A/67/286 III. Prevalent housing finance policies and their impact on the right to adequate housing of people living in poverty A. Mortgage markets 20. In recent years market-based housing finance has spread throughout the world at an unprecedented rate. In the United States, European countries, Australia and Japan residential mortgage markets represent between 50 and 100 per cent of gross domestic product (GDP). Several countries experienced strong growth in mortgage debt in the last decade before the crisis, including Australia, Ireland, Spain, Sweden and the United States. By 2009, the ratio of mortgage debt to GDP had reached more than 100 per cent in Denmark and the Netherlands. 29 Mortgage markets have also been developing in emerging markets. For example, the Chinese mortgage market, which started only in the early 1990s, has been growing at more than 40 per cent annually since 2000, reaching 11 per cent of GDP in less than 10 years 30 to become the largest mortgage market in Asia. Similarly, the Indian market has been growing at 30 per cent per year. 31 21. Mortgage lending remains low throughout most transition economies and developing countries, despite intensive efforts to develop mortgage- based finance systems. 32 In 2010, only 5 per cent of the population of Eastern Europe reported having a mortgage, 33 and mortgage lending is negligible (less than 5 per cent) in most of sub-Saharan Africa. 34 22. Market-based housing finance inevitably targets the more affluent segments of society, which have the necessary capital to take on the initial housing loan and generate profit to lenders through the payment of interest. Mortgage finance has been traditionally considered unattainable for the poor owing to issues such as lack of title, informal and illegal settlements, restrictive zoning and occupancy regulations, low and erratic income and large-scale employment in the informal sector. Banks traditionally focus their marketing on the upper-income groups, tending to adopt an over-collateralized approach to lending (multiple guarantors, low loan-to-value ratio, etc.), which inherently excludes low-income groups. Mortgage markets, therefore, in effect discriminate against low-income borrowers. Research commissioned by the FinMark Trust in 12 countries across Africa found that less than 10 per cent of local populations are eligible for mortgage finance. In Eastern European countries in transition, recent estimates by UN-Habitat indicate that rapid house price increases coupled with high unemployment and higher interest rates on mortgages have excluded more than 80 per cent of new households from the new housing construction market. 35 __________________ 29 30 31 32 33 34 35 8 International Monetary Fund (IMF), Global Financial Stability Report: Durable Financial Stability: Getting There from Here (Washington, D.C., 2011), p. 133-134. Stephens, p. 2975. World Bank, Housing Finance Policy in Emerging Markets, p. xxxi. Although some transition countries such as Hungary, the Baltic countries and Kazakhstan have seen growth of more than 20 per cent per year. IMF, Global Financial Stability Report, p. 134. European Bank for Reconstruction and Development, Transition Report 2011: Crisis and Transition: The People’s Perspective, p. 56. With the exceptions of South Africa, where mortgage debt accounts for just over 40 per cent of GDP, and Namibia, with about 20 per cent. UN-Habitat, Affordable Land and Housing in Europe and North America, p. 48. 12-45918