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Analysis

The Gentrification of Mexico’s Growing Cities

Thu, 11/01/2018 - 09:29

Mexico’s housing sector is undergoing a transformation that is not only altering city landscapes but impacting the lives of residents across the country. The 2016 Housing Act changed the rules of development and as a result incentivized compact and vertical construction. While this has improved the quality of life for residents, it has also led to price hikes that have put housing out of reach for many. “We are seeing a shift in the market dynamics,” says Andreu Cors, Director General of Gava Capital. “There has been a steady increase in housing prices that are completely unsustainable and people cannot afford to buy.”
According to the findings of the research project, between 2000 and 2015, urban development policies in Mexico City increased the prices of both the land and the units themselves and, although policies have also improved the quality of life of certain neighborhoods, most are inaccessible for the majority of the population. The conclusion of the research is that the policies have contributed to the creation of a more expensive and exclusive city.
The first line of action for governments to promote the development of compact and vertical cities can be seen as a step into “new urbanism.” According to the Congress for the New Urbanism, planning and development is based on the principals of how cities and towns are built with walkable blocks and streets, housing and shopping in close proximity and accessible public spaces. In Mexico, local governments are beginning to change the zoning plans of its downtown districts to allow for more diversified construction, fewer parking requirements and higher-density housing developments. As developers begin to add value by constructing new apartments, the riches are not flowing equally.
A clearer picture of gentrification can be seen in Mexico City, where prices keep going up, even after the Sept. 19 earthquake. In fact, this caused populations that lived in some of the highest-value, but worst-affected areas to migrate out of those neighborhoods. “The Polanco, Cuauhtemoc and Juarez neighborhoods absorbed the excess of artificial demand as people from the hard-hit areas of Condesa and Roma searched for new homes,” says Eduardo Orozco, Country Manager of Greystar Mexico. “Newer and undamaged apartments in buildings in these areas experienced a 20-30 percent rise in rent.”
According to SHF, comparing 3Q16 to 3Q17, Mexico City housing prices rose 7.4 percent. The municipalities with the highest capital gains are Escandon, Coyoacan and Alamos. The construction trends are shifting from the west to the center and south of the city where 63 percent of projects are concentrated as of 4Q17, according to TINSA.  
Of the 584 projects registered with the Association of Real Estate Developers (ADI) countrywide, 250 are within the residential sector, representing construction of over 28,868,423m2. ADI associates invested over MX$6 billion in 2017 in the Miguel Hidalgo delegation alone, the majority targeted to the middle, residential and residential-plus subsectors. According to Softec, the middle housing sector is priced between MX$639,663 and MX$1.6 million. According to INEGI’s National Occupation and Job Survey, more than 24 million workers earn less than MX$5,000 a month, only 6.1 percent of the national occupied population earns MX$12,000 a month and the 2018 minimum wage continues to be extremely low at MX$2,686.14 a month.
RECYCLING CITIES
One area in many cities that is attracting the attention of developers is the downtown core. Queretaro, Mexico City and Monterrey are pioneering in restoring these neglected districts. In Mexico, traditional neighborhoods such as San Rafael, Santa Maria La Ribera and Guerrero are beginning to see the purchasing of vecindades and the construction of six-story-plus housing complexes.
While the development of compact cities will help create more sustainable living spaces in the future, experts say these cities must first make sure that the basic necessities, such as water, energy and mobility infrastructure, are covered. “I have always thought that we need to recycle cities and start by regenerating the city centers that are inhabited. The infrastructure and homes located in the downtown area could be optimized and given a different air,” says Antonio Elosúa, President of the Board of U-Calli discussing Monterrey’s real estate boom. But he warns that developers must learn from past mistakes and carry out the adequate planning beforehand. “Before developing in this area, we must first make sure that the right infrastructure exists or if we need to construct and rehabilitate its basic infrastructure,” he adds.