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Development in the Americas (DIA)

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Room for Development: Housing Markets in Latin America and the Caribbean

Publication date: April 2012

Slums are a perennial eyesore in Latin America and the Caribbean. More people live in dilapidated homes in the region than in other countries with the same income level. The majority of households living in the region’s capitals cannot afford a dwelling built legally and on land with access to basic infrastructure services such as water and sanitation. The region would have to spend over $300 billion, or nearly 8 percent of its gross domestic product, to provide adequate housing for all its citizens. Governments alone cannot solve this problem, particularly if they continue to concentrate on treating the symptoms rather than the root cause. This latest edition of the IDB’s flagship publication, Development in the Americas, takes an in-depth look at the opportunities countries have to improve urban housing markets and pave the way for solutions that involve the private sector.

DIA Infographics

Working Papers and Technical Notes

  • Are Uruguayan Housing Policies Reaching the Poor? An Assessment of Housing Deficit, Housing Informality and Usage of Housing Programs in Uruguay
  • Abstract: This document surveys the Uruguayan housing market, first describing the main housing programs and policies, then comparing their design with households’ characteristics and needs. It additionally measures Uruguay’s housing deficit using the basis deficit as well as quantitative and qualitative deficits and provides a definition of housing informality that captures most irregular housing situations, thus delineating the size and attributes of the informal housing market. Considering both the housing deficit and informality permits an understanding of which population segments have the most urgent housing needs and whether they are currently eligible for participation in housing programs. Finally, the study considers how many households eligible for housing programs actually make use of them. Click here for more information.

  • Argentina`s Housing Market in the 2000s
  • Abstract: This study analyzes the main drivers of Argentina’s housing market, including demand and tenure choice, and relates them to the macroeconomic environment in order to advance a policy agenda for housing policy reform. Structural characteristics of the market include the high concentration of the urban population in a few large cities, the association of urban poverty with the housing deficit, and overcrowding. The mortgage market lost its appeal following the 2001-02 crisis due to widespread breaches of contract legitimized through protective legislation (still in place), insufficient long-term financing, and high inflation. The housing deficit could be eliminated in five to eight years if well-coordinated policy initiatives to develop the mortgage market and provide low-income housing were adopted under a decentralized, demand-driven, subsidized program. Click here for more information.

  • Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia
  • Abstract: Government intervention in the construction sector as a way to boost the economy has been a constant in Colombia for the past 90 years. This paper explicitly tests the impact of the most recent of such interventions: a subsidy to the mortgage interest rate. The results show that the subsidy boosted mortgage loans by around 38 percent. However, it is also found that real interest rates went up by 1.09 percent, i.e., there has been an incomplete pass-through of the subsidy to the consumer. The pass-through of this instance of intervention is estimated to be in the range of 65 percent to 74 percent. Click here for more information.

  • Housing Demand in Brazil: Evidence from the Formal and Informal Sectors
  • Abstract: This paper describes the determinants of housing demand in Brazil, with the intention of informing policy aimed at reducing the housing deficit and increasing home ownership. As price elasticity for renters is slightly higher, public policies that aim to influence the price of dwellings and/or the income of households are expected to affect renters more than owners. Given that rent is a pro-cyclical variable and that housing-price supply elasticity tends to be low, a social housing policy focused on the rental market might be an effective option, at least in the short run, to satisfy rising housing demand in Brazil. Click here for more information.

  • Housing Finance in Brazil: Institutional Improvements and Recent Developments
  • Abstract: This paper investigates the recent evolution of the housing market in Brazil, focusing on whether the current expansion in mortgage lending reflects institutional and economic improvements favoring economic stability and compliance with contractual obligations or merely the higher level of housing loans imposed by the government on financial institutions. Different explanations are found for private and public institutions. Click here for more information.

  • Housing Finance in Central America: What is Holding It Back?
  • Abstract: This paper surveys housing finance in Costa Rica, El Salvador and Panama. The development of a secondary mortgage-backed securities market in Costa Rica is very limited despite a broad legal framework, while in El Salvador it is nonexistent and in Panama has not grown due to high liquidity. In Costa Rica’s subsidy policy, core institutions responsible for housing policy act as facilitators of private agents. This contrasts with the dispersion of policy and institutional efforts identified in Panama and El Salvador. Government subsidies are especially directed to households where more of 90 percent of the housing deficit is concentrated. A solution based on public budgets is not sustainable, requiring an active role of the private housing finance sector. Increasing the purchase capacity of families and reducing the cost of financing are necessary conditions to reduce housing deficits. Click here for more information.

  • Housing Finance in Mexico: Current State and Future Sustainability
  • Abstract: This paper analyzes a large database provided by INFONAVIT, Mexico’s principal mortgage issuer, which contains information on borrowers’ repayment behavior. It finds that borrowers who received subsidies do not show higher default rates than borrowers who received no financial assistance. Borrowers receiving subsidies actually take longer to show their first default than borrowers not receiving subsidies. Therefore, current subsidy programs do not seem to have negative financial implications for participating mortgage institutions. Click here for more information.

  • Housing Finance in Peru: What is Holding it Back?
  • Abstract: Housing for most Peruvians is improving but is still grossly inadequate. Nonetheless, public housing finance policies mainly involve programs that subsidize middle-income families and banks that lend to them. Research summarized in this paper indicates that financing will not be the main obstacle to improving housing conditions in Peru and that public sector efforts would be better aimed at dealing with significant externalities and institutional restrictions. Thus, public sector efforts and funds could temporarily support the development of: i) cheaper construction techniques and materials, ii) lower-cost credit technologies for low-income housing and iii) greater availability of adequately enabled land for large-scale low-income housing projects. Click here for more information.

  • Housing Finance Policy under Dutch Disease Pressure: The Mortgage Market in Trinidad and Tobago
  • Abstract: This work analyzes housing finance in Trinidad and Tobago during the last 20 years. The period covered is influenced by an economic bonanza led by the energy sector. Housing prices in this period skyrocketed, but the demand for mortgage loans was low. The results suggest that this is explained by affordability problems in the dynamics of the new post-shock equilibrium, as housing prices increased more rapidly than wages. Public housing finance also played a role, but in recent times it has been more prudently managed than during the previous boom of the 1970s. Click here for more information.

  • Housing Markets in Uruguay: Determinants of Housing Demand and its Interaction with Public Policies
  • Abstract: This paper analyzes the determinants of housing demand for Uruguay and the extent to which housing policies impact their target population. The paper first analyzes the determinants of housing demand Determinants of formality and ownership choices include both household demographic attributes and access to and use of public housing and other social programs. Policy recommendations are offered on the basis of the finding that a price and income-inelastic formal housing market greatly contrasts with a price and income-elastic informal housing market. Click here for more information.

  • Housing Tenure and Housing Demand in Colombia
  • Abstract: Using the 2003 and 2008 Quality of Life Surveys, this paper identifies the factors that affect housing tenure decisions in Colombia. Households with higher incomes are more likely to purchase than to rent, and the choice of formal housing is positively associated with wealth. Households eligible for social housing subsidies are more likely to purchase than to rent, and those working in the informal sector are more likely to purchase informal dwellings. Subsidies and access to mortgage credit increase demand. Finally, savings boosted demand in 2008, but not in 2003. Pent-up demand for low-income housing explains why both subsidies and credit increase demand. Click here for more information.

  • Low-Income Housing Finance in Colombia
  • Abstract: Using the Quality of Life Surveys conducted in Colombia in 2003 and 2008, this study finds that policy instruments aimed at easing low-income households’ access to affordable housing such as subsidies and loan guarantees have played a modest role in increasing the use of mortgages as a source of funding. Despite this, subsidies have had a significant impact on both the quality of dwelling and the quality of life of the beneficiaries. Therefore, this paper suggests promoting the use of both instruments by improving their design and targeting. Click here for more information.

  • Tacit Collusion in the Santiago Housing Market
  • Abstract: This paper tests the extent of competition in the housing market in Santiago, Chile using a two-step methodology. In the first step, using a hedonic price model, the Santiago housing market is divided into sub-markets, which are analyzed separately. The second step is the tacit collusion test itself, which compares the industry markup with the business cycle in each sub-market using panel data regression models. Evidence of collusion is found in certain sub-markets. Click here for more information.

  • The Demand for Mortgages under Macro Volatility: The Argentine Case
  • Abstract: This paper analyzes mortgage loan demand in Argentina using a new survey administered in the Buenos Aires Metropolitan Area. It finds that recurring macro volatility and violation of financial property rights have increased demand for real estate as an investment, which in turn boosts housing prices and makes it more difficult for consumer households to meet minimum income requirements for obtaining a mortgage. Affordability thus seems to offer a better explanation than standard supply side constraints for the small size of the mortgage market in Argentina. Overall, the shallow mortgage market has not posed a major impediment to home ownership in Argentina and the small (and shrinking) mortgage market has more to do with lack of demand than credit supply constraints. Click here for more information.

  • The Missing Foundations of Housing Finance: Incomplete Markets, Fragmented Policies and Emerging Solutions in Guatemala
  • Abstract: This paper applies an analytical framework that identifies the types of market failures responsible for the underdevelopment of the housing finance system. The working hypothesis is that there is a correlation between the nature and scope of market failures, and the kind of public interventions actually implemented. Evidence seems to disprove the policy adequacy hypothesis. Nevertheless, it is encouraging that solutions have begun to emerge as economic agents learn to overcome market failures; these experiences are reinterpreted as “natural experiments” showing what could happen if market failures could be fixed on a large scale through appropriate government policy. Building on this framework, the paper proposes guidelines for the design and implementation of housing finance policy in Guatemala. Click here for more information.


Credifamilia's Housing Solutions

Low-income and independent workers in Colombia can now obtain housing mortgages without a established credit history.
04:06 minutes
September 2011

Patrimonio Hoy

750,000 low-income families will be able to make home improvements in Mexico, Colombia, Nicaragua, Costa Rica and Dominican Republic, thanks to the partnership between the IDB and CEMEX.
05:07 minutes
June 2011

Dreams in a Construction Zone

Thousands of low income Paraguayans get to make home improvements with credits provided by a Vision Banco-Habitat partnership.
03:38 minutes
January 2011

Manaus, the Transformation of a City

In Manaus, Brazil, 15,000 families living along the city´s watersheds freed from flooding and waterborne disease.
03:10 minutes
June 2009

Press releases


Cesar Patricio Bouillon, a citizen of Peru, received a Ph.D. in Economics from Georgetown University and is a lead research economist in the Research Department of the Inter-American Development Bank.


Viviane Azevedo, a Brazilian citizen, received a Ph.D. in Economics from the University of Illinois at Urbana-Champaign and is a specialist in the Opportunities for the Majority Sector of the Inter-American Development Bank.

Andres Blanco, a citizen of Colombia, is an assistant professor in the Department of Urban and Regional Planning at the University of Florida. He holds a Ph.D. (c) in City and Regional Planning from Cornell University.

Cynthia Boruchowicz, a national of Argentina, received a Master of Public Policy from the University of Chicago and is a research fellow in the Research Department of the Inter-American Development Bank.

Ophelie Chevalier, a national of France, received a Master of International Affairs at Columbia University and is a housing and urban development specialist in the Fiscal and Municipal Management Division of the Institutional Capacity and Finance Sector of the Inter-American Development Bank.

Fernando Cuenin, a citizen of Argentina, received an M.A. in Economics from Universidad Nacional de La Plata and is an operations specialist in the Andean Country Group Department of the Inter-American Development Bank.

David Dowall, a citizen of the United States, is a professor of city and regional planning at the University of California at Berkeley and holds a Master´s degree in Urban and Regional Planning and a Ph.D. in Economics from the University of Colorado.

Vicente Fretes, an Argentine citizen, received an M.B.A and a Ph.D. in Economics from the University of Pennsylvania and North Carolina State University, respectively. He is the chief of the Fiscal and Municipal Management Division of the Institutional Capacity and Finance Sector of the Inter-American Development Bank.

Arturo José Galindo, a citizen of Colombia, received a Ph.D. in Economics from the University of Illinois at Urbana Champaign. He is currently the regional economic advisor for the Andean Country Group at the Inter-American Development Bank.

Katia Herrera, a Mexican citizen, is completing her Ph.D. studies in Economics and Education at Columbia University.

Nadin Medellin, a national of Mexico, received an M.A. in Economics and Public Policy from Tecnológico de Monterrey.

Sebastian Miller, a citizen of the United States and Chile, received a Ph.D. in Economics from the University of Maryland at College Park. He is a research economist in the Research Department of the Inter-American Development Bank.

Andres Muñoz Miranda, a Colombian citizen, received a Ph.D. (c) in Public Administration from New York University and is a senior associate in the Fiscal and Municipal Management Division at the Institutional Capacity and Finance Sector of the Inter-American Development Bank.

Carolina Piedrafita, a citizen of Argentina, received a Master in Public Policy and Management from Columbia University and is a housing and urban development specialist in the Fiscal and Municipal Management Division at the Institutional Capacity and Finance Sector of the Inter-American Development Bank.

Alessandro Rebucci, a national of Italy, received a Ph.D. in Economics from the University of London and is a lead research economist in the Research Department of the Inter-American Development Bank.

Eduardo Rojas, a Chilean citizen holds an M.B.A. from Johns Hopkins University. He is a former Principal Specialist in Urban Development and Housing at the Inter American Development Bank.

Frank Warnock, a citizen of the United States, is an associate professor of business administration at the University of Virginia. He received a Ph.D. in Economics from the University of North Carolina at Chapel Hill.

Veronica Warnock, a national of the Philippines, is a senior lecturer at the School of Business of the University of Virginia. She holds a Ph.D. in Economics from Fordham University.

Previous editions of Development in the Americas (DIA):

Previous editions of the Economic and Social Progress Report (IPES):

  • 2008
    Outsiders? The Changing Patterns of Exclusion in Latin America and the Caribbean

    This report raises a number of fundamental questions about the multidimensional and interrelated nature of social exclusion and moves beyond the traditional emphasis on outcomes and groups to view exclusion as a process that results from societal traits that limit the functionings of the excluded.
  • 2007
    Living with Debt: How to Limit the Risks of Sovereign Finance

    This report analyzes the nature and evolution of sovereign debt in Latin America and discusses the policies that can be followed by countries and international financial institutions (IFIs) to reduce the vulnerabilities associated with it.
  • 2006
    The Politics of Policies

    Certain simple ideas can help to mobilize society, but they are rarely sufficient for understanding the processes of fundamental change. Sadly, there are no shortcuts to the Promised Land of sustainable development and prosperity for all.
  • 2005
    Unlocking Credit:
    The Quest for Deep and Stable Bank Lending

    Unfortunately, credit is scarce, expensive, and volatile. Without deep and stable credit markets, it will be very difficult for the region to achieve high and sustainable growth rates and combat poverty.
  • 2004
    Good Jobs Wanted: Labor Markets in Latin America

    Topics of the Report include the employer-worker dynamic, the new profile of the supply of labor, the impact of structural reforms, and the role of technology and institutions.
  • 2002
    Beyond Borders:
    The New Regionalism in Latin America

    It focuses on current subregional integration schemes, the new agenda launched in Doha for multilateral trade talks, regional initiatives, and interregional agreements between countries in the region and the European Union.
  • 2001
    Competitiveness: The Business of Growth

    This report provides guidelines to increase productivity and improve access by businesses to productive resources.
  • 2000
    Development Beyond Economics

    This report examines three entrenched structural factors -demography, geography and institutions- that are closely connected to economic and social development.
  • 1998-1999
    Facing Up to Inequality in Latin America

    Latin America in the 1990s remains the most unequal region in the world in terms of income distribution. Yet because of its changing demographics the region now has a unique window of opportunity to reduce the income gap by accelerating the development process, putting people to work, improving education, and saving for the future.
  • 1997
    Latin America After a Decade of Reforms

    This report examines the complex forces that have shaped the reform process and assesses the challenges ahead to sustain economic growth, prevent instability, improve income distribution, and foster participation in public decisionmaking.
  • 1996
    Making Social Services Work

    The 1996 Report on Economic and Social Report in Latin America interprets these macroeconomic developments in light of structural reforms implemented across the region over the past decade.

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