Access to housing finance is of critical importance for the health and well-being of people. Yet, hundreds of millions live in inadequate conditions with little or no access to decent housing. Furthermore, current conditions will be exacerbated by rapid urbanization and population growth. Housing finance is critical to the functioning of the housing market. Creating sustainable and effective housing finance requires the mobilization of longer-term sources of funding for both rental and owner-occupied housing, which is often missing in emerging markets.
In response, the Bank Group's approach has evolved over time from the use of traditional stand-alone operations, to the development of more strategic and comprehensive solutions including both supply and demand interventions.
Lessons were derived primarily from evaluated interventions in the form of World Bank loans or International Finance Corporation (IFC) investments and advisory services, including a total of 55 projects (18 World Bank lending, 14 IFC investments, and 23 IFC advisory services).
Summary of Findings
- If commercial banks are willing to provide mortgage loans they are logical partners in housing finance projects but they need to be fully committed to mortgage lending.
- NBFI's have strategic weaknesses that endanger their long-term viability. They might need to diversify funding sources, expand or convert into a bank.
- Sustainability can be enhanced when there is a strong link with advisory services. But it has to be adequately timed.
- There are certain preconditions for the developments of capital markets and primary market interventions. When these are not in place, adequate sequencing, timely interventions and committed sponsors can have compensating effects.
- A needs assessment is fundamental to design interventions tailored to specific country needs.
- If expanding affordable housing is a key objective of an intervention it needs to be targeted and the results adequately measured.
- If there is no mortgage financing, the low-income segment should not come first, but rather be introduced gradually.
Analysis shows that the WBG allocates resources primarily to countries with low mortgage penetration rates that are in the most need. Despite its important role, the WBG only has limited resources requiring a strategic allocation and the gap in coverage of countries with low access to housing finance continues to be wide.
Additionally, the dedicated staff and resources it deploys have both fallen below pre-crisis levels, creating challenges to achieve more with less.