Innovative Solutions for Affordable Housing in the Philippines

“Affordable yet quality housing is a key element of a strong and secure Filipino nation.”

– Atty. Ernesto C. Perez II, CTEP, Real estate attorney and author

(Part 2 of 2)

By Realttorney^®

In Part 1, I stated that the Philippine housing landscape is set for a significant shift with the passage of the “National Housing Authority Act” (Rep. Act No. 12216). This new law aims to strengthen the National Housing Authority (NHA) and extend its corporate life, a move lauded as a critical step towards addressing the nation’s enduring housing backlog, particularly for the underprivileged.

But while this Act introduces robust measures to empower the NHA, a closer look reveals both promising advancements and significant challenges, which leave certain gaps, particularly concerning private sector engagement and the broader affordable housing ecosystem. This article will also suggest possible solutions that can be considered by policy-makers to narrow the critical gap.

For real estate professionals navigating the evolving market and for potential homebuyers weighing their options, understanding this Act is crucial.

🏠 The Unaddressed Realities: Critical Gaps and Proposed Solutions

While the Act fortifies the NHA considerably, the new law primarily focuses on direct housing production for the “underprivileged and homeless citizens” and those in the lowest 30% of the urban population. This leaves certain critical gaps, particularly for other low-income earners and the broad “missing middle.”

🏥Severely Diminished Incentives for Private Sector Partnership in Affordable Housing

A critical change from Senate Bill No. 1713 is the absence in Rep. Act No. 12216 (in particular, Section 14 therein) of the explicit clause extending the NHA’s comprehensive tax exemptions to “projects of the NHA, in cooperation with local government units, the private sector and other entities.” While NHA can still engage in PPPs, the lack of these direct, broad fiscal incentives for developer-partners significantly weakens the financial viability and attractiveness of such collaborations for socialized and low-cost housing.

The critical impact of this is that it would severely hamper the potential scale and speed of affordable housing delivery that relies on private sector capital and expertise. It places a heavier burden on NHA’s direct resources.

So, what is the proposed solution to fill in this gap? There are two proposals on the table. First, professionals and real estate developers should strongly advocate for new legislation or an Executive Order to provide clear, substantial, and direct fiscal (e.g., VAT exemptions, investment tax credits, RPT holidays for affordable housing components) and non-fiscal incentives (e.g., mandatory streamlined permitting for compliant projects) directly to private developers undertaking price-controlled affordable and “missing middle” housing, independent of or alongside NHA partnerships.

Second, both the DHSUD and NHA should work with the PPP Center and DOF to clarify what specific incentives under the PPP Code and other existing laws can still be maximally leveraged for NHA’s joint venture housing projects, even without the broad exemptions initially envisioned.

🛂 The Persistent “Missing Middle” Affordability Chasm Persist

The Gap: The Act, while strengthening NHA’s capacity for socialized housing, does not introduce specific, large-scale programs or financing mechanisms explicitly designed for the “missing middle” — those individuals and families who earn too much to qualify for NHA’s traditional socialized housing but not enough to comfortably afford market-rate homes offered by private developers or secure standard housing loans.

Critical Impact: This segment is often trapped in a housing affordability crisis, resorting to substandard informal housing or living in overly dense conditions. For real estate professionals, this large, underserved market represents both a challenge and an opportunity if appropriate support mechanisms are in place.

💡Proposed Solutions:

Targeted Mortgage Subsidies: Advocate for and implement government-backed mortgage interest rate subsidies or downpayment assistance programs specifically for first-time homebuyers within defined mid-income brackets.

Incentivized Private Sector Participation: Develop clear guidelines and attractive incentives (e.g., density bonuses, streamlined permitting, targeted tax relief beyond NHA partnerships) for private developers to allocate a percentage of their new residential projects to this “missing middle” segment, with agreed-upon price ceilings and quality standards.

💰 Limited Direct End-User Financing for the Mid-Income Sector

The Gap: The new law outlined the role of the NHA as a “production and financing arm” for the national government’s public housing initiatives. But this financing role, as outlined, appears largely institutional (funding its own projects or those of LGUs ). There’s no explicit expansion of direct, accessible, and affordable individual housing loan programs for the broader mid-income market seeking to purchase homes outside NHA’s direct production line.

Critical Impact: Access to affordable end-user financing is a primary barrier for mid-income families. Not all Filipinos are members of the PAG-IBIG Fund. This is the reason this gap exists. Without affordable end-user financing, even if developers build more “affordable” units, this segment will struggle to purchase them.

💡Proposed Solutions:

Expand GFI Mandates: Broaden the mandate and funding of Government Financial Institutions (GFIs) like Pag-IBIG Fund to offer more products tailored to the mid-income group, potentially including lower equity requirements, longer loan tenors, or co-financing schemes with private banks.

Housing Finance Development Fund: Explore the creation of a dedicated fund to provide guarantees or first-loss provisions for housing loans extended by private banks to the mid-income sector, thereby reducing perceived risk and encouraging more lending.

🛂 Incentives Predominantly Tied to NHA Involvement

The Gap: The significant tax exemptions in Section 13 are most clearly applicable to NHA’s own projects or those undertaken “in cooperation with” it. There is a lack of broad-based incentives for private developers independently undertaking affordable housing projects for low- (not covered by NHA) and mid-income families.

Critical Impact: Relying solely on NHA-led or partnered projects may limit the scale and speed at which affordable housing can be delivered. Unleashing the full potential of the private sector requires direct incentives.

💡Proposed Solutions:

Tiered Incentive System for Private Developers: Implement a system where private developers can directly avail of fiscal and non-fiscal incentives (e.g., VAT exemptions on construction inputs, expedited environmental clearances, LGU fee waivers) based on the percentage of units they allocate to pre-defined affordable and mid-income price points, meeting specific quality and sustainability standards.

💰 The Overlooked Rental Market

The Gap: The Act, like much of Philippine housing policy, heavily emphasizes homeownership. There’s no significant provision for developing, strengthening, or regulating the affordable rental housing market, which is a crucial option for many, especially younger individuals, mobile workers, and those not yet ready or able to purchase a home. Oftenly, the rent control law is deficient in this matter as an overall policy solution.

Critical Impact: A poorly regulated and underdeveloped rental market leads to insecure tenure, often substandard living conditions, and exploitative pricing for a large segment of the population, including many low- and mid-income earners.

💡Proposed Solutions:

National Affordable Rental Housing Program: Develop and fund a comprehensive program that includes:

📌Incentives (e.g., grants, tax relief) for the construction and operation of build-to-rent projects with a significant component of affordable units.

📌A review and update of rental regulations to ensure fair practices, secure tenure for tenants, and reasonable returns for landlords.

📌Consideration of well-designed rental voucher or subsidy programs for the most vulnerable low-income households.

🏥 Ensuring Equitable Geographic Focus

The Gap: While the Act mentions “urban and rural development programs”, the historical and often current focus of large-scale housing interventions remains heavily urban-centric, driven by visible crises in cities like Metro Manila. Housing needs in diverse rural contexts, not necessarily linked to major calamities or resettlement, may not receive proportionate attention or appropriately designed solutions.

Critical Impact: Housing insecurity is not solely an urban phenomenon. Rural families also face challenges related to housing quality, access to basic services in their homes, and tenure security, often linked to agricultural livelihoods.

💡Proposed Solutions:

Dedicated Rural Housing Strategy: Task the NHA and DHSUD to develop a specific strategy and allocate dedicated resources for rural housing, considering diverse regional needs, indigenous housing practices, and linkages with agricultural development.

Strengthen LGU Capacity in Rural Areas: Provide technical and financial assistance to rural LGUs to identify housing needs, plan local housing programs, and manage projects tailored to their specific contexts.

🏡 Building a More Inclusive Housing Future

The strengthened National Housing Authority Act is undeniably a positive development, equipping a key government agency with more tools, resources, and a longer runway to tackle the immense housing challenge. Real estate professionals should see new avenues for collaboration in socialized housing and a more stable policy environment. Aspiring homebuyers within NHA’s target groups may find more opportunities emerging.

However, the Act is not a panacea. The critical gaps identified—particularly concerning the “missing middle,” broader end-user financing, independent private sector incentives for affordable housing, rental market development, and equitable geographic focus—require further attention and policy innovation.

For Real Estate Professionals: This is an opportune moment to engage proactively. Advocate for policies that address these gaps, explore innovative and inclusive business models that cater to underserved segments, and champion sustainable and community-focused development practices. Your expertise is vital in shaping a more comprehensive housing solution.

For Potential Homebuyers (especially in the low-to-mid income brackets): Stay informed about the programs that will emerge from this Act. Organize and advocate for your housing needs and rights. Explore all available options, including those offered by GFIs like Pag-IBIG Fund, and demand transparency and quality in housing projects.

For Policymakers: The passage of this Act is a commendable step. The next crucial phase involves crafting robust Implementing Rules and Regulations (IRRs) that are clear, fair, and truly empower partnerships. Furthermore, we urge policymakers to consider the proposed solutions to bridge the remaining gaps, fostering a housing landscape where every Filipino family has access to safe, decent, and affordable shelter, whether owned or rented.

The journey to housing security for all Filipinos is a marathon, not a sprint. This Act provides a stronger runner in the NHA, but the race requires a concerted effort from all stakeholders—government, private sector, and the citizens themselves—to ensure no one is left behind.

What other gaps and proposed solutions do you know that should be discussed in order to make affordable housing available to Filipinos in dire need of it? Let us know by leaving your comments below.

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Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.