The structure of housing finance and the subsidies policy in Brazil PRELIMINARY VERSION Fernando Garcia Secretaria Nacional de Habitação Ministério das Cidades São Paulo, September 24th, 2014

RESOURCES FOR HOUSING SUBSIDIES The present structure of housing subsidies in Brazil involves resources from four sources: (i)the Union budget (OGU); (ii)the Residential Leasing Fund (FAR); (iii)Workers Compensation Fund (FGTS) that allocates non-costly funds to housing financing; and (iv)Land donated by states and municipalities. These types of subsidies are used individually or in a combined manner in different federal government housing programs.

PROGRAMS OF HOUSING SUBSIDIES In the last ten years, the structure of housing subsidies in Brazil had involved programs that transfer grants for financing to: (i)states, municipalities and states, the Federal District and public companies (Pro-housing and Residential Lease Program); (ii)people grouped in unions, cooperatives, associations, COHAB or private entities focused on the production of housing (Associative Letter of Credit and Solidarity Credit Program); and (iii)Families (Individual Letter of Credit and PMCMV). These types of subsidies were used for both acquisition or leasing of social housing. PMCMV is responsible for more than 95% of all grants in the last 5 years.

Number of housing units financed with subsidies from some federal program Source: Caixa Econômica Federal.

Credit and subsidies from the MCMV Program, per family earning bracket, for 2009 to 2013, in R$ Source: Caixa Econômica Federal. (*) for beneficiaries in the earnings bracket of up to R$ 1,600.00, the amount of credit corresponds to the 120 payments of 5% of average earnings. Source : Ministério das Cidades and Caixa Econômica Federal. Income bracket Earnings bracket of up to R$ 1, Earnings bracket between R$ 1, and R$ 3, Earnings bracket between R$ 3,275,01 and R$ 5, Total Units 1,527,3791,294,919417,3613,239,659 Credit* amount 10,997,128, ,675,298, ,371,647, ,044,074, Total subsidy 62,404,222, ,779,633, ,730,073, ,913,929, Balance subsidy* 3,296,202, ,710,642, ,874, ,655,719, Union Budget subsidy -19,068,990, ,081,198, ,150,189, FAR subsidy 59,108,019, Previous savings -10,550,493, ,353,986, ,904,479, Amount of the Investment 73,401,351, ,005,425, ,455,707, ,862,483,480.24

(%) subsidies / house prices, From 2009 to June, Distribution of the subsidies by income bracket (%) Source : Ministério das Cidades and Caixa Econômica Federal.

Source: PNAD 2012, IBGE. Fraction of potential families entitled to the MCMV Program, per Brackets and Regions, September 2012 Income bracket Earnings bracket of up to R$ 1, Earnings bracket between R$ 1, and R$ 3, Earnings bracket between R$ 3,275,01 and R$ 5, Earnings higher than R$ 5, North Northeast Southeast South Center-West Brazil

Source: CEF and Ministério das Cidades. Fraction of the demand attended by MCMV Program, 24 th biggest cities,

Frequency of contracts by family monthly earnings, PMCMV, Earnings bracket of up to R$ 1, Source : IBGE, Ministério das Cidades and Caixa Econômica Federal. Demand PMCMV

Source : IBGE, Ministério das Cidades and Caixa Econômica Federal. Frequency of contracts by family monthly earnings, PMCMV, Earnings bracket between R$ 1, and R$ 3, Demand PMCMV

Source : IBGE, Ministério das Cidades and Caixa Econômica Federal. Frequency of contracts by family monthly earnings, PMCMV, Earnings bracket up to R$ 3, Demand PMCMV

Income transfers for PMCMV beneficiaries, in R$ Source: IBGE, Ministério das Cidades and Caixa Econômica Federal. The average transfers for beneficiaries with earnings of up to R$ 1, are 1.9 times the average transfers for beneficiaries with earnings between R$ 1, and R$ 3,275.00, and 10 times the transfers made for families with earnings higher than 3,275.00

Source : IBGE, Ministério das Cidades and Caixa Econômica Federal. Income transfers for PMCMV beneficiaries, in months of average earnings In terms of months of earnings, the average transfers for beneficiaries with earnings of up to R$ 1, are 6 times the average transfers for beneficiaries with earnings between R$ 1, and R$ 3,275.00, and 32 times the transfers made for families with earnings higher than 3,275.00