Sharpening the Bank's Capacity to Support the Housing Sector in Latin America and the Caribbean
By Eduardo Rojas (09/06, SDS/SOC, En, Es) See also Social Development
Background Paper for the Implementation of the Social Development Strategy.
The Bank expanded its housing finance activities in the 1990s, shifting its support toward sector reforms that increase the capacity of housing finance and delivery mechanisms to cater to the needs of low-income households. Sector reform enables housing markets to operate more efficiently by shifting the public sector away from directly building or financing houses, towards activities that improve the regulatory environment and support low-income households in obtaining mortgage loans through direct subsidies. In addition, since the early 1980s, the Bank has maintained an active portfolio of settlement upgrading loans, an integral part of its participation in the housing sector. This broadened approach to sector reform and the linkages of hous-ing to the financial and real sectors of the economy, along with their impacts on the population's quality of life, make housing sector loans good instruments for the alleviation of health, employment and wealth-related poverty issues. These loans also help strengthen the financial sector, improve fiscal discipline and assist in the decentralization of government operations.
The concept of the government as a facilitator of housing sector operation, rather than a producer or sole financier, has progressed in many Latin American countries. Several endeavors are currently underway to strengthen the housing finance sector by developing commercial credit and mortgage markets and by expanding the use of demand-based subsidies for eligible households in purchasing new homes and financing home improvements. The Bank's current housing reform projects are characterized by an emphasis on regu-latory reforms and more efficient targeting of public resources. These projects also support a wide range of housing options; foster the participation of the private sector and nonprofit and community development organizations; and promote the use of transparent, direct and up-front subsidies. These projects are more complex than previous site-and-service programs, thus taking longer to mature and presenting a consider-able challenge for the Bank and its borrowing countries. However, Bank experience in the sector has vali-dated that governments adopting an "enabling strategy" are more likely to achieve their housing sector goals than those using public funds to directly finance and construct housing units.
The present publication examines Bank experience in housing, draws lessons for the design and implemen-tation of new operations and identifies future areas for development. This report is intended to assist gov-ernment and Bank officials in the identification and design of housing sector operations. The Social Pro-grams Division hopes that this publication will contribute to the improvement of housing conditions in Latin America, especially those of the poor and excluded.
This working paper is being published with the sole objective of contributing to the debate on a topic of importance to the region, and to elicit comments and suggestions from interested parties. This paper has not gone through the Department's peer review process or undergone consideration by the SDS Management Team. As such, it does not reflect the official position of the Inter-American Development Bank.
Last updated: 05/08/07
