National Informal Settlements Upgrading Strategy for the Philippines
nisus
Comprehensive Assessment Report
In accordance with the contract between GHK Consulting Ltd, United Kingdom (the Consultants) and the Housing and Urban Development Coordinating Council (HUDCC) covering the provision of consulting services on the “Developing a National Informal Settlements Upgrading Strategy for the Philippines Project” (NISUS or the Project), this comprehensive assessment report (CAR) was prepared with funding support from the World Bank.
The CAR is the culminating output for Phase 2 of the Project. Phase 1 focused on the project preparatory activities, while Phase 3 using the findings of the CAR will focus on formulating the strategy and action plans for upgrading informal settlements in the Philippines.
The report comprises seven parts.
Section 1 provides a backgrounder on the Project and introduces the CAR.
Section 2 presents the approach and methodology used by the Consultants to undertake the assignment.
Section 3 provides an in-depth analysis of informal settlements in the Philippines—their nature, causes and consequences as well as how they shape the demand for pro-poor housing in the country.
Section 4 presents the existing laws on planning, regulatory, and financing aspects of the housing sector. It also provides an assessment of the housing programs of government and the private sector.
Section 5 discusses the results of the thematic, sectoral and regional consultations conducted under Phase 2 to assess the demand and supply gap factors influencing NISUS.
Section 6 highlights the selected best practices for informal settlements upgrading and lessons for the Philippines to consider. Section 7 builds on the comprehensive analysis undertaken and presents possible ways forward.
Informal settlement is the generic term used in the developing world for areas where groups of housing units have been illegally constructed and where housing does not comply with planning and building regulations to enable a decent quality of life. In the Philippines, the proliferation of informal settlements has become a phenomenon associatied with big cities and expanding urban centers. From the early 1970s to more recent years, estimates of the number of informal settlers in the country have varied, ranging from as low as 470,000 families to as high as 2.5 million families. The estimates depend on who is conducting the study.
Statistical bodies use the census of population and housing and strictly define informal settlements as households occupying rent-free lots without the consent of the owners. The National Housing Authority works with local government units (LGUs) to support a broader definition that includes (i) lots without the consent of the owners, (ii) danger areas along river banks, railways, under the bridge and others, (iii) areas designated for government infrastructure projects, (iv) protected/forest areas, except for indigenous peopls, (v) areas for priority development, if applicable, and (vi) other government/public lands or facilities not intended for human habitation. Current estimates using the broader definition place the number of informal settler families at about 1.5 million, representing 15% of the country’s total urban population. Yet, this still seems to be significantly lower than those suggested by global studies which indicate that about 30% to 60% of the population in many cities in the developing world lives in informal settlements.
The Metro Manila extended urban region and 7 cities in the Visayas and Mindanao are the key drivers of the Philippine urban economy, accounting for 80% of total GDP
In the Philippines, economic development and rapid urbanization have been interlinked. The economy, over the last decades, has continued to expand by transitioning from being predominantly rural to becoming more industrially diverse and service-oriented.This structural transformation of the economy has been accompanied by a rapid pace of urbanization—with millions of Filipinos migrating away from farm lands into the cities, particularly into Metro Manila, or the National Capital Region, which has become one of the world’s largest megacities. The adjacent cities of Antipolo and Lucena in the CALABARZON region, and Angeles and Olongapo cities in the Central Luzon region extend the urban reach of Metro Manila. These three regions, usually referred to as the Metro Manila extended urban region (EUR), account for 62% of the Philippines’ gross domestic product (GDP). The Metro Manila EUR with Cebu, Lapu-Lapu and Mandaue cities in the Central Visayas region; Bacolod and Iloilo cities in Western Visayas; and Davao and Cagayan de Oro cities in the southern and northern Mindanao regions produce 80% of the economy’s total output.
With rapid urbanization came unprecedented surges in the demand for housing and basic services in many cities, specially the key drivers of the econmy. Many local governments, while trying, have been unable to meet the increased demand given the accelerated pace warranted. The result has been a sustained, enormous demand-supply gap, manifested by the proliferation of informal or slum settlements which have become intertwined with a deepening urban poverty. This is because for the most part, the majority of informal settlers are among the poorest in the cities, tyically comprising the three bottom deciles of the Philippine income distribution. Paradoxically, while the more urbanized regions and provinces have lower recorded poverty incidences, the multiplicity of vulnerabilities and deprivation affecting millions of informal settler families in these cities cannot be ignored.
Beyond income poverty, informal settlers in the Philippines live in poor quality housing, lack of public and private services, and integrate poorly into the broader communities and their opportunities. Informal settlers score far lower on human development indicators than other urban residents. They have more health problems, and have limited access to capital, education, social services, and livelihood and employment. In Metro Manila, Cebu, Davao and other emerging urban centers, informal settlements stand in stark contrast to the gated and exclusive communities inhabited by the rich with access to all the amenities and conveniences of a comfortable life. Informal settlers live in sprawling slums that do not meet the most basic needs or worse, are used as dumping grounds for hazardous wastess, and where they are continually exposed to serious health risks.
The Local Government Code of 1991 (LGC) devolved to the local governments the efficient and effective delivery of basic services, including socialized housing, to its constituents. The Urban Development and Housing Act (UDHA), also enacted in 1991, tasked the local government units or the National Housing Authority, as the primary government agency responsible for providing housing to the underprivileged and homeless, to cooperate with private developers and other concerned agencies in socialized housing. Socialized housing as defined by UDHA refers to “housing programs and projects covering houses and lots, or lots only, undertaken by the Government or the private sector for the underprivileged and homeless citizens.” It encompasses “sites and services development, long-term financing, liberalized terms on interest payments, and other benefits.”
The Local Government Code of 1991 and the Urban Development Housing Act define the cornerstone for implementing socialized housing in the Philippines
In addition, UDHA stipulates that “socialized housing shall be provided with (i) potable water, (ii) power and electricity and an adequate power distribution system, (iii) sewerage facilities and an efficient and adequate solid waste disposal system; and (iv) access to primary roads and transportation facilities. The provision of other basic services and facilities such as health, education, communication, security, recreation, relief and welfare shall be planned and shall be given priority by the local government units and concerned agencies. To the extent feasible, socialized housing and resettlement projects shall be located near areas where employment opportunities are accessible. On-site development is to be implemented whenever possible in order to ensure the minimum movement of occupants in blighted lands and slum areas.”
There are other relevant legislations. The Comprehensive and Integrated Shelter Financing Act of 1994 increased the paid up capital of the National Home Mortgage Finance Corporation (NHMFC) and the Home Guaranty Corporation (HGC) to ensure continuous funding support to vigorously implement the government's programs for urban and rural housing, resettlement, the development of sites and services, and the renewal of blighted areas. It increased the capability of low-income groups to acquire decent and low-cost housing units through the introduction of amortization subsidies, development financing and cash flow guaranty. There is also, among others, Batas Pambansa 220 (BP 220) which, in part, prescribes the minimum allowable standards and technical requirements for socialized housing.
Past government housing programs, however, have largely focused on the relocation of informal settlers, construction of new houses for the fortunate few, and subsidized lending which often benefited the more affluent rather than the urban poor. But, over the past few years there has been a sign of change and substantial resources have been made available to the sector. However, government is struggling to effectively disburse this money to improve the plight of the informal settlers. For instance, although there have been changes to the Community Mortgage Program (CMP) incorporating basic infrastructure improvements with tenure regularization under Phase 1, and there is a local government supported CMP, the program has so far originated, approved, and implemented relatively few projects. Furthermore, the Social Housing Finance Corporation (SHFC) has recently introduced its high density housing—multi-storey buildings—loans program to provide in-city, near city or near site housing for relocated informal settlers in the NCR. But the resulting high cost of each unit has prompted the adoption of highly concessional terms to make the loan entitlements affordable for a package of up to PhP450,000 per family. The Asian Development Bank (ADB) funded Development of the Urban Poor Communities Project demonstrated that public private partnerships for new informal settler housing and housing microfinance offer solutions, but a component involving local government borrowing failed.
Many socialized housing programs involving local governments have so far not prospered
The assessment shows that many local governments have failed to respond to the challenges of the informal settlers and instead have looked to the central government to lead and sometimes, even to relinquish their socialized housing responsibilities. Many of them are reluctant to properly allocate adequate resources to the housing sector, except perhaps for their own employee housing. City planning and housing policy remain uncoordinated, both at the national and local levels. Despite the requirement for the preparation of a City Land Use Plan (CLUP) and a City Development Plan (CDP) by each local government, most planning in the Philippines lacks a strategic direction and a long-term vision. Too often “boiler plate” plans are produced, while the horizon for the CDPs is too short, seldom incorporating strategic thinking and often ending as a “wish list” of unfunded investment projects.
The government’s approach has led to a policy of massive relocation of entire communities to distant locations, often against the wishes of the inhabitants and their inevitable loss of income as a consequence. Furthermore, about PhP42 billion has been spent by the national government on relocating 227,000 families from 2001 to 2013—with an average cost of about PhP185,000 per unit. But this has meant the demolition of existing houses and their replacement by new units, one for one, hence, not a single additional unit has been added to the housing stock to arrest the backlog or meet new demand. In contrast some 212,000 families have been assisted more modestly under slum upgrading programs at a much less cost of nearly PhP8 billion—153,000 families under the Community Mortgage Program (CMP) for an average cost of PhP52,000 per family, and 59,000 families under the program of the National Housing Authority (NHA) for an average cost of PhP1,300 per family. Both these NHA and CMP programs mainly adddressed tenure regularization and the provision of basic services of informal settlers.
Interventions through the housing finance system has also failed to cater to the informal settlers. The now defunct Unified Home Lending Program (UHLP) of the NHMFC, despite the earlier rhetoric, never really benefited informal settlers, although it encouraged some private developers to move down market and build houses more affordable to the lower-middle income group—largely for those in the 30th to 60th percentiles of the household income distribution for the NCR. Lending under the end-user program of the Home Mutual Development Fund (HDMF) has cost the fund almost PhP318 billion to finance 556,000 housing units from 2001 to 2013. This reflects an average of PhP545,000 per unit which is clearly beyond the affordable limits of many informal settlers. Furthermore, the collateral and other documentary requirements of HDMF financing were too difficult and costly for the informal settler families to qualify.
There have been a number of housing projects developed through the Gawad Kalinga program adopting partnerships and using grant funds from private companies under their corporate social responsibility programs. Often this housing is built on land donated by local government. In a number of cases, the program has benefitted families relocated from danger areas, although in others some new housing has been built for the poor from informal settlements. Other programs such as STEP-UP of the Philippine Business for Social Progress (PBSP), and Habitat for Humanity schemes have been undertaken, often as modest projects in partnerships with the local governments and communities. Cost recovery under these programs, however, has been minimal, mostly rely on donations to continue. And because they are not mainstreamed, they only have benefited a lucky few. The Asian Coalition for Community Action (ACCA) approach to slum upgrading is promising because it has demonstrated that it can be scaled-up. However, the approach needs to be more tailored to the Philippines and its local governance system.
The current programs for informal settlers, whether undertaken by the government, civil society, communities or the private sector, are small in relation to the need. All interventions, especially those of government need to be scaled up, once and for all, to tackle the problems of informal settlements. Government must encourage the creation of an enabling policy environment that allows people the opportunity to transform from informal settlers into active participants of the urban economy, and for the potential beneficiaries to fully accept and assume the responsibilities that go with this change. Given the resources available, and with the right direction and prioritization, it will be possible to make a difference. The future program must be built on lessons learned from past interventions, and focus accordingly on communities and put people in the driving seat—to allow them decide their own futures. This means supporting those who in reality are the risk takers, potential entrepreneurs, and tomorrow’s middle class—those willing to uproot themselves from rural complacency and poverty in search of better opportunities and wealth.
The directions of change and reform that could be pursued by government include (i) a return to informal settlements upgrading within an urban renewal/regeneration framework, (ii) urban development and housing to occur guided by long–term spatial planning and guidelines by the national or local governments, (iii) Government not to build houses but only demonstrate model schemes; (iv) only those actually living in the danger zone to be relocated, not the whole informal settlement; (v) rationalized and effectively targeted subsidies; (vi) adoption of market-based approaches to housing finanance and production, (vii) microfinance and community finance as reliable alternatives in the provision of housing and infrastructure for informal settlements, (viii) bringing in the private sector to social housing finance by attracting investments into SHFC or exploring the possibility of private banks providing such finance by opening up special windows for socialized housing; (ix) strengthening the capacity of HUDCC to lead and provide a wider vision for urban development and housing in the Philippines, and (x) enabling local governments to lead through a sustainable urban renewal performance fund and local, area-specific urban renewal or regeneration partnerships.