Claudia Campero Arena

Claudia Campero-Arena
26 April, 2004


The present paper is concerned with understanding how irregular settlement upgrading can help to increase the supply of rental housing for low income groups specifically in Mexico City. This could be achieved when owners in self-help neighbourhoods decide to build new rooms for rent. The discussion will also address how policies might be structured to generate this impact. While it is essentially concerned with Mexico City, many of the principles hold true for other Latin American cities.

One of the most challenging problems developing countries encounter is the issue of housing. Answers have varied and so has their relative success. One of the reasons for some of the fiascos has been failing to recognise that there is no single answer. In other words, housing is a complex problem concerning not only houses but services, infrastructure, health, economic activities and the consequential spatial, social, economic, cultural and political dimensions that affect and are affected by it. Not surprisingly many consider housing policies to be at the heart of poverty reduction (Fiori et al, 2001b). Yet governments commonly put their housing resources and effort (which are normally from the start insufficient) to a housing policy at the time – for instance either building complete houses and subsidising their price or offering upgrading – disregarding any other strategy. But different people have different housing needs. This paper aims to emphasise on the importance of having rental accommodation alternatives in the city.

The dominant tenure in Mexico City has shifted significantly. Although its inhabitants used to be mainly tenants, homeownership in Mexico City has increased steadily during the last 50 years. Clearly governmental policies favouring home ownership have had a key role in this shift. Notwithstanding the present dominance of homeownership, the number of non-owner households has increased in absolute terms. Gilbert (2001) mentions two very different estimates of this increase. The first (Gilbert, 2001:30) calculates nearly one million tenants by 1990. This would mean the amount of tenants almost doubled from 1950 to 1990. The second estimate (2001: 59) is of 4 million. The difference might be due to the inclusion of all non-owners (including shares or rent-free occupiers) in the second estimate.

It is clear that not everybody can afford or wants homeownership. Indeed people young people may wish to rent first and latter in their lives, with a more stable lifestyle may search ownership. In many cases, families cannot afford to own the kind of home they would like, for instance, a serviced and well located house, and consequently prefer to rent (Gilbert and Valey, 1991). Most home owners were once renters. Furthermore renting is essential for the newly arrived and those only staying in the city temporarily. All this makes it clear that a considerable supply for rental housing – particularly low cost because of the dominance of low income population – is needed in Mexico City.

Nevertheless the Mexican government policies have normally favoured ownership. Regarding renting there have been sporadic and unsuccessful policies promoting it to some degree. Yet investors are not interested in being landlords. This is particularly because they consider other sectors more profitable. Adding to this fact, regulations favour tenants over landlords making it unattractive to invest in rental housing (the history of rent controls is an example).

What are the reasons for the government to favour ownership over renting? Gilbert and Valey (1991, 2001) identify two broad reasons: (1) the Mexican government does not want to repeat its short experience as providers of social housing for rent. It does not want to deal with maintenance and collecting rents. (2) Rent is perceived as unsatisfactory for a series of imprecise assumptions. Firstly, rent is considered to be an insecure form of tenure. Yet there is evidence that ‘many Mexican families seem to achieve this goal [security of tenure] perfectly satisfactorily through renting’ (Gilbert, 2001:30). Surveys show that a majority of families renting in some settlements have stayed there for more than 10 years. Secondly, there is a widespread belief that tenant-landlord relationships are very conflictive. Yet high degrees of conflict are only common when landlords either wish to evict tenants – which is not unseen but not that frequent – or completely disregard maintenance – common when they do not live in the premises. Thirdly, rents are thought to be unfairly high. This of course varies considerably with space and time. Gilbert claims that rental accommodation in Mexico City can be as low as to represent less than 10 per cent of the average household income (2001). Fourthly, many politicians think that poor people rent whereas the rich are owners. This argument may go further to belief the poor need to own to overcome their poverty. In reality, those families that decide to invade land or buy a plot irregularly might do so because they cannot afford to rent (Gilbert and Valey, 1991). Renting accommodation is more common in consolidated and nearer to the centre settlements which means better services. Living on unserviced land can be a very tough experience and families that can afford renting might decide it is a better choice even if ultimately their aim is to be owners. Fifthly, for this reason, another common assumption proves to be untrue: the consideration that homeowners living conditions are better than tenants.

Finally, renting is thought of as an inequitable tenure. This might come as a surprise, yet research has shown landlords in self-help housing normally come from the same social class that the tenants and have a similar or even lower per capita income (Gilbert and Valey, 1991; UN Habitat, 2003a). This is because landlords are simply older than the tenants and are frequently retired. In addition, UN Habitat (2003a) makes the point that providing rental accommodation may be a major livelihood source for woman who are generally more vulnerable and in greater need. In this sense the doubt of whether renting is desirable in equity terms looses its pertinence.

Recent research has shown that landowners in consolidated self-help settlements do not have a ‘good business sense and that most would probably have made much more money had they invested in stocks and shares, indulged in dollar speculation or simply put their money in the bank’ (Gilbert, 1998:95). Yet given the instability of Mexico regarding finance and the lack of high education, the landlords have decided to make a save investment – in fact, some have not even constructed new rooms but are actually renting vacant rooms of children that grew up and left –in something that might give them a stable income in times of crisis.

Something to take into account is that when talking about low income people we are certainly encompassing in a single category a group of people that is very diverse. We are not only talking about differences of income within the low income group – from the extremely poor to the poor that can afford somehow to satisfy their basic needs – but there is also differences in age, gender, ability, ethnicity that can influence their vulnerability and change their needs. In this sense promoting rental housing in consolidated self-help neighbourhoods bring twofold benefits. On the one hand, it can aid retired homeowners that may become landlords to complement their income. On the other hand, it can aid a young couple to find cheap accommodation to save money for the future.

In evaluating the role of self-help landowners, the UN Habitat goes as far as stating:

‘Such landlords perform a valuable service to the community and the labour market, giving slum dwellers a mobile base form which they can access fluid employment opportunities easily and cheaply, and providing affordable backup housing when formal or squatter building opportunities prove inadequate for urban growth. The supply of cheap rental housing is an essential component of the continued existence of a cheap urban labour force’ (2003a:110).

Indeed in order for low wages to be sustainable low living costs are essential. This fact makes the promotion of this kind of rental housing attractive for governments which wish to attract investment by maintaining the cost of labour low. In this sense it could be argued that promoting rental accommodation through slum upgrading is a way of maintaining the status quo for the reproduction of capital accumulation. Yet improving the housing conditions is certainly an important step to improving peoples life, which is ultimately what development policies are about.

Concerning the issue of slum upgrading, it is now widely accepted that in situ upgrading is a much more desirable, efficient and effective policy than those of the past (Cities Alliance, 2003). Governmental social housing construction and site and services schemes have frequently benefited the middle class instead of the lower income population they intended to. In contrast, irregular settlement upgrading does benefit the targeted population. Indeed risks of upgrading bringing displacement have proved to be largely exaggerated (Gilbert, 2001). Nevertheless a flaw identified in upgrading programmes is that they rarely recover the costs. This makes them difficult to replicate or achieve a city scale. One noticeable exception that did achieve city scale was Favela Bairro. This programme was also successful because it had a multidimensional approach aiming at alleviating poverty and social exclusion through integrating the upgraded settlement to the rest of the city (Fiori et al, 2001).

However, the idea of upgrading settlements is not always seen as positive for the renters. They may want to enjoy better services, but may fear land regularisation and service introduction might raise rents (Ward, 1986: 134). Although tenants in less consolidated self-help settlements might be poorer than those in more consolidated areas, renters, as discussed above, are not normally the poorest within the urban poor. While the UN Habitat (2003b) is critical to upgrading programmes that fail to recognise the presence of tenants in irregular settlements and involve them in the programmes, it nevertheless considers there is not enough evidence of tenants being displaced because of improved settlements. If the tenants have enough income to pay the improved accommodation, both, landlords and tenants, benefit of such programmes. Thus the importance of considering and involving tenants in upgrading programmes form the start in order to find solutions to their specific needs.

This brings us back to the importance of understanding the complexity of the housing problem. Policy implications need to address multidimensionality of housing in the economic sector as well as in the social sector. Moreover they need to contextualise the needs of different groups. Indeed, the failure to address the housing shortages for the middle class as well as the poor has been an important factor in housing projects failing to reach its targeted population. As an NGO expresses it: ‘One needs to remember that the problem of housing, at least as far as Mexico is concerned, involves not only the poorest of the poor, but also nearly all sectors of the working class. And if one fails to seek a solution to the latter problem, it will be difficult to resolve the issue of the least well off’ (Turner, 1988).
Let us examine for a moment some of the housing programmes in Mexico. At the moment there are upgrading programmes instrumented by the federal as well as the local governments in Mexico City. At the federal level a Habitat Programme has very ambitious and perhaps too ample objectives. These include: equitable public investment in services and infrastructure, improve cities’ competitiveness and complementarity to increase private investment, this, in turn, is supposed to ‘reinforce social cohesion and wealth distribution’ (Sedesol, 2002: 59) and improve local government finance. Thus it appears to be a programme that aims at everything, which might ultimately obtain very partial achievements. In spite of the apparent all-encompassing nature of the programme, it does not mention financial or other kind of help for self-help owners to improve their housing specifically for rent.

At the local level, one of the mayor urban policy objectives of the current government in the Federal District is to densify the central boroughs of the city. It has to some extent promoted this by favouring densification in consolidated self-help settlements with a housing programme that won a national price in 2002. Through the programme families can gain access to finance for adding rooms or separate houses in existing plots to house married children (GDF, 2004).

Maybe this programme is a good sign that manifests an effort of the government to adapt solutions that have been applied by Mexicans for decades and support them through finance. Yet it is interesting that the programme is specifically targeted for families that are expanding. This same finance could be made available for constructing for rent. A programme to promote enlarging and improving the housing supply for rent would have two important benefits: it would give the possibility to the landlord to have a stable income, and it would increase the competition in the supply side benefiting the people aiming to rent (demand) who would have more choices.

The city plan of Mexico City for 2001 (SEDUVI, 2001) is also supposed to promote rental housing, yet the how are the specific programmes to fulfil this aim is unclear. Although a brief explanation of the programme addressed above was available on the Ministry of Urban Development and Housing webpage, no information about rental housing promotion programmes was found. This is an example of a common feature in policy formulation: the enunciation of aims yet the failure to articulate the specifics of how these will be attained.

In any case, it is likely that upgrading programmes in general and programmes providing finance for house extensions have the effect of creating new spaces that could be eventually rented even if the intention of the programme was not to do so. In this regard Skinner states:

‘Upgrading mechanisms ... have generally been found to contribute to improved quality and quantity of housing... improvements consisted to a large extent of adding rooms or otherwise increasing the amount of sheltered space at the disposal of the households, thus contributing significantly to the expansion of the housing stock’ (Skinner et al in Gilbert, 2001:43)

The neglect of programmes addressing rental accommodation can also be explained because of the lack of interest of the international agencies that normally dictate mainstream development policy strategies. As the UN Habitat states ‘aid programmes for rental tenure remain a neglected element of international assistance, and knowledge about informal landlords and tenants and the kinds of programmes that might benefit them are rare’ (2003a:109). Indeed there is a very small amount of academic work on rental accommodation in developing countries in consolidating slums.

Furthermore the perception that state-funded programmes for self-help settlement improvements should only be targeted for low-income owner occupiers and not for landlords who intend to make a profit out of tenants is more accepted in general (UN Habitat, 2003a). This perception is most likely to be a result of the assumptions about renting accommodation Gilbert and Valey (1991) identified that were explained above. Yet many governments, and in particular the Mexican central government, are keen on giving finance to promote micro and small enterprises to improve the income of the population and promote economic activities while not considering ‘right’ to aid landlords. Thus it is contradictory that when it comes to housing policies to support landlords can be seen as inappropriate because they are getting a profit for providing a service to the tenant!

One of the issues raised by the Cities Alliance about slum upgrading is the need for the community to participate in the understanding that this includes decision-making roles. The reasons given of why this is important should be evident by now: ‘know their community and issues; have to live with the results; can, want, and have the right to participate; and can and will pay for affordable improvements of their choosing’ (2003: 21). Thus Mexico City’s government has to bear in mind the need for meaningful participation of those affected by the programmes to make them sustainable. As Fiori et al (2001) argue in the case of Favela Bairro programme ‘broader processes of democratisation… are essential not only to the implementation of successful projects but also, and above all to ensure the continuity of the policy and long-term sustainable and substantive poverty reduction’ (p. 59).

Conclusions

Concluding, the poorest in Mexico City invade or buy irregular plots. Thus slum upgrading directly benefits a very poor segment of the population. When upgrading also promotes income generating activities such as the construction of workshops and rooms for rent, the benefit the programme brings not only increases for the owners but to those potential renters that may have more and better choices for housing. Considering the housing shortage in Mexico City and that the unsatisfied demand includes a variety of incomes, slum upgrading that improves both the quality and the quantity of the housing stock seems a good policy practice. Nevertheless it is wise to keep in mind that different households have different housing needs and a combination of policies might be a more effective approach for governments than ‘putting all the eggs in one basket’.



References

Cities Alliance, 2003, ‘The challenge of scale- nationwide upgrading, 2003 Annual Report, Cities Alliance, Washington, DC.

Fiori et al, 2001a, ‘Physical Upgrading and Social Integration in Rio de Janeiro: the Case of Favela Bairro’, in DISP, No. 4, Zurich.

Fiori et al, 2001b, ‘Urban Poverty Alleviation through Environmental Upgrading in Rio de Janeiro: Favela-Bairro’, DPU/DFID, London.

GDF, 2004 http://www.prosoc.df.gob.mx/Fomento/launidad3/Reportaje3e.htm Accessed 1/03/04.

Gilbert, A. and A. Varley, 1991, Landlord and Tenant. Housing the Poor in Urban Mexico. Routledge, London.

Gilbert, A., 2001, ‘Housing in Latin America’, IDES.

Sedesol, 2002, Manual Ciudadano. Sedesol a los ojos de todos, Talleres Graficos de Mexico.

SEDUVI, 2001 Programa General de Desarrollo del Distrito Federal 2001. Gaceta Oficial, Mexico.

Turner, 1988, Building Community, Building Community Books, London.

UN Habitat, 2003a, The Challenge of Slums. Global Report on Human Settlements 2003. Earthscan Publications Ltd.

UN Habitat, 2003b, Rental Housing. An essential option for the urban poor in developing countries. UN Habitat, Nairobi.

Ward, P. 1986, Welfare Politics in Mexico. Papering over the cracks, The London Research Series in Geography 9, Allen & Unwin Ltd, London.