Mi Casa Es Tu Casa – Mexican Housing Day 2011

With research and writing assistance from Estephani Garcia

The eighth annual Mexican Housing Day (February 10, 2011) in New York City and London gave the government, financial institutions and publicly listed (not the vast majority of unlisted developers and builders) housing developers a chance to crow about the rapid growth in housing development that’s taken place in the Mexican market in recent years.

One key takeaway trumpeted throughout the conference (presentations here): Mexico’s current housing deficit stands at 8.9 million total households, of which 5.79mn are both formal and informal workers with no affiliation to Social Security. The rate of household formation and the pace of supply suggest robust housing demand for years to come (assuming that prices don’t get out of whack with ability to pay of course).

The Mexican housing sector’s positive outlook in recent years springs directly from:

-  the country’s growth (and more recently recovery after the deep US recession and financial crisis) of 4%-5% in 2011 with rising investment and private consumption (Secretaria de Hacienda y Credito Publico presentation)

- macroeconomic stability (low rates, low country risk, financial sector liquidity and stability, etc)

- favorable demographics and socioeconomic trends (young population, rising real wages, improving human development indicators) – higher GDP per capita than India, China and Brazil;

- supportive government policy through an alphabet soup of financing and policy agencies (INFONAVIT, CONAVI, FOVISSTE, SHF, SEDESOL, etc) as well as state and municipalities

- partnership between private and public sector to develop increasingly sophisticated frameworks for innovations like green mortgages (169,000 so far), digital houses (>71,000 to date) and community “rescues”

Excitement in the homebuilding industry. The homebuilding market is literally up for grabs in Mexico. The country needs 7 milion new units by 2020 when there will be 15 cities with populations of more than 1 million, which is expected to drive 4X mortgage growth… by 2020.  With 70% of the homes built constructed by unlisted companies, 30% of the approximately 1400 builders in Mexico are small and medium sized companies. While the larger listed companies represented at this event supply only about 30% of the market, their competitive advantages include their access to the capital markets and, increasingly, their embrace of manufacturing techniques for faster, more efficient, less wasteful buildout. Given that underserved market segments number at about around 1.7 million households alone, the potential in this space is substantial.

Government taking action. The housing supply response to these underserved markets is here by grace of the government agencies that provide subsidies and underwrite mortgages to these groups, as well as increasingly defining the parameters for the quality of the housing supply – very progressive among emerging and developing markets. The government’s support is unquestionably fueling the expected double digit growth in mortgages expected across all segments in 2011. This participation reaffirms the interest and dedicated involvement of the Mexican government in the Housing Finance sector. The financing schemes of these organizations focus on providing new and innovative ways to qualify more citizens for mortgages and subsidies. For example, SHF (Sociedad Hipotecaria Federal) has decided to expand its net of financial intermediaries in order to better provide credit accessibility for the underserved market.

New focus on sustainability. In fact, after decades of sprawl and poorly planned urban development, public policy is increasingly emphasizing the development of integrated sustainable urban settlement, a theme eloquently described by Sara Topelson, Undersecretary of Urban and Territorial Development and Secretary of Social Development. However compelling, the crowd of bankers and developers yielded a predictably uninterested response. This is at the heart of the problem. The capital involved understands the importance of infrastructure and open spaces, schools and transportation, jobs and appropriate housing if they’re living in it themselves or investing in high end real estate, but connecting these concepts with low and moderate income communities often draws a yawn or, worse, a roll of the eyes. This attitude has to change to ensure that affordable housing doesn’t quickly turn to slums or become semi-abandoned, crime-ridden ghost towns.

The government is still, however, pushing forward with its model for housing and community development to evolve towards efficiency, affordability, and environmental and social  soundness. The Self-sustainable Housing Environment (DUIS) concept created by a multi-agency initiative is supporting sustainability in regional development zones throughout the country, 13 of which are already in progress or planned.

We liked the four criteria for evaluating projects: RUBA (Regional, Urban, Barrio, Architectural). These points take into consideration the project’s relationship to surrounding urban areas, physical and social infrastructure, the diversity of its neighborhoods and built forms, landscape integration, disaster resilience, environmental facilities and other key factors for regional sustainable development.

Improving outlook. Several elements are still missing – an adaptable and replicable business model for encouraging private sector leadership in these developments, a plan for medium to long term monitoring, further thinking on NGO and community engagement to ensure effective maintenance, models for mixing income groups within developments, etc.

Even so, the Mexican government and private sector homebuilding industry has made impressive strides towards inclusive, sustainable and commercially viable urban communities.

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