Foreign Assistance:

The Solanda Housing Guaranty Project in Ecuador

NSIAD-86-120: Published: May 21, 1986. Publicly Released: Jun 23, 1986.

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In response to a congressional request, GAO: (1) reviewed the Solanda Housing Guaranty project in Ecuador, focusing on Agency for International Development (AID) and Ecuadoran requirements for financing, design, and implementation; (2) investigated allegations that high indirect costs have unnecessarily increased the prices of Solanda units; and (3) analyzed AID-funded wood house demonstration projects in Peru and Ecuador to determine whether using alternative construction materials might improve the Housing Guaranty Program's delivery of low-income housing in Ecuador.

GAO found that: (1) the Solanda housing units' high construction standards and costs were not affordable for much of the original target population; (2) the use of wood or other building materials alone would not have significantly lowered the units' prices; (3) allegations that, due to AID requirements, indirect costs in Solanda had reached 50 percent were unfounded; (4) the Ecuador Housing Bank charged the lowest approved interest rate for Solanda mortgages, but it was still too high for the lower strata of the Housing Guaranty target group to qualify; and (5) U.S. wood was not a viable alternative under the Housing Guaranty Program but could be used for high-income housing.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: AID is working with BEV and JNV to retarget its shelter program to families earning below the median income level.

    Recommendation: If the Ecuador Housing Bank continues its policy of investing most of its resources in homes for those above the median income, the Administrator, AID, should work with the Bank to retarget its shelter programs to families earning below the median income and refine current Bank interest rate policy for social interest projects and projects for families earning above the median income so that low-income families do not subsidize higher income families. One approach could involve the Bank: (1) separating its investments in below-median income from investments in above-median income homes; and (2) charging different rates of interest for the two separate categories which would reflect the cost of the resources to the Bank.

    Agency Affected: United States Agency for International Development


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