Neoliberal Social Housing Policies: Bringing the poor to the problem

The second feature defining this era were the changes in the way social housing, and urban development in general was being undertaken. The story has parallels to the rise of President Fox, irrational faith in the ability of markets to provide for the basic needs for a population, and the specific structural context of neoliberalism. The story as told by Chen (2018) puts the shift as occurring with the 1992 constitutional reforms enacted by Salinas which allowed for the privatization and sale of communal land, a factor that was seen as inhibiting the natural growth of cities, surrounded as they were by this land. The argument here is that the reforms initiated in the 1990s, continued and expanded under Fox in the 2000s, led to the migration of approximately 21 million Mexicans to the urban peripheries, to places where public water infrastructure (and almost all other kind of physical, social, and civic infrastructure including police, healthcare, transportation, utilities) were under provided (Marosi, 2017). Furthermore, at least in the two main study areas for this study, the building of large housing developments in close proximity to egregious water contamination has only exacerbated the vulnerabilities of these populations. I argue here that it is not enough to understand the water crisis from the perspective of the reforms that left the market to solve questions of access. It is necessary to understand the reforms to the public housing sector that also let the market solve questions of where to build housing.

Like the story of water management and access in Mexico, the story of Mexico’s housing crisis needs to be told from a perspective that locates it in the nation’s earlier development paradigm of import substitution and the roll of the financial crisis not only in opening up the country to international financial institutions’ Structural Adjustment demands, but in leaving the country with few easy alternatives. This story starts with the awakening of Mexico to a growing population and the Malthusian fears of the early and mid-20th Century when populations, here and abroad were climbing to unimagined numbers. In part because of advances in knowledge and technological development, pasteurization, refrigeration, medicine and disease knowledge, and an increased access to food (Kinder, 1998); this was the first time in human history when all of the members

of Mexico’s large Catholic families were expected to survive. From the 1930s through the 1970s Mexico had one of the highest rates of population growth in the world, due

“almost entirely to natural increase,” wrote Roberts (1973, p. 657). The overall death rate had fallen from 24 per 1000 in 1940 to 12 per 1000 in 1960 while infant mortality fell from 135 per 1000 in 1930 to 69 in 1960.²³ Today it is 12.2 (World Bank Data, 2020b).

The population story does not end there, the nation was simultaneously urbanizing as the green revolution swept the countryside, intensifying agricultural production with less labor. The nation changed from predominately rural to predominately urban and the masses crowding the cities became the classic “surplus labor” (Soederburg, 2014, p.

159; Lewis, 1957, p. 142; Harvey, 2018, p. 148) necessary for capital accumulation. In this era Mexico mostly subsidized the housing needs of the masses moving to the cities by promoting self-construction, rent control and guaranteeing titles to land (Chen, 2018, p.

79). Chen writes (2018, p. 81) “informal housing … was seen as a mechanism that could cushion the negative impacts of economic crisis on family income.” He explains that by promoting the informal housing sector, which in turn subsidized the social reproduction of the informal workers, the policy would in fact “suppress demand for higher wages.”

“Self-help housing (and the informal sector in general) reflects a symbiotic connection between the expansion of the modern capitalist sector and the rapid [urbanization]

… That is the informal sector cheapens the expansion of the modern capitalist sector by providing low-cost goods and services for the formal sector,” (Chen, 2018, p. 69).

Furthermore, the majority of housing was self-constructed without financing. ‘The vast majority are informal, self-built homes … that families spend on average, up to 10 years constructing’ (Soederberg, 2014, p. 220). The changes in the 1970s under the administration of Escheverria, who in part responded to the Tlateloclo massacre [in which the previous administration, of which Escheverria was part, ordered the military to open fire on student protestors in a public plaza in 1968) and the leftist social mobilization, unrest and urban guerrillas from the previous decade, sought to bring the economy under control of the government “and renew the social pact by showing a firm commitment to social justice and social development” (Chen, 2018, p. 71).

Warnings in the late 1990s suggested, if left unaddressed, by 2000, 40 million Mexicans would live in informal housing (Siembieda & Loacute, 1997). The community land tenure system that endured since the 1917 Constitution, the ejido, was seen as limiting urban expansion with its prohibition on selling land. Legislation in 1992 opened this land to the market. However, despite land reforms, the economic crisis of the 1990s meant that ‘commercial banks withdrew from the mortgage market’ (López-Silva, 2011, p. 21).

President Vicente Fox’s administration (2000-2006) introduced a new federal housing policy

23 According to Roberts (1973): “Mexico’s rate of population growth, 3.1% a year, is among the highest in the world. The growth rate is due almost entirely to natural increase, as immigration is negligible.

The reported death rate decreased from 24 per 1000 in 1940 to about 12 per 1000 in 1960. During the same time period the reported birth rate changed very little, actually averaging about 45 per 1000. … Infant mortality has also declined dramatically, from 135 per 1000 live births reported in the period of 1930-19034 to 69 per 1000 live birth reported in the period 1960-1964.

redesigning the nation’s housing institution, Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) as the government backer of construction and finance (López-Silva, 2011, p. 18), ‘increasing its lending to lower-income Mexicans’ (Soederberg, 2014, p. 230). Fox directed INFONAVIT ‘to ramp up its mortgage lending dramatically’

(Marosi, 2017), providing a ‘resolution between the high cost of housing supply, on the one hand, and the limited purchasing capacity of the near majority of the population, on the other’ (Soederberg, 2014, p. 219).

In the reforms that the Fox administration (2000-2012) laid out years ago, it was clear that the focus was for INFONAVIT to be part and pillar of the economic growth paradigm in Mexico. In his statement to INFONAVIT, celebrating 30 years of existence, he stated that the changes to the program were essential for reforming the public sector and creating the structural changes that would

allow the country to achieve higher growth and development rates (Fox, 2002).

INFONAVIT collects 5% of wages from all workers in the formal sector, and with this fund, subsidizes the unregulated construction of housing for these same workers. This pooled money completely removes the risk for developers and financial institutions, thus freed to build for a guaranteed market. From 2000 until 2012, one sixth of the total population, relocated into variations of these homes (Marosi, 2017).²⁴

Optimizing three variables, 1) the number of units they could build on each site, 2) the price of the land, and 3) the bureaucratic ease of the approval process (Libertun de Duren, 2018, p.

416), developers continually pushed further and further from city centers, ‘exacerbating social segregation by displacing the poor to ever more peripheral locations’ (Janoschka & Arreortua 2017: 44). The average distance from housing developments to city centers now exceeds 40km (Lopez-Silva et al., 2011).

Furthermore, while the results were quantitatively impressive, ‘the qualitative side of the story shows troublesome issues’ (López-Silva et al., 2011, p. 4). By 2008, almost 500,000 loans a year were issued for developments featuring 30m2 ‘mini-casas,’ soon to be

Image 19: Average distance in Mexico between new housing developments and city centers. Source: López-Silva et al., 2011.

24 While more than 1 million one-bedroom units were built, ‘hundreds of thousands of people have walked away from their homes, allowing squatters and gangs to take over many neighborhoods.

Marosi (2017)’ In 2019, news reports suggested 650,000 houses were abandoned, with only 27%

located in livable neighborhoods (Xantomila, 2019).

a new symbol of poverty (Marosi, 2017). Instead of addressing the needs of low-income residents, ‘this growth has been one way of channeling excess capital into global financial markets’ (Valenzuela, 2017, p. 38). In their search for profits, developers found flood plains, industrially polluted lands, and geographically isolated areas as providing their ideal location for large-scale developments. As Marosi (2017) reports, after visiting 50 of these housing developments throughout the country, dire living conditions are the norm. Common to all of the developments: poor and unfinished construction, sinking streets, electricity outages, and widespread water issues including burst pipes, sewage in the streets, and a lack of tap water (Marosi, 2017).

“The program has devolved into a slow-motion social and financial catastrophe, inflicting hardships and hazards on millions in troubled developments across the country. … [The] factory workers, small business-owners, retirees and civil servants who bought the homes got stuck with complex loans featuring mortgage payments that rose even as neighborhoods deteriorated into slums.”

Examining similar financial inclusion discourses in Spain Palomera (2015) argues that,

‘home ownership appeared as a way of tying the better off-fractions of the working class to the dominant social order: giving them a stake in society while maintaining the property and class privileges of the powerful.’ Furthermore, beyond the Foucauldian argument of population control, the extension of debt to lower income Mexicans and the state subsidization of the risk to both developers and financial institutions is a clear example of the continued financialization of social reproduction that has been widely recognized as a dominant feature of 21st Century capitalism (Sassen, 2014; Soederberg 2014). ‘Securitization involves the relocation of a building, good, or debt, into a financial circuit where it becomes mobile and can be bought and sold over and over in markets near and far. … Once an input is securitized, financial engineering can keep on building long chains of increasingly speculative instruments that all rest on the alleged stability of that first step’ (Sassen, 2014, p. 118). These families and the payment deducted directly from workers’ checks are ‘serving as an investment instrument in the secondary finance system,’ where the material asset of their home is not the real value but the ability to leverage the aggregated 30-year sub-prime loans, guaranteed by the state (Valenzuela, 2017). By 2010, Mexico’s mortgage securitization market was the largest such market in Latin America, its bulk composed of government managed and guaranteed mortgages (Soederberg, 2014, p. 217). The shift to the market was complete: the government as an instrument of finance-capital, minimizes risks for investors without offering even basic protections for the citizens/consumers.

Mexico’s housing policies and reforms were undertaken in the name of helping the poor. The federal housing agency, Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT), was founded in 1972, at a time when ‘no large scale-housing developers existed in the country’ (Lopez-Silva et al., 2011, p. 17). INFONAVIT, was charged with calculating need, buying land, obtaining local authorizations, setting standards, contracting and supervising the construction and issuing mortgages to workers. The fund was supposed to be self-financing, creating a rolling credit source, which would be initially funded

through a 5% across the board payroll tax on all workers in the formal sector. The continual contributions from workers, thus equivalent to 5% of the nation’s payroll brought about developments but low repayment rates jeopardized the fund’s future. Chen (2018, p. 78) reports that between 1975 and 1986, INFONAVIT only recovered 12% of its investment;

and between 1987 and 1991, 15%, implying “a subsidy of around 85%.” The program was an initial success as a model of state led response, providing for the “needs of rapidly swelling urban populations, which contributed to social unrest during the late 1960s,” (Reyes Ruiz del Cueto, 2018, p. 13). In the program’s first years, from 1972 to 1976, more social housing units were built “than the government had generated in the previous forty years” (Reyes Ruiz del Cueto, 2018, p. 17). But when the oil shock and financial crisis began in the 1980s, the program stalled. GDP fell, wages fell, inflation soared and the government’s cash flow froze (Chen, 2018, p. 76). “One of the conditions for Latin American countries to compete for international financial assistance and capital was to loosen the reigns of centralized state power and control,” writes Reyes Ruiz del Cueto (2018, p. 18). Yet local governments were unable to attract the finance and guarantee the conditions necessary to attract the large-scale housing projects necessary to meet the nation’s increasing demand. A second issue was the critique from market proponents of the perceived corruption that was implied by organized labor’s role in deciding who qualified and where residents were located. Thus, certain workers and families were located in the best housing, closest to their workplace, while others were not. Reforms that were pushed through in the 1990s sought to fix this. “In 1990s INFONAVIT began its transformation into a fiscally autonomous mortgage agency”

(Reyes Ruiz del Cueto, 2018, p. 73). Despite the return of the economic crisis in the 1990s the institute doubled the number of annual mortgages that it issued.

Chen (2018) attributes the return of economic stability and low inflation at the end of the 1990s, along with constitutional and institutional reforms, for creating the right conditions for the housing boom that would being in the 2000s. “Since the late 1990s the role of the public sector in housing policy has changed from that of leading housing construction and improvement, to that of fomenting the participation of the private sector in housing development,” writes Chen (2018, p. 86). “Mexico’s housing policy since the mid-20th century underwent a paradigmatic transformation, from one characterized by political corporatism and State leadership, to one centering on facilitating the participation of private capital” (Chen, 2018, p. 99). INFONAVIT changed from being slow and possibly corrupt, but building high quality structures from the 1970s and 1980s to a role of facilitator and regulator in the 1990s, to the role of completely deregulated financial institute in the 2000s (Interview, González Rosado, 17 July 2018) “One of the conditions to enter NAFTA was the expansion of construction lending,” (Reyes Ruiz del Cueto, 1998, p. 2). Because of the low repayment rate of Mexican borrowers, “in 2000, INFONAVIT was completely broke, financially devastated” (Interview, González Rosades 2018. INFONAVIT, 2018). According to Chen, new rules that allowed for foreclosure, repossession and the renegotiation of non-performing loans, resulted in significantly better loan performing rates in the early 2000s (Chen, 2018, p. 89). According to Reyes Ruiz del Cueto (2018, p. 113) Chen (2018), Janoschka and Arreortua (2017) all following and building on Soederberg (2014), these new rules employing state power in guaranteeing the repayment of these loans quickly created the biggest mortgage securitization market in Latin America.

“The housing real estate market based on this model had a spectacular boom between 2000 and 2008, largely because of the increase in the number of credits granted by INFONAVIT and, in smaller measure, by private banks and limited purpose financial companies, with mortgage-backed financial instruments reaching US$6 billion in 2006 and thus becoming the largest market of this type in Latin America,” (Valenzuela Aguilera, 2016, p. 46).

It is important to keep sight on the physical reality under-gridding these markets. Massive housing developments far from city services would create social chaos, and on a grand scale. In the 2000s, 200,000 loans per year were being issued, and this number would grow continuously peaking at 600,000 per year in 2008 (Chen, 2018). The six biggest housing developers were each building about 50,000 units per year at the peak in 2007-8 (Reyes Ruiz del Cueto, 2018, p. 6). The extent of the construction is quite unimaginable as housing developments of 5,000, 10,000 or even 20,000 units are common.

In 2005, President Fox inaugurated one of the nation’s biggest developments (at the time) close to the study region – as one of the great works of his administration. The works spanned through the southwest of Guadalajara into previously small-town farmland that had existed as small villages since the early 16th Century, complete with pyramids from pre-colonial powers. The construction which included 36,722 houses along with the accompanying 90,000 residents, radically altered the landscape in a permanent way (Avila, 2019). Far from the city centers these new developments lacked all of the amenities of civilization, including security, health care, schools, recreation and in many cases, water services. The exposé undertaken by Marosi (2017) regarding a single home builder who defrauded investors revealed that water issues were the most common concerns in these new housing developments, almost as an endemic feature of this model of social housing.

The restructuring of the constitutional right to housing, as a right to market access, with the state acting only acting as the administrator of the financing led to the simultaneous creation of enormous wealth (on behalf of the constructor) and low quality, high risk housing conditions. Libertun de Duren documents (2018) how average distances to the city center has grown to 40 kilometers, specifically bringing people further and further from the services needed by low income household. She describes a market failure in the fact that it was the developer, not the consumer/citizen who gets to decide where to locate their housing. “Because programs leave location decisions to private developers, those decisions respond to developers’ business needs as benefited households are a captive market”

(2018, p. 416). She explains (and this research has confirmed with multiple sources) that in Mexico “developers are responsible for funding and building the extension of basic services (water, sewage and electricity) to their developments” and that once the “works are completed municipal authorities are responsible for their operation.” This shifty nexus of responsibility has created a discretion that developers have exploited by cutting (thus shifting) costs on the necessary infrastructure and leaving the already overwhelmed local authorities to clean up the mess. In many cases constructors have left local municipalities with insurmountable problems, bringing large poor populations to Reyes Ruiz del Cueto explains that by making the government the ultimate provider for services ultimately means

the government is subsidizing this model of housing provision. “Contrary to the rhetoric of autonomous market-led efficiency, the Mexican government has played a key role in mitigating risks for the construction and financial sectors – and not households.” (Reyes Ruiz del Cueto, 2018, p. v).

The market didn’t work for several reasons – the guaranteed financing from the government, as well as a weak regulatory regime and even weaker legal judicial system, took all of the risks off of the developers. They simply had to get people to come and sign the papers. In many cases the homeowners have claimed that they were tricked into signing the paperwork, that the company made promises it did not keep and worse (del Castillo, 2018). In many cases it was only after the families moved into these homes that they realized that they were living near an environmental risk zone. Throughout the region where we conducted fieldwork for this study I have also conducted fieldwork from 2007-2012 in urban environments and housing developments similar to these in municipalities surrounding Guadalajara. I helped organize public participation sessions (focus groups) where local residents spoke out about the problems in their communities. The contamination of the tap water and the risks from the untreated sewage water were top concerns everywhere.

An investigation into one of the nation’s biggest developers, HOMEX, which built more than 50,000 homes per year at the peak, producing hundreds of thousands of homes throughout, reported: “At HOMEX developments across Mexico, defects revealed themselves with the first rain or turn of a faucet. Water systems failed. Pumps malfunctioned. Sewage treatment plants broke down. Poorly graded streets washed away.” (MAROSI. 2017).

Living conditions became difficult quick, and despite having finally achieved the dream of owning their own home, many of these new buyers abandoned their homes. Chen in his

Living conditions became difficult quick, and despite having finally achieved the dream of owning their own home, many of these new buyers abandoned their homes. Chen in his