The Transparency, Incidence, and Targeting Efficiency of Housing Programs in Latin America

In this paper we evaluate the targeting efficiency of Latin American housing programs of the demand-side- ABC type, acronyms based on the Spanish words for savings-voucher-mortgage. These are the typical; housing programs in Latin American countries. However, there is no systematic evaluation of the targeting efficiency of these programs. We find that most programs are not progressive and have inefficient targeting (high slippage and low coverage rates). Even reducing slippage to zero does not reduce substantially under-coverage given the small size of the programs relative to the size of housing shortage. Further, with their existing values of savings-voucher-mortgage-program house price they cannot target the poor without incurring an increased probability of mortgage delinquency. To avoid the mortgage delinquency problem requires substantial increase in the value of the housing voucher, of an average 47%, that implies a sharp reduction in annual number of housing solutions, on average of 35%, or a significant increase in the public budget allocated to the programs, on average of 185%. Thus to obtain a perfectly poor household targeted housing program requires a substantial change in the programs design and has ramifications for the size of the program and/or budgetary requirements.