Brazil confronts chronic housing shortage

March 30th, 2009

A $15 billion social housing programme announced by President Luiz Inácio Lula da Silva last week could hardly have been timelier, given the worldwide economic crisis now biting in Brazil, but the plan faces huge challenges and its future may hinge on the political will of Congress and the next government.

Photo: kathiao, flickr

Photo: kathiao, flickr

The programme aims to build one million homes for families with combined incomes of up to ten times the minimum monthly wage R$465 ($203).

The plan has won praise for its focus on providing hefty subsidies to the poorest households, whose income only stretches as far as three times the monthly minimum and for the fact it gives title to the property to the woman of the household – something that is seen as protecting the family.

“This has become more important in this moment of crisis because it generates jobs and the capacity to provide homes for low income people,” says Dr Lílian Fessler Vaz from the Architecture and Urban Development Department at Rio de Janeiro Federal University.

Much of the money is being stumped up by Brazil’s Treasury with contributions from the FGTS social welfare fund paid by employers and the national development bank (BNDES).

Massive job

Brazil’s National Industry Confederation (CNI) welcomes the move as a step in the right direction but warns the programme will require massive coordination

“Judging by the experience of other projects it’s a very difficult task to fulfil,” CNI Executive Director Jose Augusto Coelho Fernandes says.

The scale of the undertaking was underlined in government figures reported in February, showing that only 11% of projects announced under the government’s growth acceleration programme (PAC) launched two years ago have been completed.

The programme’s aim is to enable Brazil to grow at least 5% a year.

Brazil’s economy grew 5.1% last year, but the government been under pressure to take action, after the economy shrank 3.6% in the last quarter of 2008 versus the previous three months.

Economists and industry organisations are forecasting anywhere from zero growth to a 1.5% contraction in Brazil this year.

The government calculates the programme will add to 2% to Brazil’s Gross Domestic Product (GDP), the sum of all goods and services a country produces.

Meanwhile, fears have been expressed that progress on the homes building programme could be hampered by environmental issues, the ability to synchronize projects with existing urban development plans, as well as complex issues such as subsidies, insurance, guarantees and land ownership.

Questions have also been raised whether construction companies actually can build homes put at R$40,000 ($17,500) for the lowest income groups.

Though not referring directly to the housing programme and writing in the Folha de São Paulo newspaper on Sunday, Roger Agnelli, President of Brazil’s, Vale the world’s biggest producer of iron ore used to make steel said the government has to cut down on bureaucracy to get the economy moving again.

Scrutiny

Brazil’s opposition parties question the timing and motives behind the announcement, insisting Lula is using the programme to try to ensure his preferred candidate and Chief of Staff Dilma Rousseff wins the presidential poll at the end of next year.

Photo: Agencia Brasil

Photo: Agencia Brasil

No deadline has been put on completion of the million houses and Lula (pictured right) concedes it will go beyond the second and final term of his presidency, which has another 21 months to run.

Given the size of the task, by announcing the move now the president must be banking on three things: That his candidate wins the election, the next government either has the political will to continue the programme or will be too afraid to drop it for fear of losing popularity.

Lula will also have to count on cooperation from 26 diverse state governments, municipalities, private companies in the construction sector and perhaps most crucially often self-serving politicians in the country’s capital Brasilia.

One media report suggested in a bid to overcome resistance in Congress, 63% of building work will take place in states where Lula has forged political alliances.

Though the programme has been praised by some in the construction sector as a bold first step,  Brazil still has a long way to go to plug its housing shortage of more than 7 million homes.

Almost 91% of that figure are said to be in the lowest income group.

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