Removing incentives could worsen housing backlog

The country’s housing backlog could worsen with the proposed removal of “compensatory incentives” given to the private sector undertaking socialized housing.

This is according to Atty. Christopher Ryan T. Tan, President of local think tank Center for Housing and Independent Research Synergies (CHAIRS).

Tan said mass housing developers are up in arms over the planned repeal of incentives to socialized housing under Republic Act 7279 or the Urban Development and Housing Act (UDHA) under the pending Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill.

If the incentives are removed, Tan said developers should not be compelled to do socialized housing at all as this is confiscatory on the part of Congress and the state.

The law grants incentives to the private sector as developers are required to comply with the balanced development act mandating them to produce socialized housing projects equivalent to five percent for condominium projects and 15 percent for subdivisions projects.

“Removing this incentive will effectively paralyze private sector participation housing production,” Tan said.

According to him, the incentives under the law are mere compensatory incentives for doing a missionary activity and should not be misconstrued as investment incentives to be lumped under the proposed Strategic Investments Priorities Plan (SIPP) envisioned under the proposed package 2 of the ongoing tax reform program.

Furthermore, Tan said the removal of incentives of socialized housing goes against the 1987 Constitution that mandates the State “by law and for the common good to undertake with the private sector a continuing program of urban land reform and housing which shall make available at affordable cost decent housing to the underprivileged and homeless.”

“Removing such compensatory incentives to socialized housing, will not only be unconstitutional, but will also reduce the balanced housing requirements to an “unjust, oppressive, and confiscatory exercise of police power,” Tan said.

CHAIRS executive director Santiago F. Ducay also expressed apprehension over the proposed removal of the exemptions of the Home Development Mutual Fund (Pag-IBIG) from all kinds of taxes, fees and charges as stated under RA 9679.

Ducay said Pag-IBIG should continue to be tax exempt similar to the Social Security System (SSS), Government Service Insurance System (GSIS), and PhilHealth due to their with highly social functions.

“Current savings from Pag-IBIG’s tax exemption are channeled to providing interest subsidy to enable the lending for housing acquisition at a low of three percent for socialized housing,” he added.

He pointed out the removal of the tax exemption of Pag-IBIG would greatly affect the affordability of the lower income groups, particularly the bottom 30 percent of the income decile to acquire housing under the government’s National Shelter Program.

Macelino C. Mendoza, national president of the Organization of Socialized and Economic Housing Developers of the Philippines (OSHDP), said the incentives are crucial for a sustainable participation of private developers in the production and supply of socialized housing units.