Colombia Launches $420 Million USD Housing Subsidy Program

The Colombian government this week approved a housing subsidy program valued at around $420 million USD (1.2 trillion pesos) that aims to put tens of thousands of families into new urban homes.

The funds will significantly reduce the interest rate of some 77,000 mortgages that officials say will be generated by plan, which was approved by the federal Superior Council of Fiscal Policy (CONFIS) and represents a joint effort between the Ministry of Finance and Public Credit and the Ministry of Housing.

The program, which launches on February 12, will overlap with the already-established Social Interest Housing (VIS) and Priority Interest Housing (VIP) programs of the the National Housing Fund (Fonvivienda), as well as “Mi Casa Ya” program for low-income Colombians.

The subsidies will be in effect for at least seven years, providing coverage of 5 percentage points of the interest rate for those in the VIP category, 4 points for VIS, and 2.5 points for mortgages held by those whose annual income exceeds the threshold of 135 monthly minimum wages, according to the Ministry of Finance.

The ministry does note, however, that those applying under non-VIS status may not be eligible if they to have previously benefited from other governmental housing programs.

More than helping put more people in new homes, Finance Minister Mauricio Cárdenas stated that this spending initiative will be a boon to the overall economy. “We estimate that, on average, with this 1.2 trillion pesos for housing programs, we will stimulate economic activity in the order of 6 trillion,” said Cárdenas.

Housing Minister Camilo Sánchez added that housing is a vital area that can kickstart employment in “more than 30 sectors” of the economy. Overall, he stated that housing has generated at least 3.2 million jobs in Colombia and that this new plan will directly create some 35,000 jobs. “Today is a very important day for the national economy,” said Sánchez while introducing the plan.

Resources for the program will be distributed through the Banco de la República-administered Reserve Fund for the Stabilization of the Mortgage Portfolio (FRECH).

(Photo credit: Minvivienda)