keeps on
changing depending on
the change in the basic
factors of its calculation.
[1] Housing Affordability in South Korea - www.asres2007.umac.mo
Current total stocks in 9 countries - I
Particulars
Current total stock
Indonesia
54 million
Malaysia
302,224 (2002-2003)
Thailand
20.6 million
Urban stock
Comments
24 million
Indonesia’s urban
housing backlog is
estimated at 1.6
million units, ever
increasing due to
rapid urbanization.
NA
Housing Foundation
for Hard Core Poor
and private sector
excel targets for LIH
supply
6.9 million
17 mn families live
in Slums. LT
Development Plan
(2005-2025) aims at
“Cities without
Slums”. Another 14
mn families live in
Sub-Standard
housing
Philippines
NA
Mongolia
NA
NA
Housing Shortage
estimate at One
million units. Plus a
very large number is
sub-standard
housing, and slums.
Metro-Manila has a
very large slums
dwellers.
NA
Nearly half of the
population lives in
traditional Gers, and
long term plans
would need their
rehabilitation
program.
Current total stocks in 9 countries - II
Particulars
Vietnam
Hong Kong Singapore
Korea Rep.
Current total stock
NA
2,483,700
flats
NA
12,491,000
Urban stock
NA
NA
NA
NA
Comments
NA
NA
NA
NA
Country specific information – profile and housing:
INDONESIA -I
Population
248,216,193
Population Density
132.41 persons per sq.km
Per Capita Income
US $3,509
AFFORDABILITY:
In Indonesia, affordability is calculated not by individual wage earner, but
by the total income of a household. Interestingly, household
consumption/income figures showed far less volatility during the crisis
period than individual wage incomes and overall GDP. Households coped by
having household members move to informal employment and by
extending female labor force participation. As a result, the decline in
household incomes was about half the size of the decline in individual
earnings.
Country specific information – profile and housing:
INDONESIA -II
SPECIFIC HOUSING INITIATIVES:
•
National Movement for One Million Houses: The program’s objective is to provide affordable housing and
improving quality of living environment. This program was initiated by Government in 2003 to accelerate
housing supply, specifically for low-income and poor households. The movement focuses on improving
coordination amongst stakeholders in housing development. This involves programs for improving access
to land, housing finance system, institution building and capacity building within the sector.
•
Subsidized Home Mortgage (KPR): It is a housing assistance program for low income communities. The
program was initiated in 1976. Initially, the scheme was known as subsidized home mortgage “KPR”. Under
KPR the subsidized mortgages were distributed only through conventional banking institutions. To
broaden the distribution of credit for low income households and to the faith based clients, the Ministry of
Housing launched Sharia based Subsidized KPR Sharia (KPRS) schemes in 2005, to spread the scope of
availability of credit to a wide spectrum of the society under Islamic principles.
•
For non-bankable households, the Ministry of Housing also provided the opportunity for non-banking
institutions and Sharia-based cooperatives to participate in channeling housing subsidies for new
construction/home improvement through the KPRS (new construction/home improvement of self-help
housing loan) and Micro KPRS Sharia Subsidized program. The Subsidized Home Mortgage Program
facilitates low-income community to increase their purchasing power to acquire a house from developers.
The
Subsidized Self-Help Home Mortgage Program provides low income community opportunities to build or
renovate their houses on self-help basis with relatively big amount of loan and for relatively long tenor.
•
Country specific information – profile and housing:
MALAYSIA -I
Population
29,179,952
Population Density
86.44 persons per sq. km
Per Capita Income
US $ 9,700
AFFORDABILITY:
Affordable housing level is the ratio of the monthly loan payment on the
income, in which is at the rate of 30 percent from the household monthly
income. Thus, the definition and concept of the affordable housing is
measured by the income and expenditures of a household to pay for the price
or rental of a house. The expenses allocated for buying a house is 30 percent
of the household monthly income being equal to equated mortgage
installments-EMIs.
Country specific information – profile and housing:
MALAYSIA-II
SPECIFIC HOUSING INITIATIVES:






Several funds have been allocated to eradicate poverty. “Amanah Saham Bhumiputera” loan
scheme was launched to fund the hardcore poor (ASB-PPRT) scheme.
A revolving fund for low cost Housing (TPPKR) was launched to increase the number of affordable
houses for low-income earners, to solve the critical problem of low cost housing in the major
towns, to promote house ownership for the low - income earners and to upgrade the living
standards of low - income earners.
Housing Foundation for the Hard Core Poor (YPUT) was established under the Trustees Act
(Incorporation) 1952 in August 1994. The objective of the fund is to build low cost houses for the
hard - core poor.
During the period 1996- 2000, 800,000 units of houses were planned for construction to meet
housing needs, whereas a total of 859,480 units were completed, excelling the target by 107.4 per
cent.
The private sector, which targeted to build 570,000 units, has completed 737, 856 units or 129.4
per cent of the target. Distribution wise, 95.3 per cent of houses as targeted in the low-cost
category were completed, compared with 291.8 per cent in the medium-and high-cost category. In
an effort to increase the quality of low-cost houses, new designs with a floor area of 60 square
meters incorporating three bedrooms as well as washing and drying areas, especially in high-rise
buildings, were introduced.
Greater emphasis was also given to R&D in the housing sector, especially with regard to production
of cheaper and more efficient building materials, better construction techniques and life-costing
estimation of multi -storey housing.
Country specific information – profile and housing:
THAILAND -I
Population
67,091,089
Population Density
132.7 people per sq.km
Per Capita Income
US $5394
AFFORDABILITY:
Affordability is seen as the ability of a household to earn an amount 25% of
which can be paid off for housing. The Government of Thailand once
encouraged Government Housing Bank and other commercial banks to extend
repayment period up to 30 years to ease the borrower’s financial burden and
to increase affordability for homebuyers. But most Thai borrowers prefer to
borrow for a term of between 15-20 years because the extension of the
period does not help decrease the amount of payment significantly
Country specific information – profile and housing:
THAILAND -II
SPECIFIC HOUSING INITIATIVES:
•
•
•
•
Three government organizations are actively implementing government’s housing policies
and programmes. These are, National Housing Authority (NHA), Community Organization
Development Institute (CODI) and Government Housing Bank of Thailand (GHB). GHB was
established in 1953, and since then it is playing a pivotal role in housing sector of Thailand.
GHB, because of its effective role, is considered more than just a bank. It is catalyst in
economic development, and it is a real estate development leader.
CODI’s activities include the following:
– Finance slum-area communities
– Develops community-based savings programs and organization through co-operatives
– Funded from Government budget
– Baan Mankong program – very successful
– Since 2003, CODI has funded more than 77,000 households in more than 245 districts
throughout Thailand
These organizations primarily address the middle and lower income housing sector.
Recently the Government Savings Bank (GSB) has also become involved in housing finance. It
attempted to devise a new system which has been considered as to be too complicated to be
economically viable.
Country specific information – profile and housing:
PHILIPPINES -I
Population
103,775,002
Population Density
312.78 persons per sq. km
Per Capita Income
US $2,223
AFFORDABILITY:
The 2006 Family Income and Expenditure Survey shows that the affordable
average monthly housing amortisation/rent for households in the first decile
is PHP 264.78 (USD6.38); for the second decile, PHP388.71 (USD9.36); and
for the third decile, PHP496.38 (USD11.96). The Community Mortgage
Programme’s defines average monthly amortization of PHP100 – PHP500
(USD2.41 – USD12.04), depending on the location of the site and size of the
lot, is within the range of affordable monthly housing amortisation for
households in the lowest thirty percent of the income structure.
Country specific information – profile and housing:
PHILIPPINES -II
SPECIALIZED HOUSING INITIATIVES:
 The National Shelter Program (NSP), which regulates housing production,
regulation and financing, is the Philippines’ banner program for low-income
housing provision. The NSP divides housing into ‘socialized’ (valued at less than
USD 6,000, targeted at households up to the 30th income percentile) and
‘economic’ housing units (valued at up to USD 40,000, targeted at households up
to the 50th income percentile).
 Current housing efforts remain inadequate, with figures showing an acute housing
shortage estimated at over one million units – still probably a gross underestimate.
On average, the NSP has only delivered 26 per cent of its target, or less than 10 per
cent of total housing need. Moreover, the housing backlog is likely to worsen, due
to worsening poverty and increasing urbanisation.
 More than half a million people leave in low income housing near the waterways.
 The government’s approach is primarily to build “low income rental housing”
projects. These would be funded by governmental and donor organizations.
There was little analysis performed as to the long term costs of this housing.
Country specific information – profile and housing:
MONGOLIA -I
Population
3,179,997
Population Density 1.76 persons per km.
Per Capita Income
US $3,042
AFFORDABILITY:
The country needs to develop all inclusive definition about housing
affordability.
Country specific information – profile and housing:
MONGOLIA -II
SPECIFIC HOUSING INITIATIVES:
• The Mongolia Mortgage Corporation (MIK) was
established in 2003 to promote and develop primary
and secondary mortgage markets and to ensure an
efficient, long-term housing finance system in
Mongolia.
• MIK’s mission is to promote affordable home
ownership and urban development. The total amount
of home mortgage loans outstanding as of 2009 were
UD$ 157 million, with Mortgage Debt to GDP ratio of
3.88%. This performance is quite impressive given the
age of MIK.
Country specific information – profile and housing:
VIETNAM -I
Population
91,519,289
Population Density
263 person per sq. km.
Per Capita Income
US $ 1,374
AFFORDABILITY:
Vietnam is a developing economy with a small mortgage market as the loans
for home buyers are not very common. Because of socialist background, the
affordability has not been a question here.
Country specific information – profile and housing:
VIETNAM -II
SPECIFIC HOUSING INITIATIVES:
• Mortgages in Vietnam are mainly provided by foreign commercial
banks. Although VietComBank, a state-owned bank, also offers
mortgages. As there is lack of land ownership, the property rights
(for foreigners-the leasing rights) are to be pledged to the banks.
• The maximum loan-to-value ratio commonly applied is 50%.
Sometimes a ratio of 60% may be applied on the conditions that
there are extremely good and visible supporting financial conditions
of the applicant. This ratio is relatively low when compared to ratios
of 70 - 80% in other countries of the region.
• Banks feel they are subject to a higher degree of risk when lending
to borrowers in Vietnam, as there are inadequate forms of security
to protect their interests in the event the borrower defaults.
Country specific information – profile and housing:
HONG KONG -I
Population
7,153,519
Population Density
6,096 persons per sq. km.
Per Capita Income
US $50,551
AFFORDABILITY:
Like the United States and the United Kingdom, Hong Kong uses the median
rent-to-income ratio as an affordability yardstick for rent setting.
Country specific information – profile and housing:
HONG KONG -II
SPECIFIC HOUSING INITIATIVES:
• The mortgage market in Hong Kong is one of the most developed in Asia. Housing
is an important component of household assets and mortgage loans account for
approximately 25–30% of bankloans.
• Traditionally, the government has played an important role in the housing market.
On the supply side, it runs a large public housing programme (including low-cost
housing and public rental units) that provides accommodation for about half of
Hong Kong’s population. In addition, land ownership and land restrictions by the
government often restrict the adjustment of housing supply to changing demand.
• On the demand side, the government affects the availability of housing finance via
various measures, including limits on banks’ exposure to mortgage loans and
maximum loan-to-value (LTV) ratios.
• In1999, the government established the Hong Kong Mortgage Corporation to
promote mortgage loan securitisation and to provide the Mortgage Insurance
Programme for high LTV loans Nevertheless, commercial banks are the
predominant source of housing finance and there is no government-run housing
loan bank in Hong Kong.
Country specific information – profile and housing:
SINGAPORE -I
Population
5,353,494
Population Density
7,363 persons per sq. km.
Per Capita Income
US$ 49,271
AFFORDABILITY:
Singapore is often cited as a successful example of affordable housing production
in Asian cities. As with Hong Kong, the Singapore public housing policy
intervention for resident population has progressively led to society-wide
enjoyment of the right to adequate housing. Some 85 per cent of Singapore’s
resident population lives in public housing. More than 850,000 housing units in 23
new towns have been constructed. While the poor elsewhere are homeless, the
poorest 20 per cent of households in Singapore have equal access to housing
resources, albeit public housing and many are homeowners. The proportions bear
witness to the realization of housing rights. This remarkable success of Singapore
has provided answers to many questions generally raised in relation to providing
affordable housing to all.
Country specific information – profile and housing:
SINGAPORE -II
SPECIFIC HOUSING INITIATIVES:
• In Singapore the government plays extremely important role for
providing houses to Singaporeans. The Government, through
Housing Development Board (HDB) provides 90 percent of houses
in the city-state of Singapore.
• The government is not only the largest housing developer, but also
the largest mortgage provider through HDB.
• The government provided 60.1 billion Singaporean dollars (SGD) in
the year 2000, which was much higher than the total housing loans
of the private sector which was SGD 38.6 billion.
• HDB provides housing loans to all eligible buyers of public housing.
In 2005, the loan ceiling was 90 percent of the purchase price or
market valuation.
• The maximum loan maturity is 65 years minus the applicant’s age or
30 years whichever is shorter. Borrower can use provident fund
saving to repay the loans.
Country specific information – profile and housing:
REP. OF KOREA -I
Population
48,860,500
Population Density
530 persons per sq/ km
Per Capita Income
US$ 22,278
AFFORDABILITY:
Korea is working to develop an affordability index known as “Housing
Affordability Index” (HAI). HAI is calculated as follows: the mean price of raw
data of the national housing price index of Kookmin Bank is used as the
representative price of standard house. The mean income of working class in
urban area of Korea is used as a standard income. Interest rate quoted from
the weighted average mortgage rate of saving banks published by the Bank of
Korea is used in working of EMIs.
Country specific information – profile and housing:
REP. OF KOREA-II
SPECIFIC HOUSING INITIATIVES:
• In Korea the housing finance sector was very small while Korean economy
was developing. The Korean Housing Bank-KHB, owned by the
Government, was the main player in this regards.
• In 1985 the KHB had 86% market share, and Mortgage Debt to GDP ratio
stood at 6%, which went up to 10% in 1992.
• In 1997 KHB was privatized to form Housing and Commercial Bank- H&CB.
The KHB continued to play a major role in housing finance. Together the
KHB and National Housing Fund provided for more than 80% of new
housing credit, and Mortgage Debt to GDP ratio went up to 13% by late
90s.
• By 2008 the market complexion had dramatically changed with MD to GDP
Ratio reaching to 30%.
• Today Banks, including Housing and Commercial Bank, have 77% of the
market share, and 23% of the market is with Non-Bank Financial
Institutions such as cooperatives, insurance companies, savings banks, and
finance companies