Fifty years ago, just 30% of the Peruvian population lived in urban areas. Yet the past few decades have seen a vast migration to urban areas, and now around 70% […]
Fifty years ago, just 30% of the Peruvian population lived in urban areas. Yet the past few decades have seen a vast migration to urban areas, and now around 70% of Peruvians live in cities or urban areas according to Martha Ferreyros of COFOPRI, the Peruvian government organization responsible for formalizing rights to informal housing. Global trends indicate that this urbanization is likely to continue as economic opportunities are increasingly centered in urban areas. The result of this urban migration has been a lack of adequate housing for lower-income Peruvians and a massive growth in the construction of informal housing, particularly on the outskirts of Peru’s largest cities. Despite the economic slowdown over the last few years following the end of the mineral supercycle, demand for new housing in Peru continues to outstrip supply.
In order to increase the supply of housing for low-income Peruvians and improve flexibility in the property market, Peru’s Ministry of Housing, Construction, and Sanitation has introduced a number of innovative programs and legal reforms to promote private investment in housing for lower-middle income Peruvians, increase subsidized housing for the poorest Peruvians, and make it easier for Peruvians not in formal employment to rent and buy new housing.
The majority of Peru’s social housing efforts are coordinated by Fondo MiVivienda, which runs two programs of note: Nuevo Crédito MiVivienda and Techo Propio, which means “my own roof“ in Spanish. The first program, Nuevo Crédito MiVivienda is designed to increase the supply of housing to Peru’s B- and C income segments by supporting access to mortgages for qualifying Peruvians. As Luis Ángel Piazzon, Chairman of Fondo MiVivienda explained to TBY, the lack of depth in Peru’s mortgage market means that “If [MiVivienda] were not present, commercial banks would probably not participate in this segment of the market.“ One of the important and unique elements of the Nuevo Crédito MiVivienda program is that, rather than directly funding housing projects, the Fund relies on private developers to build and sell qualifying projects, removing both the financial risk for the government and the potential for housing to become too politicized. As Piazzon explained, “if a developer builds something that won’t sell, it is his own risk.“ Piazzon also highlighted that, with the economic slowdown “demand for A+, A and B+ apartments and houses has diminished“ meaning that developers “are more interested in our market sector.
The other program administered through Fondo MiVivienda is “Techo Propio“, which is targeted at extremely low-income Peruvians. Techo Propio builds simple and highly subsidized homes for the lowest income Peruvians, often replacing informal housing with formal concrete structures with electricity and indoor plumbing. Piazzon explained to TBY that the goal for 2015 is to build 60,000 homes through Techo Propio and subsidize 30,000 new mortgages.
In addition to these programs, the government has recently enacted a new ‘Leasing Law’ which will make it easier for Peruvians not in formal employment to obtain mortgages and buy homes. Previously, Peruvians not in formal employment were required to make a series of regular deposits into a savings account over the course of one to two years in order to prove their income. This law now allows Peruvians to obtain rent-to-own properties, with their initial rental payments counting as the down-payment quota they would have made under the old system.