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

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incrementally withdrawn, and focused more directly to the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.