Subsidies in Housing

Subsidies in housing / Stephen K. Mayo. Includes bibliographical references. p. cm. (Sustainable Development Dept. Technical papers series ; SOC-112) " It complements the Operational Guidelines for Housing, and should be used together " —Presentation. Presentation In 1995 the Board of Executive Directors of the Inter-American Development Bank approved an amendment to the Operational Policy for Urban Development (OP-751) lifting the restriction on housing financing imposed on the Bank. The amended policy indicates that the Bank will support borrowing countries' efforts to improve the living conditions of the low-income population, encouraging governments to pursue policies to efficiently mobilize private and public resources to help households solving their housing problems. Bank activities in housing will have the following objectives : 1. Support policies and sustainable programs and projects to improve housing conditions for low-income households. 2. Improve public sector effectiveness both as a facilitator of private sector initiatives and in the management of public resources allocated to the sector. 3. Promote sector-wide allocative efficiency of housing markets and related markets such as land, financing and construction materials and services. The Policy considers the possibility of financing housing subsidies when they can be proved to be efficient mechanisms to reach the poor. The provision of subsidies is controversial. The impact of many past national schemes has been quite contrary to the public interest, poverty reduction and the principles of equal opportunity and allocative efficiency. Concerning subsidies, the Bank's Operational Guidelines for Housing direct Project Teams to discuss key issues when conducting country sector studies and country programming activities. These include questions like: Are the proposed subsidies for housing justified in the context of the country's overall policies for social services and poverty alleviation? Specifically, are housing subsidies an appropriate use of public resources? Are subsidies justified and sustainable in light of the government's fiscal position? Even if the use of subsidies can be justified, there is still controversy concerning the correct amount of the subsidies to accomplish the policy goals pursued by governments. Lending for housing and urban development by the Inter-American Development Bank is a key component of its approach to overall economic development, poverty alleviation and environmental management. The region is among the most highly urbanized in the world, and housing is an especially important sector in the urban economy. Housing in Latin America typically comprises between 15 and 20 percent of Gross National Product and affects real, financial and …