Latin America Housing Finance

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1950s-1960s 1960s 1970s 1980s 1990s 2000s

1970s

Summary

Institutionalization.

Central government housing ministries establish policy and construct housing. Compulsory savings funds funded by workers' salaries emerge as one of the primary ways for middle class families to finance housing.

Influences

  • The region experiences economic growth predicated on external borrowing.
  • For the first time, Latin America's urban population exceeds the rural population.
  • The United Nation's Conference, Habitat I, sets minimum standards for housing.
  • Military and authoritarian regimes maintain power through force and repressive measures.
  • Slums and squatter settlements expand through land invasions.

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Policies and Programs

  • Chile approves first Urban Development Policy for Santiago, allowing a free market for land.
  • In El Salvador, the Social Fund for Housing is created; workers contribute a percentage of wages and are eligible for subsidized mortgages.
  • Under Allende, Chile provides serviced sites to the poor with no savings required.
  • The Constant Purchasing Power Unit (UPAC), which indexes mortgages against inflation, is created in Colombia in 1972.

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Institutional Roles

  • Peru creates its National Fund for Housing (FONAVI) to meet the demand of housing for workers.
  • Argentina's National Fund for Housing (FONAVI) is established in 1972, and by the end of the decade produces nearly all public housing in the country.
  • Venezuela creates the National Fund for Urban Development in 1975.
  • Bolivia creates the Ministry of Urban Development and Housing.
  • Panama sets up the Ministry of Housing and the National Mortgage Bank to promote financing for low-income families.

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Methods, Tools, and Practices

  • Mutual Savings and Loans in Costa Rica offer adjustable interest rates.
  • In Ecuador, the Institute of Social Security buys mortgage certificates issued by commercial banks, in turn providing loans to employees and affiliates.
  • Mexico creates the Institute of the National Housing Fund for Private Sector Workers (INFONAVIT), which provides mortgage credit to low-income private sector employees.
  • In Uruguay, nearly 40% of all state housing resources are used to finance housing cooperatives.

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Lessons and Outcomes

  • Inflation dooms fixed interest-rate loans for public housing. Indexing for inflation spreads.
  • Governments struggle to house the poor, especially those employed by the informal sector. Private housing is out of reach for most.
  • Housing guarantee programs require comprehensive legal and financial systems, which remain elusive.

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