By Chris Arsenault

RIO DE JANEIRO (Thomson Reuters Foundation) - Government cutbacks to Brazil's pioneering social housing program, which has provided homes for several million people, will undermine property rights and increase inequality in South America's largest economy, analysts warn.

Hailed by the United Nations as a "success" in reducing Brazil's housing shortage, the multi-billion dollar "Minha Casa, Minha Vida" (My House, My Life) program has become a target for spending cuts as the country's interim government grapples with a budget deficit and recession.

More than 4.2 million new houses are under contract to be built as part of the program, according to government figures.

However, analysts fear that cuts worth tens of millions of reais will disrupt construction.

"Six million Brazilian families are homeless or living in precarious housing," said Maria Luisa Mendonca, a University of Rio de Janeiro professor, who studies land conflicts.

"For them, these cuts matter a lot," she told the Thomson Reuters Foundation.

The Ministry of Cities announced last month spending on the program would be reduced by 1.5 percent without providing a time frame for the cuts, without specifying how much this would mean.

Under the former government of President Dilma Rousseff, who was suspended from office last month for allegedly breaking budget laws, spending on the program was expected to be $210.6 billion reais ($67 billion) over the next three years, according to data released in March.

"We are at a moment of transition," the cities minister, Bruno Araujo, said in a statement.

"We are being cautious, assessing what promises we can keep," he said in May, pledging to continue the program "to the extent that the economy allows".

The Ministry of Cities did not respond to phone calls or emails requesting an interview.

ASSESSING PROMISES

Data of how much has been spent on the initiative since its creation in 2009 is unavailable but government data shows more than 2.6 million low cost homes have been built.

The program has been criticized for corruption, inefficiency and poor construction, said Maureen Donaghy, a public policy professor at Rutgers University in the United States, who studies housing markets.

But due to its scale, the initiative actually made a "dent in the number of people needing secure housing", Donaghy told the Thomson Reuters Foundation.

"That has to be recognized."

For Michel Braga, whose old house in a slum was washed away during a landslide, the program provided a rare chance to obtain an official property title.

Most residents of Brazil's informal settlements, or favelas, a key source of housing for the working poor, do not have formal deeds certifying that they own their ramshackle properties.

"It's much better here than it was in the favela," Braga, a car wash attendant, told the Thomson Reuters Foundation.

His new apartment in a gated complex of beige concrete buildings on clean streets stands in stark contrast to the unplanned red-brick favela perched on the adjacent hillside.

Braga said he was "first on the list for one of these new apartments", because his old home had been destroyed by a natural disaster.

SECURE HOMES

Those on a low income normally apply for a subsidized home, put their name on a waiting list and are then selected through a lottery system.

Like other residents of the apartment complex, Braga pays modest condominium fees of about 119 Brazilian reais ($35) a month for maintenance.

Mortgage costs under the scheme vary depending on a person's income and are paid to a government-backed bank.

In Braga's case, his monthly mortgage payments are less than maintenance costs.

Saimon Lima, a 34-year-old computer programmer, waited two years after putting his name on the official list before getting an apartment through the initiative.

He hopes the government will continue building subsidized homes as millions of other Brazilians lack secure accommodation.

"There is danger in nearby communities," Lima told the Thomson Reuters Foundation as security guards stood nearby. "But in here it's safe."

Along with concerns over poor construction quality, opponents of the program say Brazil's government needs to save money during the recession.

The free market, not government money, should determine how homes are built, critics say.

Residents of the subsidized properties cannot sub-let the homes or use them to run other businesses.

But they can sell the apartments once they have paid off their mortgages, residents said.

HOUSING LADDER

"If not for the government, I wouldn't have this," said retired construction worker Jose Amaro pointing to his two-bedroom apartment with barred windows.

"Now, I have a deed of ownership," 71-year-old Amaro told the Thomson Reuters Foundation.

More than 20 percent of Rio de Janeiro's 6.5 million residents live in favelas, with most lacking formal property deeds - a trend seen across Brazil's major cities.

The "My House, My Life" program has been a step in the right direction for getting the poor onto the housing ladder, said Denise Morando, a professor of architecture at the Federal University of Minas Gerais.

"The program represented a major break from previous practices by bringing the issue of social housing to the center of the government agenda," Morando said.

Cutting spending now would not be wise even with government finances stretched to their limit as the housing deficit is worsening in five of Brazil's nine largest cities, Morando said.

(Reporting By Chris Arsenault. Editing by Paola Totaro and Jo Griffin. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking and climate change. Visit news.trust.org)