Mexico - Low Income Housing : Issues and Options, Volume 1. Main Report

Abstract

This report evaluates the shortcomings
 of current housing policies, and provides a framework for
 analysis of alternative policies. Its message is threefold:
 First, housing has a significant role in terms of basic
 social support, where the housing unit is a source of
 capital accumulation, thus a key to expanding Mexico's
 middle class, from a minority to a majority. Second, the
 country is facing a two-tiered housing market, those that
 can afford formal housing, and the near majority who are not
 served by current federal programs. Third, the housing
 finance system has amalgamated into multiple institutions,
 with unclear accountability, and divergent criteria for
 subsidized credit. The report further reviews the
 significant challenges facing housing demand, supply, and
 government intervention, stating that in the absence of
 viable alternatives, many Mexicans households are
 under-housed, and suffer from insecure tenure, crowding, and
 poor quality of housing. This weakness exacerbates poverty,
 by limiting capital formation, and the role of shelter in
 improving the asset base of the poor, and, adversely impacts
 the national economy. The country requires a substantial
 program of support for low-income housing over the next two
 decades. In the formal market, reform is necessary to
 increase effectiveness of current programs so as to open the
 market to a wider range of private mortgage originators, and
 investors. And, given the limited fiscal capacity,
 trade-offs between the scope and depth of support to
 different segments of the market must be made. Public
 financial support to the middle market should be
 incrementally withdrawn, and focused more directly to the
 poor, requiring a coordinated strategy among public and
 quasi-public housing agencies to strengthen the market,
 where a major role for the new Housing Commission would be
 to oversee implementation of such strategy. Moreover,
 demand-side subsidies are necessary to support the poor, as
 well as norms and practices adjusted to foster progressive housing.