BRIEF

Housing Finance

June 9, 2017


Key Messages
  • Housing plays a key socio-economic role and represents the main wealth of the poor in most developing countries
  • 3 billion people will need new housing and basic urban infrastructure by 2030, according to UN-Habitat. Without available and affordable housing financing solutions, many urban poor can't get decent formal housing.
  • Our work in housing finance helps clients provide market-based safety nets, and fund long-term investments to support sustainable economic growth.

Overview

The UN estimates that by 2030, the global population will reach 8.5 billion, with almost 60% of the population living in urban areas. Rapid urbanization is putting pressure on housing delivery systems, which are often informal or reliant on the state. The inability to keep up with the demand results in burgeoning areas of informal housing, overcrowding and slums. This has propelled the issue of affordable housing and housing finance to the forefront of the global agenda, which makes it a key focus area for the World Bank Group.

What We Do

Our work in housing finance focuses on helping client countries develop deep, resilient and affordable housing finance markets that are accessible to middle, lower and informal-income households. We provide the tools to build and expand housing finance markets; fund housing finance, often through the mobilization of long-term mortgage securities where possible; and develop sustainable and affordable housing finance markets. The most important aspect of the work is creating systems that address the needs of households at different income levels, yet also building a system that can be sustained, scaled up, and oriented to the private sector. 

We work in coordination with other parts of the World Bank and IFC to provide a comprehensive approach that reaches across the entire housing value chain. Our core interventions include:

Developing resilient Housing Finance Markets:  

We conduct diagnostic analysis, legal and regulatory reforms, and institution-building to create a sustainable and efficient housing finance system.

Long-Term Funding: We design and implement solutions to improve access to longer-term finance through capital markets instruments such as liquidity facilities, covered mortgage bonds and securitization, as well as enhanced systems to incentivize longer term savings.

Housing Finance for the Poor: We design and implement suitable solutions to expand access to lower and informal markets, including through credit markets, housing microfinance, rental housing, residential leasing, contractual savings, effective targeted subsidies, and guarantee schemes for lower and informal income households.

Affordable Housing: We support reductions in the cost of formal housing through improved access to finance for developers; support reforms of land use and primary infrastructure, facilitating titling and permits; support the introduction of new cheaper technologies and building techniques; and support energy-efficient buildings.

Results

Long-term Funding Solutions: The World Bank supported the development of Mortgage Liquidity Facilities in Jordan, Egypt, Nigeria and Tanzania with the purpose of providing medium to long-term liquidity to lenders. More work is ongoing in Azerbaijan, WAEMU and Pakistan.

In Nigeria, the Nigerian Mortgage Refinance Facility (NMRC) was developed as part of a wider Housing Finance Project supported by the World Bank through a US$300 million loan to the Federal Government of Nigeria. The program has three main components: i) development of a mortgage liquidity facility; ii) development of a housing finance guarantee product; and iii) development of housing microfinance pilot schemes. NMRC completed its first bond issue in July 2015, and the issuance was supported with a Federal Government Guarantee in recognition of the support that a new institution will need to go to market. As NMRC establishes itself, the objective is for it to go to the bond market on its own. NMRC has been active on multiple fronts to improve the overall market environment, including setting uniform underwriting standards for the industry, and drafting a model foreclosure law for states to consider adopting and implementing. It is now working on underwriting standards for informal incomes and Islamic finance.

In Tanzania, a Housing Finance project created the Tanzania Mortgage Refinance Company (TMRC). Alongside TMRC, the project aims to help the housing microfinance sector grow and take concrete steps to expand the supply of affordable housing. The mortgage market continues to grow at a strong pace, stimulated by World Bank funding. Many obstacles remain, but the increased focus on housing finance is creating momentum for change and for the resolution of many impediments to market growth.

India: Reaching the Informal Sector: An IDA loan of $100 million, channeled through the National Housing Bank of India, aimed to expand access to sustainable housing finance for low-income households, to help them purchase, build or upgrade their dwellings. The project also supports the financial institutions that target low-income and informal-sector households and help build their capacity to scale up sustainable housing finance. The entire World Bank Group has worked together in India, with IFC investing in several housing finance companies with a special focus on lending to lower-income groups. This has been supported by extensive technical assistance to lenders to better manage credit and operational risks in these new market segments.

Who We Work With

The World Bank Group works globally with Ministries of Finance and/or Housing/Urban Development, Central Banks, regulatory agencies, mortgage liquidity facilities, housing funds and agencies, and lenders (banks and Multilateral Financial Institutions).

Last Updated: Jun 09, 2017






Experts

Loic Chiquier

Chief Technical Advisor

Simon Walley

Lead Financial Sector Specialist