The housing deficit is defined by the Chilean Chamber of Construction as the amount of new housing needed to replace uninhabitable housing and provide housing for families living in shelters. Its latest Housing Balance report, whose main source is the CASEN 2022 survey, showed that the national housing requirements reached 935,000 homes. That figure is 13% higher than in 2017, and the highest since records have been kept. The distribution of the housing deficit throughout the country is presented below:

In March 2022, in order to face the housing emergency affecting the country, the Ministry of Housing and Urbanism developed the Housing Emergency Plan, whose main objective is to deliver 260,000 houses during the current government period, that is, until March 2026, the Ministry of Housing and Urban Development developed the Emergency Housing Plan, whose main objective is to deliver 260,000 housing units during the current government term, that is, until March 2026.. As background, the last progress report of the plan was in January 2024, where 105,261 homes completed to date were reported, which represents 40.5% of the goal.

In this context, the different housing subsidy programs play a fundamental role. Among these is the Social and Territorial Integration Program DS19, which allows middle-class and lower-income families seeking to acquire their first home with state support to access housing projects in well-located neighborhoods close to services, with quality standards in design, equipment and green areas. These projects offer units ranging from UF 1,200 to UF 2,800 (depending on the geographic area of the project) for beneficiaries in 3 different segments:

1. Vulnerable segment, with a subsidy of approximately 97% of the housing price.
2. Emerging segment, with a subsidy of approximately 43% of the housing price.
3. Middle Class segment, with a subsidy of approximately 23% of the housing price. 

Another highlight of the DS19 subsidy is that it allows beneficiaries to buy their home without a footing, they only need to have a minimum savings of 50 to 100 UF, depending on the home. The program also provides a state guarantee to encourage financing by banks and other institutions.

In addition, the program provides incentives for developers by offering a linkage credit of up to UF 300 per home from SERVIU, which represents approximately 20% of the total construction cost at a rate of UF + 0%. This incentive is currently very important, given the restrictive nature of bank financing, in addition to the high level of rates.

In this way, this type of project contributes directly to minimizing the country's housing deficit, and also manages to mitigate important risks for its developers in terms of marketing, financing and permitting, especially in comparison with traditional development projects. This last point is reflected in the market: According to data from Toctoc, the sale of new properties in Santiago during 2023 increased by 16.6% compared to the previous year, driven mainly by the marketing of subsidized housing. On the other hand, if the market is considered excluding subsidized sales, the annual variation in sales was only 3.3%.

Sebastian Mahave

Real Estate Analyst Fynsa AGF