International Rental Housing Asia Pacific Union for Housing Finance

1. International Rental HousingAsia Pacific Union for Housing Finance Ira G. Peppercorn Financial and Private Sector Development/Non Bank Financial Institutions World Bank January 31, 2012

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9. Why Alternatives to Homeownership? • For those that do not have enough income or whose income is informal • For those now living in poor conditions • Mortgages dangerous if outside prudent underwriting standards • Vibrant rental markets are necessary for workers’ mobility • Temporary lodging with dream of returning home Non Bank Financial Institutions World Bank I Peppercorn

10. Challenges • Cultural biases in favor of home-ownership • Negative perceptions of rental housing • Legal framework, especially in relation to tenant’s rights and evictions • Low rate of risk adjusted return • Lack of incentive for investors • Lack of adequate finance • Lack of formal property management Non Bank Financial Institutions World Bank I Peppercorn

11. Who Rents? • Workers in urban areas • Young professionals • Students who live in dormitories; • Those experiencing transitional events in their life • Families who cannot afford or qualify for a mortgage, some of whom might be living in poor housing conditions; • People who simply do not want to own • People sharing space with relatives Non Bank Financial Institutions World Bank I Peppercorn

12. Who Supplies Housing and Services • Individuals who own a single or a small number of rental units • House or apartment owners that rent a room in their homes • Providers of social housing including governments and NGOs • Companies that provide housing for their workers • Medium scale owners that own from 10 to 100 units • Institutional owners and investors, for whom the ownership of rental housing is a significant line of business • Property management companies • Builders, contractors, materials suppliers, utility companies, security firms and others who provide services to the owners of rental housing. Non Bank Financial Institutions World Bank I Peppercorn

13. Country Diagnostics • Is there a shortage of housing? • Is this in the overall number of units, in the quality of the existing units or both? • If there is a shortage, is it primarily in certain urban areas? • What is the relationship between rental housing prices and the wages at particular income levels? • Is the housing affordable? • Who are the potential investors and what incentives do they need? • Is the legal framework fair enough? • Are there major imbalances in the fiscal system that discourages investors? • Is there financing available to develop and/or improve the housing? • Are governmental subsidies available and, if so, how and for what income levels? Non Bank Financial Institutions World Bank I Peppercorn

14. Country and City Demographics Non Bank Financial Institutions World Bank I Peppercorn

15. Lack of Rental Causes • Eviction process uncertain, cumbersome or tenant biased • Return/risk ratio favors other investments • Rent control • Taxation • Lack of cost-effective professional property management Non Bank Financial Institutions World Bank I Peppercorn

16. Tenant Concerns • Tenure insecurity • Unfair or no dispute resolution • Poor conditions • Lack of formal contracts • Affordability constraints Non Bank Financial Institutions World Bank I Peppercorn

17. Types of Subsidies • Demand: Targeted but expensive • Housing assistance payments • Vouchers • Housing itself • Supply: Not ongoing; not deep enough • Construction or up-front subsidies • Direct payments to landlords • Tax incentives • Land and infrastructure Non Bank Financial Institutions World Bank I Peppercorn

18. Lack of Rental System Implications • Illegal rental units • Poor and unsafe conditions • Lack of registration • Property tax avoidance • Pressure on public sector for subsidies and units • Poor property management systems Non Bank Financial Institutions World Bank I Peppercorn

19. Recommendations • Policies recognize rental is an important sector • Fair dispute resolution • Tax system favors registration and investment • Small owner incentives, such as capital for expansion • Medium to long term capital availability, both debt and equity • Targeted, effective subsidies Non Bank Financial Institutions World Bank I Peppercorn

20. Housing Finance Group Mission To establish the building blocks for sustainable, efficient, secure and market based housing finance systems. To create conditions where housing finance can be a driver of economic growth and job creation through investment in housing To expand access to housing finance to moderate and lower income households.

21. Housing Finance Group:Tools to Assist You • Comprehensive housing finance projects • Market analyses • Legal and regulatory framework • Individual building blocks • Including registration, underwriting, credit, training • Real estate data and information systems • Capital markets design and development • Rental housing finance • Savings and subsidy programs • Housing micro-finance • Affordable housing development Non Bank Financial Institutions World Bank I Peppercorn

22. Non Bank Financial Insitutions • Capital markets development • Insurance • Post-disaster finance • Pension funds • Investment funds Non Bank Financial Institutions World Bank I Peppercorn

23. For More information • Michel Noel (Manager) • MNoel@WorldBank.Org • Olivier Hassler • Ohassler@WorldBank.org • Ira Peppercorn • Ipeppercorn@WorldBank.org • Simon Walley • Swalley@WorldBank.Org • AndreyMilyutin • Amilutin@WorldBank.Org • AshnaMathema • Amathema@WorldBank.Org • Or find Olivier or Ira at the conference for a discussion on your country’s needs Non Bank Financial Institutions World Bank I Peppercorn

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25. Thank You From the Housing Finance Team at the World Bank