Academic journal article Cityscape

Promoting Access to Affordable Housing Finance: Morocco's Fogarim Guarantee Fund and U.S. Housing Finance

Academic journal article Cityscape

Promoting Access to Affordable Housing Finance: Morocco's Fogarim Guarantee Fund and U.S. Housing Finance

Article excerpt

The views expressed in this article are those of the authors and do not represent the official positions or policies of the Office of Policy Development and Research, the U.S. Department of Housing and Urban Development, or the U.S. government.

Foreign Exchange

Foreign Exchange, a department of Cityscape, reports on what the U.S. Department of Housing and Urban Developments Office for International and Philanthropic Innovation has learned about new departures in housing and development policy in cities and suburbs throughout the world that might have value if applied in U.S. communities. If you have a recent research report or article of fewer than 2,000 words to share in a forthcoming issue of Cityscape, please send a one-paragraph abstract to matthew.l.hennessy@hud.gov.

Introduction

Housing is a capital-intensive necessity. Compared with food and clothing, the higher cost of shelter is a central constraint to socioeconomic development, threatening the sustainability of communities worldwide. The Kingdom of Morocco and the United States of America are no exception. In both countries, access to affordable housing is segmented, often out of reach to households with low and irregular incomes. Although Morocco, a lower-middle-income country, has experienced increased income and falling unemployment over the past 15 years, the persistence of informal settlements and a housing deficit have greatly hindered the livelihoods of low-income Moroccan households (al-Aissami, 2012). By comparison, U.S. households on the whole have had income gains and reduced mortgage costs since the 2008-to-2009 financial crisis (JCHS, 2015). Such progress has been blunted, however, because many low-income households derive their incomes irregularly and pay more than 30 percent of their total budget to housing costs (Federal Reserve, 2014; U.S. Census Bureau, 2015).

For the governments of Morocco and the United States, housing finance has been central to promoting access to affordable housing for all. For single-family and multifamily housing, sovereign guarantee mechanisms have been central to both countries' housing policies. The following discussion examines three sovereign guarantee programs-Morocco's Fogarim Guarantee Fund, and the Mortgage Insurance for One to Four Family Homes program and the Single Family Housing Guaranteed Loan Program in the United States. Each program shares the common objective of expanding financial access to affordable housing for lower-income households, but they have key differences.

Specifically, the Fogarim model has distinguishing features such as lending to borrowers with intermittent sources of income, methodologies in appraising borrower credit, and the use of life insurance in support of collateral. From implementation to evaluation, the Moroccan experience with Fogarim underscores innovations and a common purpose in promoting access to affordable housing finance.

Challenges to Financing Affordable Housing in Morocco

Since Morocco gained independence in 1956, its housing sector has changed considerably. The country-uniquely situated at the intersection of European, Arab, and African states-rapidly urbanized at a greater rate than its regional counterparts. Whereas 3 million Moroccan citizens lived in cities in 1956, an estimated 20.4 million Moroccans were urban dwellers in 2015 (UN DESA, 2014). In becoming a majority-urbanized country, from 50.6 percent in 1993 to 60.2 percent in 2015, Morocco has experienced increased pressures providing affordable housing. Population growth has intensified, and more people have migrated to cities in search of greater economic opportunities.

Such rapid growth and urbanization has led to increased demand for affordable housing. Land has become scarcer and building materials costlier. Meanwhile, across Moroccan cities, the dominant housing tenure shifted from rental, at 53.1 percent of all urban housing units in 1971, to homeownership, at 65. …

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