Federal government program does less than desired

Figures released by government itself show that the “Minha Casa, Minha Vida” (My Home, My Life) program underwent a slowdown in 2011

The "Minha Casa, Minha Vida" program introduced by federal government during the administration of former President Luiz Inácio Lula da Silva commissioned the constru5ction of a total 457,005 residential units in 2011. The result is equivalent to 23% of the targeted two million homes over a four-year period. The rate of construction was lower than in 2010, when 661,000 contracts were signed, due to delays in hiring construction for the lower income group (families with incomes of up to R$ 1,600.00 or US$ 914.00) which was only resumed in September due to the establishment of new rules for the program.

The number of contracted residential units in 2011 is additional to the 1.05 million houses and apartments whose construction was commissioned during the first phase of the program under the Luiz Inácio Lula da Silva administration. Also in 2011, work was completed on over 400,000 houses and apartments and more than 500,000 are still under construction. In this second phase of the "Minha Casa, Minha Vida" program, the federal government plans to invest R$ 125.7 billion (US$ 71.8 Bn) to build two million homes by 2014.

The federal government is betting on a strengthening of engagements of construction for 2012, reaching 600,000 dwellings, driven primarily by the lower income bracket, according to Jorge Hereda, president of the Caixa Econômica Federal (CEF) - a government banking institution. The expectation is that 300,000 units will be commissioned in 2012. For the second income bracket (from R$ 1,600 to R$ 3,100 or US$ 914.00 to US$ 1,771.00) 250,000 contracts are expected; and 50,000 homes in the third income bracket (from R$ 3,100 to R$ 5, 000 or US$ 1,771.00 to US$ 2,857.00).

South and Southeast with better results  
Five of Brazil’s states alone accounted for 55% of “Minha Casa, Minha Vida” commissioning in 2011: São Paulo, with 87.5 thousand homes, Minas Gerais (49 thousand), Paraná (41 thousand), Goiás (39.5 thousand) and Rio Grande do Sul (36 thousand). Also high in performance were the states of Rio de Janeiro (34 thousand), Santa Catarina (20 thousandl) and Bahia (21 thousand).

The greatest advances compared to the first phase of the program, however, occurred in the states of Goiás, which shot from 38,000 contracts in 2009 and 2010 to 88,000 in 2011; Mato Grosso do Sul, from 14,000 to 25,500 during the same period; and Paraná, where commissioning rose from 58,000 to 99,000 in the same comparison. Besides those states, the state of Amapá, which has had very poor performance since the introduction of the program, managed to surpass in 2011 the number of homes commissioned in the first phase of “Minha Casa, Minha Vida”. Last year Amapá commissioned 2,100 dwellings compared to 1,600 in 2009 and 2010.

Although it’s at the top of the list in the number of commissioning contracts in the country in 2011, São Paulo is one of the states where the program finds a serious difficulty to address: the region has great difficulty in making investments that cater to the lower income bracket because of the high price of land in metropolitan areas. The same is not true as regards the other two income brackets defined in the program which gather families with incomes between R$ 1,600.00 and R$ 5,000.00 (US$ 914.00 to US$ 2,857.00).

Another concern is the CEF’s overall limit on leveraging, determined by the analysis of risk performed on construction companies, especially with regard to those companies that operate in the lower-income range of the program. According to João Robusti Claudio, Vice-president for popular housing of the Union of the Construction Industry of the State of São Paulo (SindusCon-SP), ideally one should observe the capacity of the construction companies to  undertake such constructions, not only their credit rating. "If this keeps up, it could discourage companies from engaging in new projects in the 1st income bracket”, warns João Claudio Robusti.

He also expresses his concern regarding the procedures involved in analyzing proposals by the Regional Superintendent Agencies of the CEF, defending the standardization of processes. "Very often different interpretations in the analysis raise the level of demands and slow down the whole process," said Robusti.

Recently, Brazil’s President Dilma Roussef signed an agreement with São Paulo Governor Geraldo Alckmin to search for a solution to the problem of the state’s housing deficit.

In Rio de Janeiro, where 34,000 dwellings were commissioned, the state government expects to free up land to enable the construction of houses for families with incomes of up to R$ 1,600.00. Some R$ 150 million (US$ 85.7 million) should be released by the state treasury in return for investments in urban infrastructure and development land acquisition. The goal is to stimulate the production of 190,000 housing units in the phase two of the federal program.

In the South, where 97,000 dwellings have been commissioned, the three states displayed strong performance compared to the results of phase one of the program. According to Marcel Frison, Secretary of Housing in Rio Grande do Sul, the state is expected to provide a complementary R$ 3,000.00 (US$ 1,714.00) for the production of houses in the “Minha Casa, Minha Vida” program for low income families. The government’s intention is to successfully encourage, in this manner, the construction of a total 20,000 homes in the administration’s four years in office, he says

Bahia leads in the Northeast and Pará in the North
The Northeast closed 2011 with 92,299 housing units commissioned by the CEF (or ‘Caixa’, as it is also known). Bahia is the state in the Northeast that contracted the most (21,000 homes), but the state of Paraíba had a big boost in commissioning and managed to close 10,500 contracts which represent 41% of the results obtained in the first phase of the program (April, 2009 to December 2010).

In the North region, commissioning of popular housing by the CEF added up to 31,141 units in 2011. The state where commissioning was strongest was Pará (13 thousandl), while Roraima contracted just 117 units.

Recently, Guido Mantega, Brazilian Minister of Finance, confirmed that the "Minha Casa, Minha Vida" program is one of the government’s main bets in 2012 to surpass the target of 4% of growth in the Brazil’s GDP. "It's an important program for enabling the investments that are required for Brazil to achieve a higher rate of growth in 2012 than we had last year," said Mantega.

To encourage investment, Planning Minister Miriam Belchior said that she has discussed, with businesspeople, measures that can reduce cost seeking a reduction in timeframes: "We have identified issues that hinder investment and increase cost - such as delays in issuing Occupancy Permits,( aka “Habite-se”), in the hooking up water and energy, and in public notary services. The increase in the price of homes targeting the lower income bracket, the major demand among businesspeople, is out of the question. It is not yet the time for a readjustment”.

‘Casa Paulista’ Program
In September 2011, Geraldo Alckmin, Governor of the State of São Paulo, signed a decree to create the “Casa Paulista” (‘Paulista House’) Program, a project of the state’s Department of Housing, modeled after "Minha Casa, Minha Vida”, which aims to build, between 2012 and 2015, 150,000 new housing units for civil servants with incomes of up to 5 minimum wages.

According to Silvio Torres, State Secretary for Housing, the idea in “Casa Paulista” is for the government to use the budget funds that come in the form of subsidies for housing construction in the State of São Paulo to leverage private resources that have historically not been invested to meet the demand for housing among the low-income population. "We have traditionally stipulated up to 10 minimum wages, but in our focal group, 90% make no more that three minimum wages, and the private sector does not invest in this income bracket”.

The main innovation, in the secretary’s opinion, are Public-Private Partnerships. "Instead of producing housing, we will make a call for companies to qualify - they bring the land and design project and, if this is in order, we guarantee the payment of the units. For us, this represents saving time, since it is much more efficient to work with the private sector. The union of the public sector with private initiative is essential for increasing the offer of social housing and intervening in the ‘favelas’ (shanty towns) or slums and degraded areas or areas of risk in metropolitan regions. The "Casa Paulista” program has innovated in the state of Sao Paulo with the establishment of the first partnerships of this kind in the area of housing”.

Torres explained that people in this income bracket have difficulty complying with the bureaucratic requirements set by financial institutions for financing realty, and at the beginning of “Minha Casa, Minha Vida”, the goal was to serve the population with limited financial resources and investors believed they would have greater security by dealing with the highest income brackets. "The costs for construction in Sao Paulo increased greatly, especially in metropolitan areas. Our commitment is to remove families from areas of risk and areas of environmental preservation, as well as people who have been displaced because of works to build roads and subways. So this is the big change. We have 40,000 units under construction in the state and there is an expected deficit of one million. There’s a deficit of 500,000 dwellings and another two million that are considered inadequate for other reasons. Our project is to enable the construction of 150,000 units over the next four years.”

In order to make this goal a reality, besides the R$ 7.9 billion (US$ 4.5 Bn) scheduled in the Multi-year Plan (with R$ 6.6 billion/US$ 3,8 billion from the state budget and R$ 1.3 billion/US$ 743 million from federal government programs and investment by financial institutions), the agency intends to leverage investments by public and private sector partners for the segment of social housing by some R$ 22 billion (US$ 12.57 Bn).