Even though Brazil adopted socially progressive policies in the 2000s, over 200 million people still live in substandard housing. In efforts to address this, the government launched Minha Casa, Minha Vida (MCMV) in 2009, which aimed to build 3 million homes for low-income families in five years. The second phase of MCMV started in 2011 with BRL140 billion in funding. MCMV operates by incentivizing housing developers, provided that they will offer the new homes at a government-capped price. Low-income families receive an allowance to purchase these homes, and a low-interest mortgage to cover the rest of the cost – a shift from how Brazil’s market worked previously, in which mortgages were only available for upper class families.
Despite attempts to assure homeownership through a combination of credit, subsidies, and guarantees, by the end of 2015, researchers across six major metropolitan regions found a 28% delinquency rate in the program. Possible explanations for delinquency include the peripheral location of units, insufficient incomes to cover costs, moral hazard in management of MCMV, and organized crime in some projects – meaning that in subsidy scaling projects, the inclusion of location criteria is important to program success.
Source:
Acolin, A., Hoek-Smit, M.C., & Magalhães Eloy, C. (2019) High delinquency rates in Brazil’s Minha Casa Minha Vida housing program: Possible causes and necessary reforms. Habitat International. 83: 99-110.