The Argentine Mortgage Credit System

The Argentine Mortgage Bank was founded exactly 139 years ago (1886).

Argentina’s economic development during the second half of the 19th century, characterized by the expansion of sectors such as transportation, construction, and industry, created the necessary conditions for the emergence of a dynamic real estate market. Massive immigration, political stability, and the growth of the working class drove housing demand. The expansion of the railway network and the urbanization of Buenos Aires facilitated access to land and the construction of new homes.

In addition, the development of the financial system, with the creation of institutions such as the National Bank, enabled the granting of mortgage loans and made property ownership accessible to a broader segment of the population. These factors converged to generate a process of upward social mobility, in which homeownership became a symbol of status and social progress.

In 1997, the Mortgage Bank was privatized, marking a milestone in its history and forcing it to face new challenges in an increasingly competitive market. To address these challenges, the bank began to diversify its range of products.

TOTAL LOANS GRANTED BY BHN, 1920–1954

(in number of units)

The Two Peronist Governments and the Implementation of Massive Housing Plans for the Popular Sector (1946–1955)

With the inauguration of Juan Domingo Perón, a new Charter was enacted and, thanks to the favorable economic conditions generated by the high level of foreign trade activity, the BHN began to grant loans through the application of a policy of abundant and low-cost credit. What followed was the development of massive, standardized housing construction plans based on an assistentialist model, meaning that the State absorbed a significant portion of the real value of the housing units. This model became distorted over time and ultimately turned into one of the main sources of corruption in Peronist governments, persisting even into recent decades.

On the other hand, although the BHN was responsible for awarding both construction contracts and mortgage loans, the construction companies in charge of the projects were subject to a low and fixed profit margin in pesos, which was incompatible with inflationary contexts. This resulted in difficulties in completing projects and led to the granting of State subsidies to these companies. As a consequence, the institution faced growing demand for loans tied to unfinished projects, its resources were depleted, and a wave of real estate speculation financed with public funds emerged, contributing to the housing deficit that still persists today.

In 1952, during Juan Domingo Perón’s second administration, a fight against inflation was launched, leading to a series of contractionary public spending measures under the Emergency Plan. These measures were accompanied by price and wage freezes aimed at encouraging savings, achieving stabilization with inflation reduced to 4% annually. Development loans for the construction of owner-occupied housing were extended to 50 years, while the amortization periods for funds granted for rental construction were extended to up to 30 years. In addition, loans granted for the development of neighborhoods undertaken by cooperative companies and labor unions were given grace periods of up to five years. All of this led, during this period, to a new peak in the number of agreements reached, increasing the percentage of homeowners and reducing the country’s housing deficit.

HOUSES BUILT AND ACCUMULATED IN ARGENTINA 1910 – 1956

(in number of units)

Radical party Governments and the Attempt to Resume State-Led Housing Construction. 1958 – 1966

During the constitutional government of Arturo Frondizi (1958–1962), in 1959, the Stabilization Plan was implemented alongside an agreement with the International Monetary Fund (IMF), carrying out a fiscal cut. In 1961, the Federal Housing Fund was created, for which the Inter-American Development Bank (IDB) contributed 50% to finance housing programs (Federal Housing Plan) promoted by the agency as an attempt to return to a state-led housing construction policy (Fridman, P. 2022; Dvoskin, N. 2017). The fund was “centralized by the BHN from 1962—following the short-lived creation of the Federal Housing Administration” (Fridman, P. 2022, p.18). This plan allowed many companies and unions to build neighborhoods for their members. Once the construction was completed and the houses delivered to beneficiaries, they began paying installments, which were directly deducted from their salaries. The BHN’s role in this plan was that of a financial agent (Banco Hipotecario, n.d.a).

During the presidency of Arturo Umberto Illia (1963–1966), mortgage credit was expanded, and in 1964, direct government actions were taken through the Federal Housing Plan.

In 1969, under the de facto government led by Juan Carlos Onganía (1966–1970), after several years of halted social housing activity for the most vulnerable social classes, the Argentine Economic Housing Plan was launched, funded with flows from private savings treated as public savings, social security funds, and international loans. The plans were granted to intermediary entities such as cooperatives, unions, and mutual organizations (entities managing union funds). At this stage, Banco Provincia de Buenos Aires participated with mortgage credits. Private banks also focused on construction, which was an expanding sector, but the housing targeted higher-income levels, real estate agencies began participating, and credit access conditions were tightened, creating an oversupply of units.

This period was also characterized by a lack of urban planning.

In 1971, the government attempted measures to redirect private credit toward the construction of low-cost housing, regulated maximum prices, and promoted tax exemptions—measures that worsened access for low-income sectors and increased housing construction for middle- and upper-income groups, reinforcing financial speculation in the face of high demand for accessible credit.

HOUSING PRODUCTION BY SOURCE OF FINANCING 1961 – 1971

In 1972, the FONAVI (National Housing Fund) was created, financed through taxes on employers and the agricultural sector on livestock sales. Its goal was to promote the construction of low-cost housing, once again organized through cooperatives, mutual organizations, unions, and non-profit entities.

In 1975, the country experienced a major crisis known as the Rodrigazo, which led to the collapse of significant sectors of the economy and triggered widespread structural inflation and a recession.

In 1976, the military dictatorship began, lasting until 1983. During this period, the Financial Entities Law was enacted, favoring national indebtedness and attracting speculative capital that was not directed toward the development of the real economy. In real estate, property prices were dollarized, consolidating the sector as a source of financial income without considering the actual use of the housing, and the state ceased to play an active role in housing access.

Additionally, the rental market was deregulated. From 1921 to 1976, rent increases had to be authorized by the government. This deregulation aimed to expand rental supply and improve pricing. The market became divided between FONAVI programs for low-income sectors and mortgage loans for the middle and upper-middle classes.

In 1980, a new reform of the BHN was implemented, establishing the institution’s autonomy and requirement to generate its own resources. This marked the end of state intervention in mortgage lending, as the BHN faced severe financial mismatches after losing financing from the Central Bank of Argentina (BCRA) through short-term rediscounts with inflation-adjusted rates, while its loans were long-term and offered lower interest rates.

The return to democracy brought high inflation and rising unemployment. Mortgage loans and social housing programs suffered significant deterioration, and construction was impacted by rising costs, uncertainty, and economic instability.

PERMITS, DEEDS, AND MORTGAGE DEEDS 1980 – 1989

In 1989, Menem assumed the presidency amid a severe financial, economic, and social crisis. The country faced hyperinflation similar to the Rodrigazo. The economy was dollarized, establishing the peso at a 1:1 ratio with the dollar. Economic expansion was immediate, giving rise to a new wave of mortgage loans in dollars. Between 1992 and 1994, the BHN transformed into a wholesale institution, reducing its presence in the retail market and ceasing to provide loans to individuals, changing its name to Banco Hipotecario S.A. (BHSA).

Between 1995 and 1996, BHSA launched mortgage securitization in the market, creating a real estate investment fund under strict international standards, with the goal of listing it on the U.S. stock exchange. In 1997, the bank was privatized, leaving only 49% under state ownership. As a consequence of this new structure adopted by BHSA, mortgage lending maintained high interest rates in dollars and a low proportion of GDP compared to peer countries.

From the beginning of the convertibility plan until 1999, BHN led the ranking of banks in mortgage lending. However, in a more competitive environment, it entered a downward trend reflected in its reduced market share, which fell from 34.3% in 1994 to 17.3% in 2001, being overtaken by Banco de la Nación Argentina, which has maintained that position ever since.

EVOLUTION OF MORTGAGE LOAN MARKET SHARE BY HOMOGENEOUS BANK GROUP. 1994–2006

In terms of mortgage lending, until December 2001, BHSA offered individual mortgage loans for the purchase, construction, or renovation of homes under its “Acceso Inmediato” (Immediate Access) line. These loans were offered in U.S. dollars at fixed and floating rates (LIBOR15) with terms ranging from 3 to 20 years, and in pesos at a fixed rate with terms of 3 to 15 years. Other products with higher interest rates than traditional products were also available, such as “Crédito Confianza,” “Confianza 50 y 50,” and “Destino Libre,” also available in pesos or dollars.

In December 2001, social unrest combined with other political factors led the president to declare a State of Emergency and subsequently resign.

In 2002, CER rates (Reference Stabilization Coefficient) were established, reflecting changes in the CPI (Consumer Price Index). These rates are published monthly and are currently used for adjusting rental prices.

After the 2001 crisis, construction quickly reactivated, particularly in the residential sector, but without mortgage financing and primarily accessible to high-income households.

In 2003, the Kirchner era began, and in 2015, BHSA launched the “Casa Plus” mortgage product targeting the upper-middle class. It required at least a 30% down payment of the property value, a maximum debt-to-income ratio of 25–30%, and only accepted properties with a certain replacement value, reducing mortgage lending to minimal international levels.

In 2008, a pension fund was established to finance public works and housing projects.

In 2012, the Argentine Bicentennial Housing Credit Program for Single-Family Homes, also known as PRO.CRE.AR, was created to address the housing deficit through accessible loans and the construction of neighborhoods on public land.

The program started with main lines at subsidized rates, aimed at building homes for families who already owned land or could acquire it. Later, other credit lines were added, such as “urban development,” “new housing,” and “construction with land.” PRO.CRE.AR was primarily financed by the FGS and also had public land transferred by the State Assets Administration Agency, as well as funds generated from loan repayments and the securitization of the program’s mortgage debt. Trust certificates of the debt were issued by BHSA in its fiduciary role.

Regarding BHSA, the bank’s activity increasingly resembled that of a commercial bank, with its product portfolio shifting toward higher-yield lines, favoring short-term consumer loans over mortgages.

The current government under Javier Milei has canceled the PRO.CRE.AR program, citing a lack of state funds for the program or public works and questioning the actual use of the funds due to numerous cases of corruption and misuse of public resources in such programs. This opens an opportunity, as hundreds of partially completed construction projects are left in liquidation. Argentina has a long history of overpricing and lack of oversight in contracts with construction companies.

As observed throughout the previous section, the Argentine mortgage market has remained relatively small and always tied to macroeconomic conditions and government policies, which, depending on their approach, consistently favored one social class over another, without establishing long-term policies or plans to develop the mortgage market sustainably.

FLOW OF STATE PROGRAMS AND BANK MORTGAGES FOR HOUSING IN ARGENTINA 1994–2008 (AS % OF GDP)

In the case of mortgage loans, countries in the region, such as Uruguay, Argentina, and Chile, have opted for the use of indexed loans (in Argentina, dollar-denominated loans were also used before the 2001 crisis) to address this situation. Of these three countries, only Chile has achieved successful development of the mortgage market through this system because, in recent decades, real wages and the economy have grown steadily. In the other countries, the option of offering variable-rate loans has been present but has not developed extensively, due to borrowers’ fear of the high volatility of these rates. Variable-rate mortgage loans have been successful in regions and countries with a long track record of economic and financial stability, such as in Europe and the U.S., where the market reference rate is used as a basis (Kiguel, M., and Podjarny, E., 2007).