‘Minha Casa, Minha Vida’ Housing Program

October 3rd, 2009 by Ruban Selvanayagam 12 Comments

Minha Casa, Minha Vida

The Minha Casa, Minha Vida (My House, My Life) campaign was announced by the Federal Government in March 2009 as one of the means of reducing the inequality gap and housing deficit in Brazil. With a governmental investment of over 34 million reais, 1 million houses are planned to be built (in partnership with the states, municipalities and private sector) and allocated to families on a means tested basis:

Households with a total income of up to 3 times the minimum wage (currently at 465 reais per month) will be permitted to access the full allowance without any insurance and notary registration costs to pay.

Households with a total income between 3 and 6 times the minimum wage can gain income supplements for loans; a discount on the cost of insurance; a 90% reduction of the notary registration cost and access to the ‘guaranteed’ fund (which will cover them in the case of unemployment, death or other specified circumstances).

Households with a total income of between 6 and 10 the minimum wage can receive lower costs of insurance, an 80% reduction of the notary registration cost and access to the ‘guaranteed’ fund;

Under the program, households earning up to 4,200 reais will be able to purchase a house with a close to zero interest rate and refinance it over 36 months. As an example, those households that are earning up to 3 times the minimum wage will be allowed to purchase a house up to the value of 52,000 reais, for which the scheme will contribute 46,000 reais leaving the buyer to provide the remainder 6,000 reais – this would (usually) be borrowed from the Caixa Federal and repaid in instalments of approximately 167 reais per month. Those in the higher income brackets are able to access smaller subsidies and finance packages. A number of incentives have also been granted to the Brazilian construction industry including loans at 1% above the TJLP (the long-term interest rate); reduced or completely eliminated tax structures; and extended repayment / grace periods.

As with most government schemes of this scale, Minha Casa, Minha Vida has not fallen short of criticism from academics, the media and the Brazilian public themselves. One accusation is that the Lula government is using the program to attract voters at next year’s presidential campaign for his ‘Workers’ Party (it is claimed by some that the President used the Bolsa Familia – a cash transfer program to the poor – to help his re-election in 2006). There is the fear that placing political interests above the financial practicality of sustaining the program is a dangerous game. Many middle class citizens express their frustration with the fact that they continue to pay a high rate of interest with no comparable breaks and questions have also arisen as to its full implementation across the country.

Nevertheless, the employment benefits of the increased construction workers required to meet the ever rising demand of the program has been noted. Share indexes of two the largest homebuilders, Cyrela Brazil Realty and Gafisa SA, have increased by over 50% since the introduction of the program. Furthermore, the breakthrough in the ability of the poorer end of Brazilian society to better their lives cannot be underestimated and many see it as a long-overdue necessity which will assist the country’s long-term growth.