Recommendations to make the affordable housing sector in Mexico more efficient in order to increase the welfare and quality of life of Mexicans

Abstract

Enrique Peña Nieto, Mexico's current president, voiced strong support for extending the social mission of INFONAVIT -- the largest mortgage lender in Mexico -- to embrace quality of life metrics. He also indicated a strong interest in expanding housing opportunities to segments of the population who are currently not being served by the housing funds and banks to the extent that the right to a dignified home is enshrined in Mexico's Constitution. In order to continue giving greater importance to quality of life metrics and not just lending volumes, INFONAVIT strategy will focus on the creation of cities that are more efficiently organized and less segregated in an unprecedented effort to move towards an inclusive, prosperous Mexico on the basis of orderly and sustainable urban development. INFONAVITs 2013-2022 financial plan projected cash flow growth of 8.82 % CAGR and its strategic agenda focused on four dimensions: i) Housing needs: providing funding and housing solutions that enhance the welfare of workers; ii) Social balance: ensuring housing quality and sustainability and promoting urban planning with a focus on employment growth; iii) Scope of policies: expanding connections with other housing institutions and aligning programs and policies with strategic sector guidelines; and iv) Risk & Return: sustaining strong financial and operational performance. The process of urban development is incremental for low-income households in Mexico since a significant percentage of the population has no possibility of living in dwellings constructed by the formal sector. Mexico is currently facing significant challenges in its future housing requirements. Specifically, this thesis will focus on three different proposals that complement the vision of President Enrique Peña Nieto and that could enhance the affordable housing sector in Mexico in order to create a better future for local residents. The proposals are: i) the creation of affordable Mexican edge cities, ii) the exploration of the Section 8 tenant-based housing voucher program practiced in the United States, and iii) the use of housing development as a regional development tool coupled with an industrial policy to rescue the Mexican southern region from deep-rooted stagnation and to potentiate the multiplier effect on the economy. Housing is a strategic sector for the economic growth and social development of Mexico since it triggers investment, creates jobs, strengthens the local market, and improves the quality of life of Mexican families. In order to analyze these proposals, this thesis reviews multiple reports from the Mexican government, industry, and academia. This is an exploratory document that will aim to provide useful information to policy makers in Mexico.