Chile: subsidies, credit and housing deficit

CEPAL Review

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Date Published 2013
Primary Author Fernando Garcia de Freitas
Other Authors Ana Lélia Magnabosco, Patrícia H. F. Cunha
Theme Legal Framework for Housing Finance , Housing Finance Subsidies
Country Chile


In the mid-1970s, a far-reaching reform of the realestate financing system was undertaken in Chile, with the explicit aim of boosting investments in homes and overcoming the housing deficit. Innovative mechanisms combining credits and subsidies were created, and these had an immediate effect on the market. Apart from representing a satisfactory experience of real-estate financing and serving as a benchmark for other Latin American countries, the Chilean case provides a good empirical basis for an analysis of how a subsidies policy can affect economic agents’ decisions and the volume of real-estate investments —partly because it is a policy that has now been applied for many years, so its long-term effects can be observed. Moreover, the wide variety of home-purchase modalities available allow for a more effective evaluation of the relations that exist between subsidy, credit and income. Housing can be financed through subsidies, credit, self-financing without subsidies and, lastly, through a combination of credit and subsidies. This article is organized in five sections following this introduction. Section II describes the Chilean financing model and the main subsidy programmes; section III sets forth a theoretical model to analyse how subsidies influence housing credit and affect equilibrium in the real-estate market. That model offers new perspectives on the role played by subsidies policy and provides the structure on which the empirical research reported in the following sections is based. Section IV performs an econometric analysis to measure the influence of the subsidies on a family’s chances of obtaining housing credit, which, in addition to helping to interpret the Chilean experience, provides empirical elements that corroborate the proposed theoretical model. Section V describes the methodology for estimating the housing deficit in Chile, and provides details of the calculations, based on data obtained from the National Socioeconomic Survey (casen). The section also reports other econometric research inspired in the relations that exist between the variables that determine real-estate investment. The article concludes with a section offering final thoughts.

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