Paavo Monkkonen

The Housing Transition in Mexico: Expanding Access to Housing Finance

Dramatic reform of the housing finance system is transforming the way housing is produced and acquired in Mexican cities. More housing is now built on speculation by private companies and purchased with mortgages than through the incremental building process that traditionally housed most of the country. A majority of housing finance, however, is provided through government provident funds and, as such, only available to individuals with a formal, salaried job. This article describes the housing transition and assesses the impact of restrictions in the finance system on housing outcomes using logistic regression and nonparametric matching procedures. Regional development impacts are also explored in the context of national goals.

Land Use Regulations, Compliance and Land Markets in Argentina

Empirical evidence on the impact of stringent land use regulations on the price of land and housing in urban areas is growing, yet most research has been carried out in countries where ordinances are enforced. If enforcement is lax, the ultimate impact of strict rules on land and housing prices is unclear. Lower levels of compliance with rules can result in negative externalities and thereby exert downward pressure on the price of formal land. This paper presents an empirical analysis of the relationship between land use regulations, compliance and land prices in the three major metropolitan areas of Argentina, the country with the most stringent land use and urban development regulations in Latin America, using an original dataset gathered from parcel- and municipal-level surveys. Results show that municipalities with higher levels of regulation have lower rates of compliance with property laws, and lots selling legally in these municipalities have lower land prices.

The Demand for Land Regularisation: Theory and Evidence from Tijuana, Mexico

International organisations increasingly encourage land regularisation programmes as a component of urban policy in developing countries, yet research on the mechanisms of these programmes is limited. This paper examines the land regularisation system in Tijuana, Mexico, which has had limited success after several decades of operation. A theoretical model of the demand for land regularisation in urban areas is developed based on models of demand for registration of agricultural land. A unique combination of census and administrative data on informally developed neighbourhoods in Tijuana is used to test the model empirically. Results are mostly consistent with theory. One of the central predictions, however—that more valuable land will have a higher rate of regularisation—is rejected. When considered alongside the incentives to regularise land, this result suggests that the land regularisation system is not well structured to encourage land market efficiency or the upgrading of low-income neighbourhoods.

Housing deficits as a frame for housing policy: demographic change, economic crisis and household formation in Indonesia

The idea of housing deficit is a common, seemingly objective frame for housing policies that promote increased supply. This paper critically examines the concept through a case study of Indonesia, where different sources report a deficit of between 3 and 14 million dwelling units estimated without a transparent methodology. The wide range of estimates demonstrates the multiple interpretations of the terms meaning. In the paper, changes in household formation trends in urban Indonesia from 1990 to 2007 are used to estimate a quantitative housing deficit. I find the decreasing rate of household formation that is being interpreted as a housing deficit. However, this interpretation is complicated by the countrys demographic transition and the high urbanization rate. Further, the abrupt change in household formation occurred around the year 2000, suggesting that the economic and political upheavals following the Asian financial crisis played an important role. Comparison of household formation rates across socioeconomic groups and urban areas shows housing markets also matter, illustrating the complexity of the issue.

Are civil-law notaries rent-seeking monopolists or essential market intermediaries? Endogenous development of a property rights institution in Mexico

As the fourth contribution in the ‘Land’ section, this paper forms a research ‘diptych’ with the next paper by Levy. Whereas she focuses on the notarial institution in mid-nineteenth century Mexico, this contribution examines it in a contemporary context. The notary is one of the chief components of property rights protection in civil-law systems, performing various public functions such as writing deeds for real estate property. Yet notaries are considered an ‘inefficient’ institution by many, due to the perception of rent-seeking behavior enabled by their near-monopoly over validating property rights claims. This study examines notaries in Mexico to unpack the apparent contradiction in the role of notaries in economic development. I use a combination of interviews with notaries and clients, and data on notarial practice and bureaucratic outcomes across the country, to examine notaries’ social function. The theoretical lens of endogenous development and institutional functionalism reveals an alternate explanation for their seemingly high-cost services, as well as their role in economic development. Mexican notaries have a dual social function: public representative and private service provider. They perform diverse and essential activities, which in other countries are performed by multiple actors such as real estate agents, escrow offices and title insurance companies. Thus, what is perceived as inefficiency by some can be interpreted as an efficient response to the context in which they operate, and their semi-privatized nature can overcome problems found in other bureaucratic arrangements.

The value of property management services: an experiment

Purpose – Assessing the value of property management services is challenging because of collinearity between property quality and the quality of property management companies. In order to overcome this challenge and isolate the impact of property management services, the purpose of this paper is to use an experimental approach inspired by work in labor economics (Bertrand and Mullainathan, 2004) to measure the value of property management services for residential properties in Hong Kong. Design/methodology/approach – The authors surveyed over 150 experts in the real estate industry and asked them to estimate the value of five hypothetical properties. In each survey, the authors randomly assign different property management companies, which we have ranked by levels of quality, to the properties. In this way the authors were able to test whether property management services significantly impact property prices and whether this impact varies across types of residential buildings. Findings – Results show that...

The Role of Housing Finance in Mexico's Vacancy Crisis

In the wake of the housing market crash in the United States in the late 2000s, images of abandoned homes on the urban periphery of American cities dominated international media coverage. This narrative of peri-urban over-extension was used by media documenting the housing crisis in Mexico, despite the profound differences in context, namely the role of the government in housing finance. This paper disentangles the issue of Mexican housing vacancy from surface similarities with the US through an examination of vacancy rates within cities in Mexico, and tests of four hypotheses about their determinants using data from the 2010 Census of Population and Housing. Results confirm that violence related to the drug war, international migration, and housing finance are associated with vacancy. However, more housing finance is strongly related to higher vacancy in the central city but not in the urban periphery. In spite of the existence of vacancy in newly built houses, the expansion of credit for new housing in Mexico has been most significant for the role it has played in hollowing out the central city. The paper concludes with a review of policies to address the vacancy crisis in Mexico and a framework of best practices.

La segregación residencial en el México urbano: niveles y patrones

Changing patterns of urban development in Latin America have drawn increasing attention to residential segregation, yet there are no systematic quantitative analyses in the literature. Using data from the Mexican census of 2000, this paper measures spatial patterns and levels of segregation by ethnicity and socioeconomic status in over one hundred cities. Findings confirm that many recognized patterns hold across a wide variety of cities. Low-income and informally employed households tend to live in peripheral areas of the city, while high-income households are more centrally concentrated. High-income areas are denser and more socioeconomically diverse. Further, the paper shows that there is a statistically significant relationship between segregation by income and city size; larger cities are more segregated. Similarly, regional differences in patterns of segregation are also statistically significant and large, demonstrating the importance of both historical periods of urbanization and levels of regional economic development.

Do we need innovation in housing policy? Mass production, community-based upgrading, and the politics of urban land in the Global South

The papers in this Special Issue demonstrate three persistent, global challenges to urban housing policy: that it is difficult to mass produce housing well; that community-based upgrading programmes often fail to benefit the worst off; and that ultimately, housing policy is a political problem that often fails to consider the diversity of populations at the expense of the least powerful. Importantly, some of the papers problematise what many consider the two most successful areas of housing policy in these regions: the community-based land sharing programmes for redevelopment in south-east Asia and the finance-driven social housing programmes in Latin America. The collection of scholarship, which spans cases in nine countries and touches on mass housing production programmes, incremental development processes, community-based urban upgrading, the legal structure of condominiums, and land-sharing policies, also highlights challenges to policy learning across contexts. In addition to synthesising the major research findings in the component articles in pairs, this editorial introduction reframes the idea of innovation in housing policy and argues that scholars should expand the topics and focus of housing policy research.

Economic segregation in transition China: evidence from the 20 largest cities

ABSTRACT Economic segregation in urban areas is important to scholars and policymakers because it is thought to exacerbate inequality in social outcomes such as education, social capital formation, and employment. A growing body of comparative work examines factors associated with higher levels of urban segregation within different countries. Increasingly, this work examines differences between levels of segregation across the income distribution rather than just one measure of segregation per city. China has high levels of income inequality and has undergone a dynamic process of urbanization in recent decades as it transitions from a centrally planned system to one in which markets allocate goods. Using census data from the 20 largest cities in China, we measure the level of economic segregation and examine its determinants. Chinese cities are highly segregated. Segregation levels tend to be higher in larger and richer cities and more pronounced among renters. There is a stronger link between segregation based on housing type and expenditure than between migrant status and expenditures, which leads us to speculate that the pace, timing, and scale of housing development are the dominant drivers of economic segregation.