International Rental Housing Asia Pacific Union for Housing Finance

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International Rental Housing Asia Pacific
Union for Housing Finance

• Ira G. Peppercorn
• Financial and Private Sector Development/Non Bank
  Financial Institutions
• World Bank
• January 31, 2012

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Why Alternatives to Homeownership?

• For those that do not have enough income or whose
  income is informal
• For those now living in poor conditions
• Mortgages dangerous if outside prudent
  underwriting standards
• Vibrant rental markets are necessary for workers
  mobility
• Temporary lodging with dream of returning home

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Challenges

• Cultural biases in favor of home-ownership
• Negative perceptions of rental housing
• Legal framework, especially in relation to
  tenants rights and evictions
• Low rate of risk adjusted return
• Lack of incentive for investors
• Lack of adequate finance
• Lack of formal property management

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Who Rents?

• Workers in urban areas
• Young professionals
• Students who live in dormitories
• Those experiencing transitional events in their
  life
• Families who cannot afford or qualify for a
  mortgage, some of whom might be living in poor
  housing conditions
• People who simply do not want to own
• People sharing space with relatives

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Who Supplies Housing and Services

• Individuals who own a single or a small number of
  rental units
• House or apartment owners that rent a room in
  their homes
• Providers of social housing including governments
  and NGOs
• Companies that provide housing for their workers
• Medium scale owners that own from 10 to 100 units
• Institutional owners and investors, for whom the
  ownership of rental housing is a significant line
  of business
• Property management companies
• Builders, contractors, materials suppliers,
  utility companies, security firms and others who
  provide services to the owners of rental housing.

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Country Diagnostics

• Is there a shortage of housing?
• Is this in the overall number of units, in the
  quality of the existing units or both?
• If there is a shortage, is it primarily in
  certain urban areas?
• What is the relationship between rental housing
  prices and the wages at particular income levels?
  
• Is the housing affordable?
• Who are the potential investors and what
  incentives do they need?
• Is the legal framework fair enough?
• Are there major imbalances in the fiscal system
  that discourages investors?
• Is there financing available to develop and/or
  improve the housing?
• Are governmental subsidies available and, if so,
  how and for what income levels?

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Country and City Demographics

Countries Countries Countries Countries Cities Cities Cities Cities
Africa Owners Renters Others   Owners Renters Others
Egypt 69 31 - Cairo 37 63 -
South-Africa 77 22 2 Johannesburg 55 42 3
Asia              
China 84 16 - Beijing 59 40 1
India 87 11 3 Bangalore 43 55 2
Thailand 82 18 - Bangkok 56 40 4
Latin-America              
Bolivia 60 18 22 Santa Cruz 48 27 25
Brazil 73 17 10 Sao Paolo 70 20 10
Uruguay 62 15 23 Montevideo      
Developed Countries              
France 57 40 3 Paris 48 49 3
Germany 43 57 - Berlin 12 88 -
The Netherlands 57 43 - Rotterdam 26 49 25
Switzerland 37 63   Geneva 14 86  
United Kingdom 69 31 - London 58 41 -
U.S.A. 67 33 - New York 34 66 -
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Lack of Rental Causes

• Eviction process uncertain, cumbersome or tenant
  biased
• Return/risk ratio favors other investments
• Rent control
• Taxation
• Lack of cost-effective professional property
  management

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Tenant Concerns

• Tenure insecurity
• Unfair or no dispute resolution
• Poor conditions
• Lack of formal contracts
• Affordability constraints

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Types of Subsidies

• Demand Targeted but expensive
• Housing assistance payments
• Vouchers
• Housing itself
• Supply Not ongoing not deep enough
• Construction or up-front subsidies
• Direct payments to landlords
• Tax incentives
• Land and infrastructure

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Lack of Rental System Implications

• Illegal rental units
• Poor and unsafe conditions
• Lack of registration
• Property tax avoidance
• Pressure on public sector for subsidies and units
• Poor property management systems

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Recommendations

• Policies recognize rental is an important sector
• Fair dispute resolution
• Tax system favors registration and investment
• Small owner incentives, such as capital for
  expansion
• Medium to long term capital availability, both
  debt and equity
• Targeted, effective subsidies

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Housing Finance Group Mission

• To establish the building blocks for sustainable,
  efficient, secure and market based housing
  finance systems.
• To create conditions where housing finance can be
  a driver of economic growth and job creation
  through investment in housing
• To expand access to housing finance to moderate
  and lower income households.

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Housing Finance GroupTools to Assist You

• Comprehensive housing finance projects
• Market analyses
• Legal and regulatory framework
• Individual building blocks
• Including registration, underwriting, credit,
  training
• Real estate data and information systems
• Capital markets design and development
• Rental housing finance
• Savings and subsidy programs
• Housing micro-finance
• Affordable housing development

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Non Bank Financial Insitutions

• Capital markets development
• Insurance
• Post-disaster finance
• Pension funds
• Investment funds

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For More information

• Michel Noel (Manager)
• MNoel_at_WorldBank.Org
• Olivier Hassler
• Ohassler_at_WorldBank.org
• Ira Peppercorn
• Ipeppercorn_at_WorldBank.org
• Simon Walley
• Swalley_at_WorldBank.Org
• Andrey Milyutin
• Amilutin_at_WorldBank.Org
• Ashna Mathema
• Amathema_at_WorldBank.Org
• Or find Olivier or Ira at the conference for a
  discussion on your countrys needs

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Thank You

• From the Housing Finance Team at the World Bank