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Policy reforms needed vs land price hikes – PIDS

The government will need to implement policy reforms to address speculative increases in land prices and take a more active role in the development of housing by creating a fund to support its construction to make it more affordable and accessible, according to a study from state think tank Philippine Institute for Development Studies (PIDS).


In a PIDS discussion paper titled Measuring Housing Affordability in the Philippines, authors Marife Ballesteros, Tatum Ramos, and Jenica Ancheta recommended measures that can be taken by the government to address the limited access to affordable housing in the formal market.


The study found that for an average household, only socialized housing, which is below P1 million is considered affordable.

“Given the housing affordability problem in the country, the government must undertake reforms to prevent speculative increases in land and residential prices and to reexamine the role of the public sector in the delivery of affordable housing,” the PIDS said.


Citing previous studies, it said speculative increases in land prices in Metro Manila were brought about by inefficient taxation.

As such, it said the first policy goal would be to have the Valuation Reform Act, which seeks to have an equitable and efficient valuation system to enable the government to properly implement real property taxation and expropriation of real properties.


“With proper valuation, the government can effectively capture gains from government infrastructure projects through taxation,” PIDS said.


In addition, it said an effective implementation of the idle land tax by all local government units (LGUs), as well as regulation on borrowings through financial ceilings on loan to real estate value, household debt to income ratios to reduce over borrowing of richer families for residential investments would reduce speculative forces on real estate prices.


PIDS said foreign ownership of housing, particularly condominium units, should also be regulated. This can be done by following other countries that allow foreign ownership of housing, but tax foreigners more, and issue moratoriums on sale when the real estate market is heating up.


Furthermore, it said reforms should be seen in terms of the government playing a bigger role in the development and maintenance of affordable housing.

“Government should create a public housing fund to finance direct subsidies, public construction of housing and recovery from disasters,” PIDS said.


The think tank said the housing fund could be funded from idle land taxes and the balanced housing requirement.


It also said LGUs should have community development funds to support housing projects arising from urbanization challenges such as upgrading, renewal, safety and environmental considerations.



Measuring Housing Affordability in the Philippines 2022
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Source: Philstar and PIDS

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