Public housing policies

Financing

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Housing guarantees for populations in informal conditions: the case of FOGARIM, Morocco  

In 2003, the Moroccan Ministry of Housing created the National Urban Strategy to support the production of affordable housing through tax exemptions, public-private partnerships, zoning changes, and a solidarity fund that subsidizes urban upgrading and the production of housing. households. In 2004, the Moroccan government created the FOGARIM program (Fonds de Garantie en Faveur des Poblations à RevenuesIrréguliers et/ou Modestes), which is subsidized with taxes for the construction industry, to facilitate access to credit for low-income citizens and informal economy workers. Its purpose is to facilitate access to credit. FOGARIM guarantees loans to finance housing, whether through the purchase, acquisition of land or construction. When a client cannot make his monthly payment, the mortgage bank benefits from the guarantee and can eventually foreclose on the mortgage. The fund pays 70% of the debt while the legal process to recover it begins. By reducing the loss and transferring much of it to the Government, FOGARIM reduced the risk for the banks.  

MIA Project (Assisted Comprehensive Improvement), Housing for rural populations in Mexico  

 3.2a

The MIA model is innovative in the framework of affordable and quality housing solutions for rural populations in Mexico. It is responsible for identifying the communities that need a decent housing solution, builds the residence and assists its future owners through the financing process in coalition with the local government. And above all, it offers complete management of the project: it buys the construction materials, handles the logistics of the work, helps with the financing of its clients and works with the federal, state and local governments to secure subsidies. Also, it carries out technical inspections and makes sure that land tenure is guaranteed by the local government.  

Case of INFONAVIT and FOVISSSTE, Mexico

 3.2b

The housing finance market in Mexico was first established with the creation of national housing agencies such as INFONAVIT and FOVISSSTE (1972). INFONAVIT, in particular, has become a very efficient mechanism for housing finance; in the period 1972-2016, INFONAVIT granted more than 9.3 million loans to improve, expand, remodel, self-build and purchase housing.  

During 1997, an unprecedented reform of the Retirement Savings System was carried out in order to individualise the retirement, unemployment and old age sub-accounts and to create the Retirement Fund Administrators (AFORES), which, together with the Investment Companies, became the main institutional investors that today finance the housing sector through the Mexican Stock Exchange.  

Likewise, in 2002, the Sociedad Hipotecaria Federal was created, a development bank specialised in financing the housing sector through whose financing, guarantee or credit insurance, commercial banks, microfinance institutions and other intermediaries finance housing developers, and grant mortgage loans and microcredits to families for their housing needs. On the other hand, in 2008, the Mortgage Securitisation Market was developed under the figure of BORHIS, CEDEVIS and TFOVIS so that banks, INFONAVIT and FOVISSSTE could package their mortgages, unload them from their balance sheets and institutional investors could acquire bonds backed by those mortgages. This market invigorated the sector and today more than 3 million mortgages are backed by the financial market. Finally, in 2006, the Mexican government created the National Housing Commission, which provides subsidies to low-income families so that they can access housing finance with affordable monthly payments.  

The program constitutes 53 per cent of all mortgage loans in Mexico.  

INFONAVIT’s core functions are collecting funds from contributors, originating loans according to its mandate, and servicing the credits that have been invested. The program has largely overcome widespread criticism in the 1990’s about the quality of homes built by developers and reports of endemic patronage. Additionally, INFONAVIT is the leader in issuing mortgage backed securities in Mexico, with a 25 per cent share of the market. The institution also manages nearly a third of all retirement savings in Mexico.  

The numbers of households that have benefited from INFONAVIT has reached an unparalleled scale, enabling millions of families to access housing finance. The program has achieved a solvency that will likely enable it to meet projected future demand, and securitization has bolstered its ability to provide capital to its target households. The question remains of whether INFONAVIT and associated programs will, in the long run, be a positive on the balance sheet of the Mexican housing sector. Time and further study will tell if the program is a net positive – and if massive subsidized lending allows enough breathing room for the private market to expand and independently provide market-based mechanisms to address housing needs. One Achilles heel of the program is that workers in the informal sector – typically poorer households – do not contribute and thus have no access to INFONAVIT funds, meaning that a major state subsidy is not reaching some of those who need it most. The market for mortgages is expected to grow significantly over the next two decades, with the economically active population (20-59 years) projected to increase from 51 to 72 million between 2005 and 2025. The programs goal from 2008-2012 is to expand the reach of the program geographically, continuing to emphasis building the quality of homes, move closer to an equality of income distribution of loans, and support efforts at “well-planned urban development”.  

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