The Housing Transition in Mexico: Local Impacts of National Policy

The dramatic reform and expansion of Mexico's housing finance system since the early 1990s has transformed production and acquisition of housing in Mexico. More housing is now built by formal private sector construction companies and purchased with mortgages than through the informal, incremental process that traditionally housed the majority of the population. Most housing finance is provided by government lenders, with tight restrictions on eligibility for loans and on the houses they can be used to purchase. These restrictions have consequential secondary effects on urban development in the country; leading to neighborhoods that have a more homogenous housing stock and are more segregated. Understanding the impact of housing finance on the homebuilding industry, access to housing, regional development, and residential segregation is critical to understanding the rapid transformation of national life and culture as Mexico moves into the twenty-first century.The dissertation opens with a history of housing finance in Mexico, documents the housing transition quantitatively, and explores the implications of restricting housing finance to formal, salaried employees, which make up roughly half the workforce in Mexico. It is shown that otherwise identical households with a salaried household head are between 10 and 20 percent more likely to live in a consolidated house than are those with a part-time or informally employed head. Furthermore, by directing housing investment to cities with more salaried workers, the finance system functions as a regional development policy, favoring manufacturing centers in the north.The third chapter focuses on the reorganization of the residential construction industry, documenting the rise of large, national homebuilding firms. The impact of mortgage lending from government agencies is shown to be a significant determinant of variation in the size of construction firms and levels of market concentration at the metropolitan level. Cities with larger shares of lending have larger firms, but lower levels of market concentration and lower prices.The remainder of the dissertation focuses on the impact of Mexico's new urban growth patterns on residential segregation. Chapter four adapts commonly used measures of segregation in the United States to the 128 metropolitan statistical areas in Mexico to describe patterns of residential segregation by ethnicity and socioeconomic status. It is the first systematic quantitative analysis of segregation patterns in a Latin American country. The fifth chapter analyzes changes in levels of socioeconomic segregation, testing a number of hypotheses about the drivers of segregation. Findings show that characteristics of land and housing markets, including the share of housing that is acquired under the new housing finance system, are significant and important determinants of levels of segregation, growth of segregation during the 1990s, and the share of socioeconomic segregation that is conditional on the distribution of the housing stock.The results of the dissertation have important implications for Mexico and for all countries seeking to emulate the success of the expanded housing finance system there. In Mexico, the demographic structure of the population means that cities will continue to grow rapidly for at least the next 20 years. Because the housing finance system is run primarily by government agencies, an understanding of the secondary impacts of the system can be used to modify further reform; expanding access to the system and build cities that are more efficiently organized and less segregated. This experience will also be useful for other countries, which can incorporate considerations about the urban form of the neighborhoods that will be built under a government housing finance system before it is created