Helping the poor through housing subsidies: lessons from Chile, Colombia and South Africa

Today, few governments are prepared to offer housing subsidies to the poor unless they are delivered as up-front, targeted capital subsidies. Such a model began in Chile in 1977 and a similar model has since appeared in a number of other countries. This paper examines the experiences of Chile, Colombia and South Africa in implementing a capital housing subsidy model. Most observers in those countries admit that the new system is better than that which preceded it; there is certainly no going back to the public housing policies of the past. But there are problems nonetheless. Most stem from the central dilemma that the resources are always too limited, particularly since fiscal balance is the watchword emanating from all three finance ministries. The lack of resources has forced each government into making difficult decisions about the size and the number of subsidies to be offered. Dependent on those decisions, has come a series of implementation problems relating to the quality of construction, the location of the new housing solutions, the use of credit and how to allocate subsidies between so many petitioners. Capital housing subsidies have reduced housing problems in Chile and perhaps South Africa. But whether it is worth tackling housing problems in this way in conditions of high unemployment, huge income inequality and widespread poverty, is another question.