Priced out: why many working Ilonggos can’t afford to live formally

By Antonio Calleja

By any surface reading, Iloilo City should not be facing an explosion in informal settlements.

Population growth has been modest — about 0.88% annually from 2020 to 2024. Poverty is low and declining. The local economy has been one of the stronger performers in Western Visayas. On paper, this is a city doing many things right.

And yet informal settler families (ISFs) have surged to roughly 22,000 households.

That contradiction tells us something important: Iloilo’s ISF problem is not primarily demographic. It is structural — specifically, an affordability crisis unfolding inside a growing secondary city.

For years, discussions about informal settlements in the Philippines have defaulted to familiar explanations such as rapid population growth or widespread poverty. Those factors matter in some contexts, but the Iloilo data point elsewhere.

Start with poverty. Iloilo City’s family poverty incidence is only about 2.3%. In other words, the vast majority of households are not officially poor. Yet informality is rising sharply. If poverty were the main driver, we would expect the opposite pattern.

The real pressure point lies in the widening gap between incomes and the cost of formal urban housing.

Consider the arithmetic facing a typical working household. A minimum-wage earner in Western Visayas brings home roughly PHP 14,000 to PHP 15,000 a month. The monthly amortization for a basic socialized housing unit is already around PHP 4,000. On paper, that appears manageable. In reality, once food, transport, utilities, and schooling are factored in, the margin disappears quickly.

This is where the “near-poor” become central to the story. Iloilo does not have a large mass of chronically poor households. What it does have — like many fast-growing regional cities — is a sizable group of economically vulnerable families earning just above the poverty line. They are employed and productive, but they are one rent increase or income shock away from housing instability.

In policy terms, this is growth-driven housing exclusion.

As Iloilo’s economy strengthens — particularly in services, BPO, and commercial development — land values in key districts have risen. Formal housing production has skewed toward middle-income buyers. Meanwhile, the supply of genuinely affordable rental and ownership options has lagged. The result is predictable: households priced out of the formal market migrate into informal arrangements.

This dynamic also explains why the recent real property tax (RPT) adjustments, while politically visible, are unlikely to be the root cause of the ISF surge.

Higher property taxes can exert pressure at the margins. Some landlords pass costs on to tenants. Some small rental operators may exit the low-end market. In a tight housing environment, even modest cost increases can push vulnerable renters over the edge.

But the key issue is scale.

The structural affordability gap in Iloilo existed before the RPT changes. Minimum-wage households were already on the edge of formal housing viability. The city already faced a significant housing backlog. Informal settlements were already embedded in riverbanks, coastal zones, and other high-risk areas. The tax adjustment did not create these conditions. At most, it made an already tight system slightly tighter.

Blaming RPT as the primary driver risks misdirecting policy energy away from the deeper structural fixes Iloilo now urgently needs.

The policy implications are pretty straightforward.

First, Iloilo must treat affordable housing supply as core urban infrastructure, not a peripheral social program. The city needs sustained production of socialized and near-socialized units at scale, particularly in locations connected to employment centers.

Second, rental housing deserves far more attention. Many near-poor households are not ready for ownership but urgently need stable, affordable rental options. Public rental, rent-to-own, and incentives for formal low-cost rentals should be part of the mainstream housing toolkit.

Third, urban integration matters. Large-scale off-city relocations that sever households from jobs and transport will continue to struggle. The future lies in a mix of in-city upgrading, near-city development, and transit-linked housing aligned with Metro Iloilo’s growth corridors.

Iloilo City still has a valuable window of opportunity. The ISF problem, while serious, remains tractable if addressed with the right structural lens.

Fix the housing ladder — and the ISF curve can bend. Ignore it, and the numbers will keep climbing, even if the population barely moves.

Antonio Calleja writes on macroeconomic issues, urban policy, and regional development.