BRIEF

Housing Finance

September 23, 2019


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 housing finance offerings are closely linked with the capital markets agenda as support for long term finance funding channels and mechanisms and also with the pensions and insurance agenda as key institutional investor sources for long term debt

Overview

Housing plays a key socio-economic role and represents the main wealth of the poor in most developing countries. The UN estimates that the global population will reach 8.5 billion by 2030, with almost 60% of the population living in urban centers. An estimated 3 billion people will need new housing and basic urban infrastructure by 2030. Against the backdrop of rapid urbanization putting pressure on housing delivery systems, many urban poor will not be able to afford formal housing without proper housing finance solutions. This puts the issue of housing finance at the forefront of the global development agenda.

We assist client countries in developing and deepening resilient and affordable housing finance markets that are accessible to the lower & informal income and middle-income households. This requires managing risks and regulating the lending industry, as well as implementing targeted and fiscally responsible policy interventions. The business line is important because it provides economic stimulus across the economy – leverage on growth, investment, and jobs – through the constructive value chain, helps in maintaining overall financial stability (housing finance markets representing a large share of the financial sector), and addresses the issue of urban poverty.

Housing finance is also a critical component of the financial markets deepening process with complex capital markets products, and linkages to the domestic and global institutional investor base.

The Global Housing Finance team works closely with colleagues from the Urban, Resilience, Territorial and Land GP, the Digital Development GP, the Energy and Extractives GP and IFC FIG and MAS.

What We Do:

We work on a variety of housing finance development challenges by providing client countries with the tools to build and expand housing finance markets, fund housing finance (often through the mobilization of long-term mortgage securities where possible), develop sustainable and affordable housing finance markets, and respond effectively to housing finance crises.

We focus on creating systems that address the needs of households across different income levels and developing solutions that are scalable, sustainable, and oriented to the private sector. Our work in housing finance helps clients provide market-based safety nets, and fund long-term investments to support sustainable and inclusive economic growth.

Core interventions include:

  • Developing Resilient Housing Finance Markets: We conduct diagnostic analysis, advise on legal & regulatory frameworks and policy reforms, support institution building to create a sustainable and efficient housing finance system, and work on other building blocks of housing finance markets development. This work includes support to our clients in understanding and implementing fintech innovations in housing finance product development, delivery, and legal and regulatory frameworks.
  • Designing and Implementing Long-Term Funding Solutions: We provide solutions to improve access to long-term finance through capital markets instruments such as liquidity facilities and covered mortgage bonds as well enhanced systems to incentivize longer-term savings. We also help diversify long-term funding options, including through local currency bond markets.
  • Expanding Access to Lower-Income and Informal Markets: We enhance access to lower-income and informal workers’ segments of the population through credit markets, housing microfinance, rental housing, residential leasing, contractual savings, effective targeted subsidies, and guarantee schemes.
  • Addressing Obstacles to Affordable Housing: In addition to the finance side that affects the demand, affordability reflects the cost of housing and its supply, so increasingly, we work on various supply side issues: titling, land use and land infrastructure issues, construction finance, and housing policies including supply subsidies. Furthermore, we apply innovative thinking to reduce costs – both financial and environmental costs – of formal housing through the introduction of new, cheaper, technologies and supporting energy-efficient buildings. 
  • Climate change agenda in housing finance: Cognizant of the significant contribution of the housing sector to global GHG emissions, of up to 40% of the total in some countries, we provide policy, legal and regulatory support to client countries and globally on setting up sustainable financial solutions for affordable and impactful “green” housing refurbishment and construction in support of reaching the Paris COP targets.





Experts

Loic Chiquier

Chief Technical Advisor

Simon Walley

Lead Financial Sector Specialist


Api

Api

Api