Image credits: Brandon Griggs
News Article

Informal Construction: Challenge for Mexico’s Housing Issues

By Fernando Mares | Tue, 09/06/2022 - 12:54

Mexico faces several challenges if it is to ensure affordable housing, including a lack of housing availability compared to current demand, economic inequality, insufficient investment in development, informal construction and little access to housing financing, said a report by the Massachusetts Institute of Technology (MIT).

The report “Confronting the Housing Challenge in Latin America Part I” was made by MIT’s Urban Economics Lab and the Colombia-based proptech La Haus. It stated that progress in real estate development has been made and Latin American policies and laws have become more efficient and progressive de jure than those in some developed countries, at least on paper. Nevertheless, the informality of the housing market and difficulty to access high-quality homes affordably affects those with the lowest incomes. What is more, these problems spill over to the middle classes and the younger generations, which find it difficult to fully emancipate on the economic level.

The report uses Colombian and Mexican housing information. According to MIT, the data and methodology of these countries can be exported to other states in the region. The report highlighted the importance of the sustained growth of the middle class and the existence of housing policies that target the poorest to make affordable housing a reality.

According to the report, Mexico currently has a deficit of 2.2 million housing units that can only be reduced slowly. The report estimated that in the case of Colombia, the country must 400,000 new homes per year in the next 20 years, whereas Mexico needs to build over 800,000. It furthermore highlighted that Mexico is close to or already fulfilling these construction goals, but the country must now focus on carrying out construction formally. Most of Mexico’s construction is informal, which could become the only alternative for those in the lower income brackets. “[informal construction] occurs without an official permit nor adequate infrastructure and sometimes without safety standards in the type of house, materials and services applied,” the report reads. 

MIT suggests that Mexico should invest over one percent of its GDP to build enough houses to meet the demand, as well as increase formal construction by 30 percent. Nonetheless, one of the main challenges to meet this goal is the availability of land. In the eight reference cities of Mexico, the report shows that over 120,000ha of land in the next 20 years will be required. In the case of greenfield development, this amount could double.

According to Jerónimo Uribe, Director General and Co-founder, La Haus, it is not possible to meet the land requirement since the availability of space is extremely low. However, vertical construction is an option to mitigate this lack of space. “The construction plan for the next 20 years must promote taller cities, with better-utilized land, appropriate infrastructure and adequate financing,” Uribe added.

The data used in this article was sourced from:  
MIT’s Urban Economic Lab, El Economista
Photo by:   Brandon Griggs
Fernando Mares Fernando Mares Junior Journalist and Industry Analyst