A strategy for cooperative housing

PUNCHLINE

Ike Señeres

It is a common practice in many developed countries to gather and report the “housing starts” data, meaning the number of new houses that are built in a given year. This data is used as an indicator of how good or bad the economy is for the year that is reported, based on the premise that the housing industry is one among several industries that would drive national economic growth by way of creating new jobs and creating a bigger demand for housing materials. It seems that here in the Philippines, “housing starts” data is not being gathered and is not reported, thus there is no growth indicator for us to use.

Common sense would tell us that there would always be a high demand for new houses, and people would buy them provided that the developers would offer good quality and a good price, meaning at a price that people could afford. In actual practice however, it is not really the selling price that matters, but the amount of the monthly amortization that is spread out over a reasonable number of years. In theory, anyone could actually afford a Mercedes Benz, provided that the payment period is long enough for the amortization to be spread out. This is the same argument that I would like to use in the case of housing, that anyone could actually afford a quality house if the amount of amortization is affordable.

To their credit, Hong Kong and Singapore have long ago implemented a house financing program that could best be called “trans-generational” or TG for short. The idea behind TG is very simple. Housing mortgages are passed on from one generation to another, over several generations as a matter of fact. As it happens, the next generations are able to take over the mortgages from their parents, as they become economically productive on their own. Given the fact that this program has worked for these two robust economies, I would even say that they have actually solved two problems with one solution, because they have solved their housing problem will at the same time they have also boosted their economies.

I have been exposed to housing issues from the time that I was connected with the old Ministry of Human Settlements (MHS) until now. I remember that during the time of MHS, many families were able to avail of the housing programs because these were affordable, at qualities that were acceptable given the national standards at that time. Proof of that is that most if not all of the MHS housing projects are still standing up to now. Looking back, it is very clear that the secret to the success of MHS was its capability to understand the difference between social housing and social pricing.

Going back to my example about the Mercedes Benz, very few people could afford it if it is sold on a cash basis at regular prices. More people could afford it however, if it is sold on an installment basis over many years, at discounted prices. I think the problem in the housing industry now is that there is no middle ground, because very expensive houses with very high qualities are being sold at the high end, and lower quality houses are being sold at the low end at prices that are still relatively high, relative of course to the paying capacity of the low income buyers.

Some local buildings have already been certified as being compliant with Leadership in Energy and Environmental Design (LEED) standards. That is good, but so far, all of these buildings were built for the upscale market. None so far has been built for the midrange and lower end markets. This should become a challenge for our housing agencies, how to make available to everyone what is now available only for those who are very rich. As I understand it, LEED compliant buildings are already energy efficient and are also environmentally friendly, but are generally not yet fully automated and connected.

To my knowledge, the UP Employees Housing Cooperative (UPEHCO) is the only organization in the country so far that has successfully built and sustained a cooperative housing project. I am very much interested in cooperative housing as a business model, and I believe that this is the only way to make access to housing more democratic and pervasive in our country. The capability to access affordable housing is only one side of the opportunity, the other side is the capability to save money on the cost of living expenses within the housing project.

Using technology, it is highly possible to bring down the cost of utilities and other basic necessities within the housing project. On one hand, designs for cooler buildings would reduce the costs of electricity. On the other hand, these buildings could also generate their own sources of electricity and cooking fuels, thus adding more savings. As a matter of fact, these buildings could also filter their own water, so that residents need not buy water in expensive bottles. These are just some ideas, the bottom line is that the cooperative that owns the building could make more money from the commerce within, more money that they could make from the building construction.

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