This report evaluates the shortcomingsof current housing policies, and provides a framework foranalysis of alternative policies. Its message is threefold:First, housing has a significant role in terms of basicsocial support, where the housing unit is a source ofcapital accumulation, thus a key to expanding Mexico'smiddle class, from a minority to a majority. Second, thecountry is facing a two-tiered housing market, those thatcan afford formal housing, and the near majority who are notserved by current federal programs. Third, the housingfinance system has amalgamated into multiple institutions,with unclear accountability, and divergent criteria forsubsidized credit. The report further reviews thesignificant challenges facing housing demand, supply, andgovernment intervention, stating that in the absence ofviable alternatives, many Mexicans households areunder-housed, and suffer from insecure tenure, crowding, andpoor quality of housing. This weakness exacerbates poverty,by limiting capital formation, and the role of shelter inimproving the asset base of the poor, and, adversely impactsthe national economy. The country requires a substantialprogram of support for low-income housing over the next twodecades. In the formal market, reform is necessary toincrease effectiveness of current programs so as to open themarket to a wider range of private mortgage originators, andinvestors. And, given the limited fiscal capacity,trade-offs between the scope and depth of support todifferent segments of the market must be made. Publicfinancial support to the middle market should beincrementally withdrawn, and focused more directly to thepoor, requiring a coordinated strategy among public andquasi-public housing agencies to strengthen the market,where a major role for the new Housing Commission would beto oversee implementation of such strategy. Moreover,demand-side subsidies are necessary to support the poor, aswell as norms and practices adjusted to foster progressive housing.
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