Restructuring the Role of the National Housing Fund and Policy Recommendations

Abstract

This paper analyzes various NHF loan programs and provides policy recommendations to enhance their efficiency and legitimacy. First, analyses on household loan programs revealed that a discrepancy exists between target households (total income of households is lower than the 6th decile) and actual beneficiaries. This is due to the fact that loan eligibility has been determined not by total household income but rather by the income of the head of the household. On the other hand, analyses on the financial status of construction companies, which were approved for loans from the NHF, show that the profitability of construction companies is not sound. Based on the above evaluation and operational changes, the policy recommendations are as follows: First, financial support for housing construction should focus on the construction of rental housing units. Second, the NHF’s financial support of households should target lower-income groups and accessibility to NHF programs should be improved. This paper also proposes detailed operational improvements based on the analyses of existing NHF programs. First, loan eligibility should be modified to warrant the original NHF mission. In the long run, eligibility should be based on the total income and wealth of households. In the short run, eligibility should be based on total household income. Second, NHF programs for the construction of middlesized rental units should be modified to enhance the efficiency and soundness of the Fund.