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Table of Contents
I. INTRODUCTION ................................................................................................................................................................ 1
II. RELEVANCE OF THE STUDY ........................................................................................................................................ 1
III. OWNERS, TENANTS, AND SHARERS ....................................................................................................................... 2
IV. SUPPLY OF RENTAL HOUSING AND RENTAL INVESTMENTS..................................................................... 2
V. ISSUES ..................................................................................................................................................................................... 3
VI. LOW-INCOME RENTAL HOUSING OPTIONS...................................................................................................... 4
VII. CURRENT TRENDS IN RENTAL HOUSING ............................................................................................................. 5
DORMITORIES.......................................................................................................................................................................... 5
RENTAL HOUSING VOUCHER SCHEME (ACE Philippines, Inc., 2015)......................................................... 6
PUBLIC RENTAL HOUSING ............................................................................................................................................... 7
VIII. LEARNINGS FROM RENTAL HOUSING .................................................................................................................. 7

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 I. INTRODUCTION
The report is written in consideration of
giving focus on the issue of affordable
housing types for low-income families in the
Philippines as, currently, most low-income
households tend to reside in highly
constrained environments (e.g. riverbanks,
streets, and embankments). These informal
types of housing are formed through
sharing between households, living in
unauthorized housing, and squatting on
public and private spaces. This is caused ISFs along railways in Metro Manila
mostly by the market mismatch for housing
in the country; the inflated cost of housing, limitations in location choices, and the stocks of the
housing market often leave low-income households limited choices.
Informal housing often leads to congestion and overcrowding but has been tolerated in most
developing countries, albeit causing major environmental and health issues, since they are perceived
as an opportunity for government intervention. However, the informal settlements have become too
costly the government, threaten urban development, and result in huge losses in revenues.
The Philippines has one of the highest rates of urbanization in the developing world. Alongside this,
the country also has a prominent level of poverty. According to Strassman, the low affordability levels
of households, the unprecedented increases in land prices and the untamed fiscal problem in the
country are conditions that raise the need for government to find alternative solutions to increase
the choices of the low-income sector in the housing market. The rental housing arrangement is
considered as a housing strategy by the government. The objective of the study is to examine the
rental housing market in the country and provide possible policy options for a feasible rental scheme
for low-income households.

II. RELEVANCE OF THE STUDY

The rental housing situation in the Philippines, especially for the low-income households, is relevant
as rental housing is vital in accommodating large numbers of families not only in developed nations
but also in developing countries. Furthermore, regardless of GNP, many countries have high
percentages of renters; the demand for rental housing is apparent in rich and poor nations. Even so,
the desire for ownership in developing countries is more evident as it has been greatly influenced by
housing policies modeled after Western countries. Incentives of homeownership in developing
countries such as income tax relief and subsidies are provided to households. Another significant
incentive is that the State distributes public lands for settlements and the poor are permitted to buy
or invade public and private lands. In countries or cities where much land has been acquired through
invasion, higher rates of ownership are noted.
Ownership covers not only legal rights on land but de facto rights on land. De facto ownership refers
to homes where the household owns the structure but not the land on which it is built.
Despite the trends, ownership in many countries have been slowing down in recent years.
Homeownership have expanded rapidly from 1980 to 1990 but declined in the succeeding years.
One reason for this that some nations have become less tolerant of land invasions. Additionally,
studies also noted increasing competition in the informal land markets. UNCHS reports that even

Rental Housing for Urban Low-income Households in the Philippines 1

illegal land markets have become increasingly commercialized. It has become rare for low-income
households to be able to find sites which they can occupy.
The developments across developing countries are strong indications that the ‘age of free urban
land’ is over. There has been a slowdown in ownership and an increase in the need for renting in
many developing countries. The growth of shared and other forms of non-ownership such as
borrowing houses or rent-free accommodations is also an important development.

III. OWNERS, TENANTS, AND SHARERS

As mentioned earlier, the choice of residence of low-income households in the Philippines are in
highly constrained environments. These choices are mainly determined by the range of housing
options and the household’s budget. As there are many types of housing tenure, there is also
diversity in ownership, renting and sharing arrangements. Owners includes not only those with legal
rights but also those with de facto rights on land. In urban areas in the country, the incidence of
ownership is high among the urban poor and low-income households (60% of total households).
However, the housing market in Metro Manila is different as about half of low-income households
are owners, one-third are renters, and others are sharers. The incidence of ownership among low
income households is lower in the city, where relatively more are tenants or sharers.
In response to the shortage of affordable housing in the country’s cities, the incidence of
renting (including renting informal settlements) and sharing increased. Renters, or tenants, are not
only those who rent homes but also those who rent lots or temporarily build their house in lots not
their own. Renting is a plausible response to the acute shortage of low cost housing in the country.
Sharers, on the other hand, are those who share or borrow homes rent free or pay rent irregularly.
Both of which constitute a significant percentage of households in the Philippines.
In the Philippines, income is a major constraint to owning a home in the city. On average, owners
have significantly higher incomes than tenants or sharers. However, among low income households,
there is no significant difference in income levels between owners and tenants. It has been observed
that the poorest households are often owners of dwelling in danger zones (MMUSP 2002). On the
other hand, majority (50%) of tenants belong to the lowest 5th income percentile. Sharers, on the
other hand, are poorer than tenants as majority (70%) of sharers in Metro Manila belong to the 5th
income percentile.
Besides income, demographic characteristics such as age,
size of household and structure of family group are regarded Ownership includes not
as critical elements determining tenure choice. Various
stages of the lifecycle can generate different sets of only owners with legal
residential needs.
rights but also those
The tenure arrangements and characteristics of households
show that tenure choice is more complex. Overall, lifecycle with ‘de facto’ rights on
factors (e.g. income, household size, age) appear to be the
most conclusive factor behind residential trajectories. land.

IV. SUPPLY OF RENTAL HOUSING AND RENTAL

INVESTMENTS
The private sector production (formal and informal) supplies majority of housing in the Philippines,
including rental housing as the government has built only few public housing for rent. Rental
housing available in the country varies by type, size, construction, quality, ownership, rents, kind of

Rental Housing for Urban Low-income Households in the Philippines 2

contract and profitability. Thus, there is diversity in rental housing as with ownership. Tenants in
Metro Manila that live in areas near major business districts mostly reside in multi-units (i.e. tenements,
rowhouses whereas those living in peripheral areas lease single houses.
Rental housing is mainly categorized into two types: public and private. Private housing is provided
by households and the business sector. This includes dwellings that are provided by employers to
employees and arrangements of temporary occupation among relatives or friends. Public housing,
on the other hand, is government-owned structures; buildings specifically for rent to low income
households. The buildings are medium-rise walk-up apartments or tenements. These units are
provided with a 25-year lease contract and low rental rates.
As for the quality of the rental housing units, 86% of rental dwellings in Metro Manila are more than
10 years of age. Factors affecting the slowdown in the supply of rental housing include the
prohibitive cost of building materials and the lack of credit/financing for small scale landlords.
Owners and tenants housing tenures are predominantly made up of strong structural materials.
Tenant households are noted to be better off than owner households with less than 20% of the
former dependent on peddled water compared to 23% of the latter. Ownership tenure among low
income households does not always represent decent shelter; in the same manner that rental
accommodations do not always represent poor facilities. Low income owner households providing
rental accommodation to low income tenants have become the trend which has provided owners
additional income to invest on housing.
Revenue from rental housing are highly variable, and is influenced by the landlord’s reasons for
letting property. Private rental housing homeowners usually let property for profits, however,
intentions still vary according to the markets they provide for. Landlords who cater to middle to high
income households view letting as a commercial exercise, whereas, landlords catering to the low-
income groups primarily view letting as a means to supplement their income to cover basic needs.
Some landlords also invest in letting for future financial security, and other investments are
circumstantial.

V. ISSUES
Following all things discussed earlier, there are many problematic issues in rental housing in the
Philippines. Firstly, appropriate rent levels and rent increase are highly dictated by market forces.
Landlords usually consider the existing rental rates in the area for similar structure and adjust rates
based on facilities and affordability of the tenants. Often most tenants, even in the low-income sector,
would consider the rent levels high. This is often based on the amount of rent households would
want to pay, and the comparative cost of homeownership program of the government.
Due to this affordability constraint, the government has sought to keep rents low through the Rent
Control Law. The Rent Control Act in the Philippines allows increases in rent but places a cap on the
maximum allowable increase (currently to 10%). However, there are sentiments that the law may be
irrelevant. One reason is that the rent levels are comparatively high relative to the cost of ownership.
This means encouraging more and better supply of low cost rental dwellings. Another reason why
the rent control law does not benefit the low-income groups is that these households rent mainly in
the informal sector.
While rent increase seems not to be a critical issue among low income tenants, it is noted that the
quality of rental housing is a key concern. It is expected that low cost rents provide poor facilities,
however, concerns about cost sharing in the maintenance of rental dwellings have been raised. The
Rent Control Law has been implicit with respect to maintenance of low cost rental dwellings. On the
other hand, landlords under a rent control law may effectively increase rent by directly increasing
the amount of rent or by doing no repairs and transferring the cost of repairs to tenants.

Rental Housing for Urban Low-income Households in the Philippines 3

The quality of rental housing greatly affects rent levels. It is expected that housing for the middle and
high-income sector have better facilities and structure than those in the low-income groups. The key
challenge is how to improve the conditions of households living in slums. The best approach is for
the government to influence the supply and demand side. The government should give incentives
for small scale housing production. Another possibility is to undertake or support upgrading
programs in slums. The government may also provide direct rent subsidy to poor families via public
rental housing and/or improve incomes of households.
Other concerns of rental housing in the Philippines include legal issues and eviction. The bulk of low-
income rental accommodation in the country is informal and rental agreements are mostly verbal.
The informality of rental transactions among low-income tenants has created some flexibility in the
agreements between landlords and tenants.
On the other hand, the presence of a rent control law provides the legal grounds for rental business
in both formal and informal sectors. According to the law, the rental rate increase is fixed at a
maximum of 10% annually. Furthermore, ejectment from rental premises is only valid on specific
grounds.
Lastly, with regards to the management and operation of public housing, the government has been
hesitant to pursue rental housing program specifically for the low-income group because these
projects so far have not been practical, especially public rental buildings occupied by low-income
households. The problem, however, is mismanagement rather than poor returns from rental
business. An assessment of public rental housing show that the problem lies mainly on the inability
of the government to transfer to tenants some expenses that results from the tenants’ use of the
building and its facilities, and the failure of the tenant association to implement rules on grounds for
ejectment.
The key factors for public rental housing is appropriate management which includes the
maintenance of good living conditions, providing housing and recreation centers as part of rental
housing, and making residents recognize management of common space and facilities.

VI. LOW-INCOME RENTAL HOUSING OPTIONS

The development of the rental housing market has become a critical aspect in urbanization. The
rental housing market is not simply an alternative to ownership. In the Philippines, the proportion of
renter households has increased considerably in the last decade. Renting and sharing has been the
response of households to the acute shortage of affordable housing in the country. However, the
supply of the rental housing has increased and is provided through self-help rental developments,
mostly found in informal settlements.
There is a need to reexamine government policy on housing in general and rental housing. Providing
housing for the poor must be undertaken with a balanced view of ownership and rental. Policies
should be tenure neutral and incentives to stimulate the rental housing market should likewise be
provided.
The rent control law is an inadequate substitute to policies that will stimulate the development of low
cost rental housing. The law is also irrelevant given the prevalence of informal, verbal contracts
partaken by most low-income renters in informal settlements.
Aside from rent control, the government can adopt other schemes to assist or protect the poor and
low-income renters. Firstly, small scale landlords must be encouraged to provide more and better
rental accommodation through building rental incentives into upgrading programs, providing micro
credit, creating appropriate planning and rental regulations in informal settlements, and giving out
incentives to investments in low cost renting.

Rental Housing for Urban Low-income Households in the Philippines 4

The letting of property in informal settlements should be encouraged by the State as well as
upgrading programs for the housing in these depressed areas. Letting also provides an opportunity
for income augmentation in informal settlements, thus, it addresses both household income and
better accommodation for tenants. Incorporating rental housing in informal settlements would
require the government to modify regulations and lower the standards. Strict planning regulations
can increase the price of housing in these areas creating problems on affordability. Government
subsidies may also be directed to providing public rental housing for low income households on a
purely lease arrangement.

VII. CURRENT TRENDS IN RENTAL HOUSING

This chapter will discuss the existing trends on rental housing in the Philippines, both private and
public rental.

DORMITORIES
According to the 2017 Philippine real estate market report by Leechiu Property Consultants, there is
a rise in the demand for dormitories. This is due to the current population growth especially in urban
areas. Currently, almost 49% of Filipinos live in urban areas. People prefer living in the urban areas
because of better employment and higher salary, and for better education. Another reason for the
demand in dormitories is the increase in overseas Filipino remittances wherein 50% of these
remittances are real estate related. There is also a growing number of BPO workers that creates a
great demand for people who choose to live near their workplace.

Presently, there are 2 major housing developers that are venturing in dormitories development, Ayala
Land Inc. (ALI) and SM Investments Corp. ALI is building a chain of affordable flats for rent to young
professionals in need of living space close to their place of work. Their proposed dormitory
development will be built in CBDs such as Makati and BGC. Each unit/ room of 20 to 24 sqm. will
accommodate up to four people for Php5,500 to Php6,000 per person per month. These dormitories
basically caters to middle income earners or single and young professionals that are starting up.

Rental Housing for Urban Low-income Households in the Philippines 5

The SM Investments Corp. on the other hand has already acquired 61.2% stake in Philippine Urban
Living Solutions Inc., the company that operates a growing chain of dormitory buildings under the
“MyTown” brand.
Though dormitories offer a more
affordable housing type within CBDs,
these private developments do not help
in decreasing the housing backlog of the
country. The market of these
developments are the growing pool of
office workers – especially young people
who had just entered the workforce –
who need halfway homes but cannot
afford yet to purchase their first
residence. Basically, the middle-income
earners will benefit from this kind of
Architect’s Vision of the ALI dormitory unit
housing but not the low-income earners.

RENTAL HOUSING VOUCHER SCHEME (ACE Philippines, Inc., 2015)

The rental housing voucher scheme is a scheme whereby, assistance is provided to displaced
households by allowing them to rent in a low-cost private rental housing accommodation over a
specified duration, with government either subsidizing or assuming the rental cost. Eligibility of
displaced households is determined, so as to be consistent with the objectives of government
assistance on housing.
This is a public-private joint effort wherein the government exploits the available rental housing
supply of the private sector. Though there are no existing notable scheme as of late, a study done in
2015 which aimed at understanding the low-cost private rental housing market in major urban cities
in Metro Manila by assessing the low-cost rental housing supply, and rental demand of low-income
households, showed that across types of low-cost rental housing in the four urban cities (i.e.
Muntinlupa City, Caloocan City, Taguig City and Quezon City), apartments and rooms-for-rent
represent a big segment of the supply.
In the survey, the respondents were asked if
they are willing to rent-out to informal settler
families, and majority of the low-cost rental
housing owners expressed non-willingness to
deal with ISF renters. They are primarily
concerned with the ability of the ISF renters to
fulfill rental payment obligations, considering
that they are mostly aware of the unstable
sources of income of these families.
The concept of rental housing voucher
Willingness to rent out to ISFs
scheme was explained to survey respondents,
Source: Survey of Low Cost Rental Housing Supply and Rental as a government measure extended to
Demand of Low Income Households households residing in vulnerable areas such
Ace Philippines, Inc. February 2015 as major waterways that may assist them in
finding a safer place to transfer. Such
intervention may be in the form of a rental housing voucher, a negotiable instrument which can be
used as rental payment to low-cost rental housing unit owners. When asked of the willingness to
participate in such rental housing voucher scheme, a big majority of the rental housing unit owners
in the three cities namely, Muntinlupa City, Caloocan City and Quezon City were not receptive to

Rental Housing for Urban Low-income Households in the Philippines 6

 participating. Only rental housing unit
owners in Taguig City expressed such
willingness to accommodate rental
housing vouchers as payment for rent.
Some of the reasons that was brought
up were because the respondents are
concerned that the scheme may be
taken advantage of without foolproof
mechanisms in place. Another reason is
the cumbersome transacting with banks
to exchange vouchers, unlike their usual
renters that pay cash on a monthly basis.
The respondents are also unsure of the Willingness to participate in Government’s
government's reliability to implement Rental Housing Voucher Scheme
Source: Survey of Low Cost Rental Housing Supply
such a program. And lastly, because most and Rental Demand of Low Income Households
of the rental housing are not formally Ace Philippines, Inc. February 2015
registered or do not have a business
permit, the respondents are concerned that the rental voucher may be used as a means to verify or
track down those in the rental housing business.

PUBLIC RENTAL HOUSING

One example of an operational public rental housing in Metro Manila is the Disiplina Village in Bignay
Valenzuela City which was established in 2016. The 11 hectare development has a total 3,834
beneficiaries coming from the waterways of Valenzuela City. The beneficiaries were housed in a
27sqm unit (16sqm+11sqm loft) with a monthly rental fee of only Php300.
The development, costing to about Php1.2
billion includes a 3S center, Mega health center,
Police community precinct, Fire substation,
Barangay hall, Day care center, Elementary
school, High school, Activity center/ covered
court, Park, Transport terminal, Public market,
Chapel, and a Community vegetable garden.
Barangay Bignay is chosen as the relocation site
because it is near factories which can provide
livelihood for the relocatees. The beneficiaries
are relocated and grouped according to where they came from. The beneficiaries has the same
neighbors thus co-habitation and adjustment to the new environment and system is not that difficult.
These 2, apart from the low rent and spacious units, made the Bignay Disiplina Village successful.

VIII. LEARNINGS FROM RENTAL HOUSING

The report by Dr. Ballesteros presents a different view of rental housing. Her points which she
discussed towards the end of the report are:
 Rental housing market is not simply an alternative to ownership.
 There is a need to reexamine government policy on housing in general and rental housing
 The rent control law is an inadequate substitute to policies that will stimulate the
development of low cost rental housing.

Rental Housing for Urban Low-income Households in the Philippines 7

  Aside from rent control, the government can adopt other schemes to assist or protect the
poor and low-income renters.
 The letting of property in informal settlements should be encouraged by the State
While most of her points are true, the team believes that rental housing can be an alternative to
ownership. Policies and mechanisms in rental housing needs to be put in place in order for it to be
mainstreamed both in the government and private sector. As seen in the trends in rental housing,
there are already efforts from a local government, which just needs replication, and from the private
sector, which just needs to be studied further to include low-income earners.
The rental housing voucher scheme is very promising for providing affordable housing for ISFs in
urban areas because it aligns with the existing supply provided by the private sector and the demand
created by the low income households. But its mechanisms should be further studied so as to
encourage the private sector to participate.
Another idea pointed out by Dr. Ballesteros is encouraging letting of property in informal settlements
for low-income families. Though this may actually be effective and already happening, the
government is actually indirectly acknowledging that squatting is legal. Making informal settlements
participate in rental housing, more so in providing housing to low income earners, gives the informal
settlers permission to stay and squat legally in the lands and properties where they are not supposed
to.
There are also positive takeaways in the examples of rental housing. It is apparent that in order for a
housing program, whether ownership, CMP, or rental housing to succeed, it should be
accompanied by skills training and livelihood opportunity provision. Without livelihood opportunity
near the housing program, beneficiaries will have the propensity to relocate and leave the housing
sites. It is a known fact that most families live where work opportunities are thriving. That is why rental
housing is more applicable to urban centers because most of the lands in urban areas are already
occupied, in addition to the fact that the land in urban areas are expensive thus housing units will
also be expensive to sell.
Lastly, public rental housing, unlike ownership, retains the assets (i.e. land and buildings) to the
government. Unlike ownership wherein the lands and houses are awarded to the families, in rental
housing the whole development remains as the property of the government. Therefore the increase
in the market value of the property over time will be benefited to the government.

Rental Housing for Urban Low-income Households in the Philippines 8