Opinion – Claudio Bernardes: Proposals for the Brazilian housing financing system

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Opinion – Claudio Bernardes: Proposals for the Brazilian housing financing system

According to data reviewed in 2019 by the João Pinheiro Foundation, the Brazilian housing deficit is 5.8 million homes, and the trend is for an increase.

The demand for housing in the coming years to eliminate the deficit and meet the needs of the growing number of households, according to studies by the CBIC (Brazilian Chamber of Construction Industry), is 1.5 million units per year. The number of homes, in turn, that present some type of inadequacy reaches more than 24.8 million. These data indicate the dimension of the country’s housing needs.

IDB (Inter-American Development Bank) publication of September 2021 assesses the current panorama of the Brazilian housing sector financing system, and presents proposals to improve it. The diagnosis carried out by the IDB shows that the main bottleneck in housing financing is still the relationship between the cost of credit, the cost of housing and the income of most Brazilian families.

Also according to the IDB report, the scenario of high uncertainty caused by Covid-19, further aggravated by the stock market’s declines, has changed investment dynamics, making it difficult to make projections regarding sources of funds.

The prospects for the FGTS (Guarantee Fund for Employees) are of a drop in collection and an increase in withdrawals. In this way, a situation of possible retraction is outlined, due to the loss of income and the increase in unemployment.

According to a survey by Datastore consulting in April 2020, 5 million families chose to postpone the purchase of their own home (76% in the Southeast), while another 2.4 million gave up and left the market (60% in the Northeast and North regions). Of those who are still willing to buy a property within two years, 59% are in the Southeast region of the country.

Taking into account this scenario and its broad diagnosis, the IDB report points out some alternatives for reaching an improvement in the housing financing system.

One of the proposals would be to recalibrate the limits and modalities of service provided by the FGTS, so that there is greater efficiency and social impact in the use of the Fund’s resources. This would mean the gradual reduction of the maximum income limit served with resources from the Fund.

The creation of a modality of microcredit for improvements in housing is an interesting proposition and a fundamental alternative to diversify the service, serve families who do not fit in or do not wish to take out credit for the purchase of a ready and finished unit, and also to address the inadequacy of low-income housing (bathroom construction, floor and ceiling improvements, among others).

Another important proposal would be the review of the regional distribution system. This review aims to expand the financing granted in the North and Northeast regions and allow the execution to adhere to the FGTS budget, promoting greater efficiency in allocation, eliminating questions from control bodies, and increasing the attractiveness for expanding the financial agents that operate in the system.

This proposal may evolve, in a second moment, to adjust the hiring targets by state, if necessary to ensure better intra-regional distribution. However, the maintenance of proportionality between the supply of resources and effective housing demand must be maintained.

The structuring of housing credit insurance would be another suggestion aimed at reducing credit risk in the event of default, distinguishing it from insurance relating to other types of claims arising from the debtor’s death or damage to property.

Favoring the expansion and diversification of the ecosystem of financial agents can also be fundamental for the wide improvement of the financing system. Encouraging the expansion of this ecosystem requires the establishment of adequate incentives, through medium and long-term planning.

Improving the financing system will be an indispensable step in achieving the objectives of the National Housing Policy, aimed at expanding access to housing, especially in the HIS (Social Interest Housing) segment, thus balancing economic growth and social stability.

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