A resident of Conchalí, a low-income district in northern Santiago, making use of caseta, a government-financed and government-built housing unit containing cooking and sanitation facilities
Courtesy Inter-AmeÍÍÍÍrican Development Bank

The mayor of the low-income community of Peñalolén on the eastern side of the Santiago metropolitan area paying a visit to her constituents to inspect casetas
Courtesy Inter-American Development Bank

The state began its involvement in the construction of low-cost housing in 1906, with a law stipulating that builders of low-cost units would qualify for a complete exemption from all taxes and that their owners would be exempt from real estate taxes for twenty-five years. Subsequent housing programs in Chile have usually consisted of providing subsidies to those who built lowcost houses or to those who bought them. In addition the programs have furnished one-time grants for the necessary down payments to permit people to obtain a loan or qualify for a housing program. Generally, all three features have been in place since the 1950s, although the emphasis on one or another means has shifted with changing governments. Subsidies to buyers have been channeled through below-market interest rates for long-term loans. These generally were made available through pension plans. Between 1955 and 1973, these subsidies mostly benefited the poorest 60 percent of the population, especially the lower-middle 30 percent (for definition of extreme poverty, see Glossary).

Starting in the 1950s, the state also assumed a major role in the construction of low-cost housing. The Housing Corporation (Corporación de la Vivienda--Corvi) was established by the national government in 1953. Between 1960 and 1972, an average of 42,000 houses per year were built in Chile, of which the state built 60 percent and the private sector with state financing built 20 percent private companies built the remaining 20 percent with private funding.

The military government cut public spending for housing to less than half of its 1970 levels. Supporters of the regime argued that state resources were more efficiently used than before, citing a slight increase, to about 43,000 units, in average annual housing construction. They also argued that attempts were made--with greater success in the late 1980s than at the beginning of the Pinochet regime--to channel state subsidies to the poorest sectors. However, on average the number of new housing units was equal to no more than 56 percent of the total number of new households created between 1974 and 1989 the result was an increase in the nation's housing deficit. A rapid acceleration of construction toward the end of the 1980s, with almost 84,000 units being built in 1989, kept the deficit from becoming even worse.

The military regime reduced the subsidies on housing loans and initiated a monthly re 83aadjustmement of all such loans according to the rate of inflation as a means of retaining their real value. The government also increased the participation of the private sector in the construction of housing and municipal buildings. It also attempted to allocate houses primarily to households that met certain savings goals, an objective that proved virtually impossible for poor families to meet. As a result, toward the end of military rule the state put more resources into one-time grants to enable families to cover the down payment.

The Aylwin government increased public funds for housing by about 50 percent, although construction remained in the hands of the private sector. It changed the eligibility requirements for public housing programs to favor poorer people unable to save money. The government's intention was to freeze the housing deficit that existed in 1990 by facilitating the building of as many new houses as were needed by the new households that were being formed (see Construction , ch. 3). It also reintroduced utilities subsidies to poor neighborhoods and placed a greater emphasis on communal services for such areas.

Data as of March 1994