Important conclusions of a research paper I did with an Economist a couple of years ago was that a third force, appart from bankers and developers must be born in our country, and it must be a force that protects consumer rights, in this case, buyers of popular housing projects. This force can be represented by Real Estate Professionals and their associations.
Another important conclusion is that developers must enter a process in which construction costs must be reduced by applying better construction technologies and standards that can be reflected in a lower selling price of this types of homes and motivate developers to be more efficient, and also that the market supply that developers create, gives more aggregate value to buyers (bigger lot size, better water supply,etc), and public financial institutions have in this way, better projects to finance which will not be foreclosed because of buyers unwillingness to pay a loan for a house that doesn’t have the promised water or electrical supply, or basic living conditions, which in the end creates a Real Estate Owned Portfolio to financial institutions.
Also, a revision must be made of important institutions as the private banking system of our country, in respect to supply of short term real estate loans (corporate loans) for development of housing projects and long term financing for buyers (retail banking), that have in the past been managed with nepotism and corruption in some cases, setting aside market, technical, and financial aspects for financing approval of this real estate projects, and puts the eye not only in institutional credibility as happened in the U.S. with the Enron case, but also in the moral standards of the people who manage this institutions. The high moral standards of this people is important for the right development of the real estate industry and housing solutions for the poorest of the poor. The structure of our financial system must be reviewed, as big banks are the biggest receivers of savings in our country and aren’t interested in managing small loans for the poor because of their strategy of giving a priority to transnational clients in a more globalized world, and the fact that bank financial conglomerates presently own Private Pension Funds that are the only investors of Public Financial Institutions such as the “Fondo Social para La Vivienda” that invests near 60% of long term financing for low income buyers in our country, and gives rise to a situation in which financial conglomerates not only concentrate control of short term and long term housing financing, but puts in risk pension funds of the poor that are beeing invested in financing projects that have been constructed by developers that obtained corporate loans through corrupt methods with some bank-officer participation, and that creates a never ending circle that at the end could affect savings and pension fund savings of the poor, or even governments’ fiscal stability when it buys private banks that get bankrupt and that must be bought by government wth our taxes as is the case of CREDISA, a real estate private bank that went bankrupt and whose porfolio was bought by the Central Bank to repay little owners of savings accounts.
A stronger parcipation of government in short term and long term financing is recommended through it’s real estate funds like FONAVIPO and public banks as HIPOTECARIO, that can provide incentives to savings accounts that can be invested in long term real estate financing and corporate financing controled by goverment.
We are also suggesting to revive a proposal that was made in the early 90’s, in which a creation of a National Housing Advisory Board was proposed: the “CONSEJO NACIONAL DE LA VIVIENDA” , and that included private and public sectors in the consultive plans and policy formulation, and that Real Estate Proffesionals are included in this Board.
Finally, with a new set of laws like securitization, leasing and investment fund laws, and that will directly affect financing, development and sales of housing projects, a strong stand must be made to protect consumer rights to make sure that this new laws benefit the poorest of the poor and don’t propitiate the creation of a bigger monopoly of financial conglomerates that are presently owning banks, controling short term and long term real estate financing, pension funds, the stock brokerage business, and that are also to own leasing companies that will own, develop, and lease with a promise to sell houses of popular housing projects, expanding financial conglomerate activities to real estate development and owning of big portfolios of houses that produce rent, and probably having control of rent prices of the poor, and control of the property management business.
We ask ourselves if recommendations of the Monetary Fund at the beginning of the 90’s to reduce government control and that gives more power to the market, and puts the popular housing problem in the hands of the market (developers and bankers) is the best strategy for our countries or a stronger participation of government as producer, financier and seller of housing projects must be implemented.
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