Housing Finance Panel: MANDATORY HOUSING FUNDS

1
Housing Finance Panel MANDATORY HOUSING FUNDS

• Bertrand RENAUD
• BRenaud_at_cal.berkeley.edu

- Session E-5 - Joint AREUEA-AsRES International
Conference Seoul,KOREA, 4-6 July 2002. 
2
Mandatory Housing Funds

• Legacy of directed credit policies
• Korea National Housing Fund
• Japan Japan Home Loan Corporation
• China Housing Provident Funds (1994)
• Philippines HDMF-Pag Ibig
• Singapore Central Provident Fund
• Mexico Infonavit
• Other cases in Asia, Latin America, Europe

3
Rationale Behind Mandatory Funds

• Increase individual saving rates
• Mobilize more resources for the housing system
  and/or for the total economy
• Raise L-T resources at a low cost
• Relieve the government from its social burdens
  and reduce budgetary costs
• Avoid adverse selection because everybody has to
  save a wage percentage for housing
• Target more resources for middle- and low-income
  households

4
Types of Problems

• Weak legal charter and improper governance
  structure savers right in decision-making are
  ignored.
• In some countries like China, HPF quasi-fiscal
  resources for other projects than intended.
• Regressive income redistribution.Successful loan
  borrowers represent a small proportion of total
  savers. Have the higher incomes.
• Liquidity and funding risks
• long-term sustainability

5
(No Transcript)
6
Directions for Change

• Mandatory funds must not undermine financial
  sector modernization. Impact on the savings
  market? Loan under-pricing?
• Become a second tierfinancial institution
• Governance structure
• Consumer responsive rather than MOC and planner
  driven
• Link contributions to benefits to avoid
  regressive outcomes (CSH)
• No monopolistic distribution channel