COLOMBIA - Real Estate & Construction
Minister, Ministry of Housing, City, and Territory of Colombia
Jonathan Malagón graduated with honors from the economics faculty at Universidad Nacional de Colombia and holds a degree in business management from the University of London. He holds a Master’s Degree (MPA) in Economic Policy from Columbia University, a Master’s Degree in Finance from the University of Barcelona and a PhD in Economics from Tilburg University. Among other recognitions, he was one of the 25 global winners of the Eisenhower Fellowship Global (2017) and was selected as the best economics student in Colombia according to the Portafolio Awards (2006). He was Vice President of ASOBANCARIA, Director of Economic Analysis of FEDESARROLLO, General Manager of the COMPARTEL Program, Manager of Management Control, Assistant to the CEO and Head of Economic Studies of Telefónica Colombia, and researcher of ANIF. He has belonged to the boards of directors of the National Guarantee Fund, the Latin American Housing Union (UNIAPRAVI), the Latin American Federation of Banks (FELABAN), the Bankers and Employers Club, the Anti-Cancer League and the Council on Global Future of Financing for the Development of the World Economic Forum. He also worked as a consultant for CAF, the World Bank and UNDP.
Colombia, like many countries in Latin America and the Caribbean, although having made important progress in recent years, still presents challenges in terms of housing and urban development due to the accelerated growth of cities in recent decades. This dynamic of urban growth generates difficulties, such as insufficient adequate housing, habitat vulnerability, insufficient provision of public services and, in general, disorderly urban planning and not in accordance with the expected population growth. Colombia still must make progress in reducing the housing deficit, which in its quantitative dimension averages out to 9.8% and in its qualitative dimension to 26.7%. Moreover, half of the homes that will exist in 2050 have not yet been built imposing additional pressure on the generation of quality housing. Regarding the universalization of access to drinking water and basic sanitation services, Colombia has made important progress during the last two decades and today has coverage greater than 90%. However, there remains the challenge of reaching people without access, mostly in urban settlements and in rural areas. Thus, the National Government has recognized in these challenges an opportunity to develop a robust and comprehensive public policy, which is based on two fundamental premises: reducing inequality and putting the citizen at the center of politics. For example, in order to reduce the quantitative deficit, we have designed a subsidy policy focused on the demand, making it easier for lower-income households to access a home. Regarding the qualitative deficit, by the program “Casa Digna, Vida Digna“ we seek to improve people’s living conditions through proving property titles and through promoting housing improvements and social facilities. In addition, at the beginning of this year we sanctioned the “Housing and Habitat Law“ (“Ley de Vivienda y Hábitat“), which turns the housing policy into a State policy and aims to guarantee continuity of our housing policy beyond legislative periods. This Law allows for better planning of our territory and provides more favorable conditions in order to continue providing decent housing solutions to the most vulnerable families. Finally, in terms of drinking water and basic sanitation, we have developed differential regulatory schemes to promote the provision of these services in informal urban settlements and in rural areas with difficult access. This has allowed us to reach territories, which previously had been impossible to reach at the regulatory level.
As mentioned above, the housing policy of our Government has two main objectives: (i) reduce the number of households in quantitative deficit, and (ii) reduce the qualitative deficit, by promoting dignified living conditions for Colombians who already are owners, but the home is in inadequate condition. First, the government of President Iván Duque has focused on its subsidy allocation strategy, the most ambitious in the country’s recent history. As of May 10, 2021, we have already delivered more than 113,000 subsidies for the purchase of social housing (VIS) and about 17,000 Non-VIS subsidies. The good performance in the allocation of subsidies, together with the regulatory modernization promoted by the Housing and Habitat Law, the efforts in digitizing the sector and the initiatives to facilitate access to credit, led to the year 2020 having become the record year in sales, with more than 200,000 units sold. The prospects for home sales for 2021 and 2022 are positive too, as we expect to mark sales levels above the 2020 record level in both years. With respect to the qualitative deficit, the National Development Plan establishes that 600,000 households will benefit from the “Casa Digna, Vida Digna“ program by the end of the four-year term of this Government. This program is a joint effort between the Ministry of Agriculture, the governmental entity “Social Prosperity” and the Ministry of Housing. As of May 10, more than half a million families have benefited from the program’s three lines of action: property titles (formalization of ownership), housing improvements and social facilities.
The housing sector has been affected by the effects caused by COVID-19. During the months of March, April, and May 2020, sales of less than 7,000 units of social housing (VIS) per month were registered, and Non-VIS sales reached historical lows in April, with less than 2,000 units sold. Likewise, the employment in the building sector in April 2020 presented a reduction of 47% compared to the same month of 2019. In this regard, the National Government issued more than 10 measures that sought to mitigate the harmful effects on the sector. These measures, which placed housing at the center of the reactivation strategy, promoted employment in the sector and protected home tenure. In this context, aiming to foster the country’s economic reactivation, the National Government launched the initiative of 200,000 subsidies for the purchase of VIS and Non-VIS housing. Since its announcement on May 27, 2020, by May 10, 2021, more than 68,000 families have fulfilled their dream of owning a home thanks to these state aid. The success of this initiative went so far, as that in March 2021 the country reached the highest level of sales in its history, with more than 21,000 units sold.
The program “Mi Casa Ya“ was launched in 2015. This Government recognized its potential and strengthened some of its elements in which there were opportunities for improvement. In particular, we decided on amplifying its scope, in order to assign subsidies to a greater number of people and to more municipalities. Besides, we increased the program’s progressivity, aiming to allocate aid to the most vulnerable families. The dynamics of VIS subsidies allocation is impressive. While in 2016, 133 VIS subsidies were assigned weekly and in 2017 close to 300, currently we exceed 1,000 subsidies per week. Since the beginning of the program until May 10, 2021, 150,000 VIS subsidies have been assigned, of which 75% have been delivered during our Government (113,000 subsidies). The program’s greater scope has allowed us to benefit Bogotá as well as 26 of the 32 departments of Colombia, allocating subsidies in 252 municipalities. We also have managed great progress. In 2017, less than 20% of the families having incomes below two minimum wages had accessed VIS subsidies, a figure that for 2019 increased up to 63% and for 2021 (as of May 10, 2021) up to 78%. In other words, eight out of every 10 families that access this help from the National Government have incomes of less than two times the minimum wage. These good results in terms of the allocation of subsidies and progress are explained by different policies that we have been implementing during our Government. In the first place, the measure of “concurrent subsidies“, that allows combining subsidies for down payments provided by the Family Compensation Funds with those of the National Government. Thus, a household with an income below two minimum wages can obtain the value of 50 minimum wages for the payment of its initial installment, an incentive accompanied by a coverage of the interest rate on the mortgage loan for the first seven years. The “concurrent subsidy“ has been implemented in 26 departments and 175 municipalities across the country. Second, through mortgage loan guarantees, the National Government now can act as guarantor for lower-income families. This program subsidizes 100% of the guarantee for families with incomes below two minimum wages. Consequently, access to housing credit is promoted for the most vulnerable households.
Now is the best time for purchase a home. According to “Galería Inmobiliaria”, in March 2021 more than 21,000 families bought a house, of which 15,000 units correspond to VIS housing, both numbers representing the highest monthly value on record. As already mentioned, these good results are explained by the positive performance in the delivery of subsidies. March 2021 was the record month regarding the number of VIS subsidies (5,519 subsidies). Likewise, it is worth noting that the record in sales also can be traced back to low interest rates, the digitization and simplification of home buying processes, the new possibility of the Government as co-debtor as well as the facilitation of access to credit by modifications to the “Debt to Income“ ratio (DTI), which increased from 30% to 40% in the case of the purchase of social housing.
Guaranteeing a safe and successful reactivation process necessarily implies articulation between the private sector and National Government in their work agendas. In particular, as Ministry of Housing, we have been working with the union that groups together construction companies and companies in the value chain of the sector across the country, as well as with the private sector. Working aligned with the construction union and the private sector has allowed us to move into the right direction and we can emphasize that the construction sector today is the protagonist of the country’s economic reactivation.
With respect to housing and employment in the sector, the outlook for 2021 is very good. We hope to exceed the records reached in 2020, by selling 213,000 housing units this year. In the VIS segment we expect to sell 143,000 units and in the No Vis segment the remaining 70,000. In that regard, we expect to launch 200,000 units (138,000 VIS and 62,000 No VIS) and start the construction of 242,000 units (55.3% VIS). This will allow maintaining a monthly average of more than one million jobs within the sector. On the other hand, we expect an average growth of the GDP of the buildings sector higher than 10% in 2021 and 2022. If we continue with the excellent allocation rates observed so far, more than 80,000 families will benefit by our subsidy strategy during 2021. In the long term, according to the estimates of the Ministry, today one out of every five homes that will exist in 2030 has not yet been built. This constitutes an opportunity to rethink the sustainable and orderly urban development of the country we dream of. To this end, we will continue making progress in facilitating access to housing credit, improving the progression of the policy, promoting the orderly growth of cities, modernizing and digitizing the sector’s processes, among others.
COLOMBIA - Industry
Sales & Marketing Director, Western States Machine Company
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