Demand for Housing in the Metropolitan Cities of the Philippines

Abstract

This paper adds to the existing literature on the housing demand behavior of households in the Philippines. Unlike previous studies on housing demand, the paper compares major metropolitan cities — Metro Manila, Metro Cebu, and Metro Davao — and uses a panel set of households instead of single-year household data in the analysis. The results show that housing demand for owners or amortizing owners is income elastic for both poor and non-poor households in the key metropolises of the country. Even chronically poor households are willing to spend more of their income on improvements in tenure and dwelling conditions. The rate of improvements, however, is also affected by location. Tenure change and improvements in dwelling in Metro Cebu and Davao City are modest compared to Metro Manila. In the case of renter households, demand for housing is income inelastic. Renter households have less incentive to spend a higher proportion of additional income on housing. These findings suggest that shelter design projects of government should adopt a more realistic and variable basis for households’ housing expenditure. It also suggests the need to develop the low-cost rental housing market, where the bulk of subsidies should be channeled instead of programs on homeownership. This will not only provide efficient targeting but also lessen housing in illegal settlements.

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