Social Housing in Bolivia: Challenges and Contradictions

By Emily P. Achtenberg

Bolivia’s vice minister for housing, Ramiro Rivera, had been on the job only two weeks last March when his office was occupied by 100 angry members of Ponchos Rojos (Red Ponchos), a militant Aymara peasant group. Three weeks later, wheelbarrow porters from the Abastos market in Santa Cruz staged a similar protest. Both groups were demanding that the MAS (Movement Towards Socialism) government, headed by indigenous president Evo Morales, make good on its promise to deliver low-cost housing to their constituencies.

As befits a self-proclaimed “government of the social movements,” the MAS has articulated a strong commitment to a progressive, non-market vision of social housing, epitomized by the slogan: Vivienda Digna Para Vivir Bien: Evo Cumple! (Decent Housing for a Good Life: Evo Delivers!). Meeting with our visiting group of U.S. housing and neighborhood activists last summer, Vice Minister Rivera traced the social housing concept back to the ayllu, the traditional socio-political organization in Bolivia’s rural indigenous communities, where every family’s right to the land is protected. “We don’t believe in making a market commodity out of Pachamama (Mother Earth),” he told us.

Yet, the reality is more complex. During our visit, we gained perspective on the challenges and contradictions facing the MAS government as it seeks to implement a progressive social housing agenda within the constraints of a mixed economy, a politically divided society and a state bureaucracy undermined by twenty years of neoliberal restructuring.

The Social Housing Program: PVSS
The MAS’ ambitious $90 million Program for Social and Solidarity Housing (PVSS) was launched with significant fanfare in April 2007, promising to provide at least 14,500 new housing units by the end of the year. Bolivia’s 300,000 unit housing deficit (consisting of unlivable and overcrowded units) would be reduced by 5 percent, and totally eliminated in ten to twenty years. The program would also generate 73,000 new jobs, reduce unemployment and emigration, promote investment and provide a major stimulus to the national economy.

In important respects, PVSS represents a departure from Bolivia’s discredited housing programs of the past, which gave stable middle-income workers better access to private mortgage credit, often to buy a second home. Under PVSS, the government provides direct loans on favorable terms to enable renters with limited means to build or buy their first new home in urban or peripheral areas. In rural communities, beneficiaries receive direct grants.

In the urban program, twenty-year government loans are available for 100 percent of land and construction costs. Interest rates are 0 percent for houses in the lowest price categories ($2,500 to $8,000 initially, indexed to inflation), and 3 percent for houses in the next price tier ($8,001 to $15,000). For a point of reference, the interest rate on a typical private bank loan, for which few families in Bolivia qualify, is at least 10 percent.

In rural areas, the government directly subsidizes up to 60 percent of construction costs (initially capped at around $3,600/unit), while families contribute the remaining 40 percent through self-help labor or donated materials. Departments, municipalities and non-governmental organizations are encouraged to offset one-third of the national government’s cost. Similar grants are available for remodeling, upgrading and expansion of rural housing, with an initial production target of 26,600 units.

With these financing terms, an urban family earning the minimum wage of $83 per month can afford a new $5,000 house with a monthly payment of around $21, at 25 percent of income. The smallest loan of $2,500 can benefit a family earning as little as $42 per month.

Moreover, although PVSS funding is derived from mandatory housing benefit contributions paid by salaried public- and private-sector workers and employers, for the first time in Bolivia’s history these funds also benefit informal sector workers. (Only the 3 percent loan program is limited to salaried workers.) Informal sector workers, whose earnings vary tremendously, now constitute an estimated 80 percent of Bolivia’s workforce and are an important MAS constituency. This initially controversial PVSS feature has become a hallmark of the MAS government’s approach to social programs, resurfacing in a recent dispute over proposed pension fund legislation, which caused a rift between the government and the national trade union federation.

Despite these novel features, PVSS also represents a continuity with the past, reflecting the political, economic and institutional constraints under which the MAS government operates. Like previous programs, the emphasis is on new construction, which has high political visibility.

While PVSS projects are typically targeted to social sectors such as unions, neighborhood organizations and indigenous groups, the program is largely driven by the private sector, subject to government regulation. For example, the financieras who review credit applications, disburse government funds and collect loan repayments are primarily established cooperative banks and other financial institutions. Theconstructoras who develop and build the housing are typically private or cooperative construction companies.

Major materials producers like SOBOCE, the largest cement company in Bolivia, which is owned by Samuel Doria Medina, head of the center-right National Unity (UN) party, have committed discounted materials to the program, and some are participating as builders. According to Doria Medina, whose company’s production capacity stands to double from government construction projects, “SOBOCE’s business philosophy is to support the country’s development.”

As a result of this pragmatic design, the launch of PVSS was greeted enthusiastically across the political spectrum—an unusual event in Bolivia. The program even received a strong editorial endorsement from Bolivia’s newspaper of record La Razon, a consistent MAS critic.

Experience to Date: A Mixed Record
During the first year, PVSS experienced major start-up difficulties. By the end of 2007, despite significant demand, only 8,000 housing units had been approved and funded, with scant evidence of actual construction. In his January 2008 State of the Union address, Morales lamented the government’s disappointing performance while pledging at least another 14,500 units for 2008.

Over the past year, however, the program’s pace has accelerated considerably. As of the end of August, funds were committed for approximately 27,600 units in 200 projects, and all available PVSS resources were exhausted. Approved projects, located in 52 of Bolivia’s 112 provinces, were widely disbursed throughout the country. More than 90 percent of the units were new construction.

Interestingly, the distribution of program benefits has not favored the western, heavily indigenous and poorer regions that represent MAS’ political base. On the contrary, the eastern “Media Luna” departments (and allied Chuquisaca) have received a disproportionate share of units (55 percent) and funds committed (64 percent) relative to their share of total population (40 percent). Agro-business elites in these resource-rich regions have been waging a violent “autonomy” campaign in opposition to the Morales government, although outside the provincial capitals the MAS maintains strong support.

On the whole, the housing approved by PVSS to date appears to be relatively affordable. Approximately half the units funded are in the rural program, targeted to the lowest population strata. In the urban program, three-quarters of units are in the $5,001 to $8,000 price range.

From MAS’ perspective, PVSS has surpassed its original goal, achieving in just seventeen months what it had promised to accomplish in two years. Still, in terms of tangible results, fewer than 4,000 units have actually been completed (with another 1,000 anticipated to be delivered by year-end).

To be sure, substantial time lags from project initiation to funding and completion are typical of all government housing programs. But with more than 86,000 credit applicants approved or in process, the government appears to be creating its own credibility gap. As one MAS representative has noted: “Bolivia as a state has great economic limitations. We’ve got a program for social housing which has generated a lot of expectation…but…expectation mustn’t exceed reality!”

Many problems encountered in the PVSS program appear to be systemic in nature. Materials costs have doubled over the past year, a predicament not unique to Bolivia. Some labor cost increases have been induced by internal shortages, e.g., as skilled bricklayers migrate to take advantage of new opportunities in Bolivia’s mining sector, or abroad.

In the cities, rising land costs, due in part to PVSS-generated demand, are a significant problem. A prominent bank participating in the program is under investigation for allegedly inflating land costs through straw purchases at several sites. This is the thirdfinanciera to be relieved of its PVSS responsibilities for suspected irregularities, a factor which has contributed to program delays. Still another prevalent problem is the inability of prospective purchasers to secure clear land title, a prerequisite for PVSS loans which require mortgage security.

Delays have also resulted from administrative shortcomings, related in part to Bolivia’s centralized governmental structure, a controversial political issue today. Popular frustration with centralized government has been manipulated by regional elites to fuel the autonomy conflicts that brought the country to the brink of civil war last September. The weakened capacity of public-sector institutions is a legacy of twenty years of neoliberal retrenchment, compounded by the new MAS bureaucracy’s inexperience and persistent corruption allegations. In its less than two-year life, the PVSS program has had four housing vice ministers (Ramiro Rivera was replaced last October).

PVSS has also not been immune to partisan conflict. Funding commitments have often appeared to be politically motivated, especially during the August 2008 recall referendum campaign (a plebiscite vote on Morales’ government) when significant awards were made to projects in the embattled departments of Santa Cruz, Tarija and Chuquisaca. The government has also used PVSS funds to settle political disputes with rebellious social movement organizations, such as the transport workers’ union.

Most dramatically, in October 2008, following Morales’ strong referendum victory (67 percent) and successful negotiation in the Congress to bring the new Constitution to a popular vote, the municipality of Santa Cruz (headquarters of the regional opposition) destroyed 100 PVSS houses constructed for a local indigenous group. While the immediate cause of this conflict was a jurisdictional dispute between two municipalities, the episode had broader political overtones. As ex-Vice Minister Rivera noted, “The anti-MAS municipalities don’t want PVSS to succeed.” The government is pursuing legal remedies for restitution, as well as punishment of the offending officials.

The 386-unit “Integration of the Americas” project in the municipality of La Guardia, Santa Cruz, illustrates many of PVSS’ contradictions and challenges. Built for the wheelbarrow porters’ union (which had previously occupied government offices to protest construction delays), the houses were nearly completed but not yet occupied when we visited last August.

The units feature a utilitarian design and are densely packed across the site, and at a total cost of $5,000 (including land), they are extremely affordable. While some residents have criticized the quality of construction and are demanding an investigation of their financiera’s possible role in land speculation, owners—all former renters—interviewed in a recent news account welcomed the reduced costs, increased security of tenure and accessible location of their new homes. Miriam Sánchez, a single mother of five, commented: “What hurt me most, living as a tenant, was that having children seemed to be a sin…a barrier to finding a place to live. The dream of having my own home seemed impossible to realize, until now.”

The NGO Perspective
An alternative approach to social housing is offered by RENASEH (the National Network of Human Settlements), a coalition of eleven NGOs that combine housing advocacy, development and organizing, which has led the struggle for housing rights in Bolivia. To date, NGOs have not played a significant role in the PVSS program, although Habitat for Humanity has participated from the start as a financiera.

In RENASEH’s view, social housing (urban as well as rural) should emphasize incremental construction and remodeling of units with reliance on individual and collective self-help, progressive microcredit loans and other forms of creative, non-mortgage financing. This is the dominant shelter strategy that poor Bolivian families have used for generations. For households with unstable sources of income, it is easier to borrow small amounts and upgrade living space incrementally as family needs expand. Focusing on rehab, RENASEH maintains, will stretch scarce public resources further. Arguably, Bolivia’s “qualitative” housing deficit—those lacking basic services or in poor condition—ranges from 600,000 to 900,000 units and is more pressing than its quantitative housing needs.

Moreover, self-help and community financing strategies build solidarity, empower communities and foster a collective, participatory stake in housing. This approach, RENASEH believes, is more consistent with social housing objectives than is reliance on market-oriented strategies that encourage households to spend beyond their means. Says Guillermo Bazoberry, an architect, “For most Bolivians, housing is a form of social security, not an investment. The government should be helping people and communities directly, to make the informal housing economy work better.”

Over the past fifteen years, RENASEH’s member NGOs have helped families build 10,000 new homes and renovate 30,000 units, utilizing incremental and self-help building and financing strategies. Moreover, their 15,000 microcredit loans have a repayment failure rate substantially lower than that of traditional banks.

Critics argue that families with the most pressing housing needs (including female-headed households) may lack the time and skills for individual or collective self-help, and point to the public and private costs of uncompensated labor. In addition to the loss of construction jobs and economic stimulus, creating a decent unit takes longer, and quality may be compromised. The critical supportive services provided by the NGOs (including architectural, construction management and organizational assistance) are labor-intensive and may be difficult to replicate on a larger scale.

Still, successful examples, such as the Maria Auxiliadora community we visited in Cochabamba, are inspirational. Founded by a group of victims of domestic violence, the community has worked with several NGOs to build and renovate approximately 100 houses in nine years. The majority of members are female-headed households (divorced, widowed or with husbands working abroad). The land is owned cooperatively, unusual in Bolivia, and the houses individually—similar to the U.S. community land trust model. Houses cannot be rented or sold, and revert to community use if vacated.

To finance the housing, the community uses a traditional collective savings system called pasanaku in which members’ personal funds are pooled and redistributed, as needed, to each family in turn. Progressive microcredit loans of between $1,000 and $3,000 are made by the NGOs to individual households, but are guaranteed collectively (with no mortgage security). Mutual-help construction is a community obligation; the community has developed its own water, sewer and irrigation systems. The pasanakusystem is also used to finance family and community enterprises (such as catering, sewing and construction materials).

The community has approached PVSS for funding to build additional units. The cooperative form of land ownership poses a challenge, but this may be ameliorated by the new constitution.

Social Housing and the Constitution
RENASEH was instrumental in securing the right to housing in Bolivia’s new constitution, now scheduled for a referendum vote in January 2009 (and widely anticipated to be approved). Its members organized a petition campaign, formed alliances with health, education and labor sectors by demonstrating the importance of social housing to their agendas and promoted community input on housing during the drafting process.

Article Nineteen of the new constitution establishes every Bolivian’s right to a decent, adequate home and living environment that dignifies family and community life. It requires all levels of government to promote social housing programs, including adequate financing, based on principles of solidarity and equity, and with preference to groups having the least resources and greatest need. (An unanticipated benefit of the autonomy conflict, notes RENASEH, is that all levels of government now want to take credit for social housing.)

Article Fifty-Six guarantees both private and collective ownership of property, provided that its use is not harmful to the collective good. The original draft explicitly allowed the government to expropriate surplus urban land not serving a social function to be reused for social housing. This anti-speculation provision was removed in a compromise with Samuel Doria Medina to prevent his UN party from joining the opposition boycott of the Constituent Assembly vote. The final constitution negotiated between MAS and the opposition parties in Congress emphasizes that urban real estate is not subject to confiscation.

Looking Ahead
With the new constitution about to be ratified, Bolivia has resolved, for the moment, its political tensions. The MAS government now faces the real (and perhaps more difficult) challenge of delivering on its promises.

In November, the government announced that resources had been found to fund another 26,000 units of social housing in 2009. In line with the new decentralization trend and toward the goal of more delegated decision-making, satellite program offices have been established in several departments. The government is considering allocating funds to each department on the basis of population, with projects to be selected jointly by the departments, municipalities and popular organizations. An agreement has been signed with the National Federation of Neighborhood Boards (CONALJUVE) to promote participatory decision-making in housing design and construction.

To contain costs, the government has announced plans to develop a state cement company with loans from Iran and Venezuela. This is widely seen as an attempt to outmaneuver Doria Medina, a potential rival to Evo Morales in the next election. Measures to curb land speculation are also being considered. All projects are being audited for irregularities in land costs and acquisition practices—an issue which has cast a cloud over the entire PVSS program.

Finally, RENASEH hopes to work with the Housing Ministry to develop a program for urban housing remodeling, expansion and upgrading based on its successful community experience. Habitat for Humanity is now acting as a constructora for several projects. Whether the incremental building and financing approach can be scaled up and made compatible with the political and institutional requirements of a national housing program remains to be seen.

In many respects, the PVSS program illustrates the larger challenges and contradictions of the government’s efforts to bring about “revolutionary” change through democratic reform. As with other MAS initiatives (such as gas nationalization and agrarian reform), ambitious social goals have been constrained by underlying economic and market forces and the need to accommodate opposing political interests. The weakness of existing government institutions and bureaucracies is an obstacle to the achievement of MAS’ redistributive agenda across the board. Tensions between the consolidation of state power and popular demands for more democratic and community-oriented practices are characteristic of relations between the social movements and the MAS government today.

As it evolves, the PVSS social housing program will likely continue to provide a revealing window into Bolivia’s radical process of social transformation.

Emily P. Achtenberg is an affordable housing consultant and urban planner. She last visited Bolivia in August 2008.

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