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In parallel to a sweeping structural reform agenda, Mexico announced in 2013 a new approach to housing and urban policy. Calling for a more explicit qualitative focus on housing and the urban environment, the policy shift is a welcome development. Mexico urbanised more rapidly than most OECD countries in the past half-century, in part as a result of the expansion of housing finance led by INFONAVIT and facilitated by policies aiming to expand access to formal housing. Yet the quantitative push for formal housing came with quantitative costs: inefficient development patterns resulting in a hollowing out of city centres and the third-highest rate of urban sprawl in the OECD; increasing motorisation rates; a significant share of vacant housing, with one-seventh of the housing stock uninhabited in 2010; housing developments with inadequate access to public transport and basic urban services; and social segregation. How can the Mexican authorities “get cities right” and develop more competitive, sustainable and inclusive cities? How can they improve the capacity of the relevant institutions and foster greater collaboration among them? How can INFONAVIT ensure that its lending activities generate more sustainable urban outcomes as it also fulfils its pension mandate and help Mexicans save more for retirement?

Mexico has undertaken ambitious housing and urban policy reforms in parallel to its adoption of a series of structural reforms emerging from the Pacto por Mexico. Responding to the country’s rapid urbanisation in the second half of the 20th century, previous housing policies were successful in reducing the country’s quantitative housing deficit and making home ownership increasingly accessible to all income levels. The rapid expansion of housing finance, led by INFONAVIT – the country’s largest provident housing fund – and facilitated by public policies aiming to expand access to housing, made formal housing a reality for an ever larger share of the population. By early 2013, INFONAVIT had assisted more than 7 million workers acquire decent housing, and today roughly one in four homes in Mexico is financed by INFONAVIT.

This chapter analyses the main trends and challenges for urban areas in Mexico, with particular emphasis on housing, and their implications on the country’s economic, social and environmental outcomes (e.g. urban sprawl, congestion and social segregation). Specifically, this chapter addresses: i) the diverse factors contributing to Mexico’s economic under-performance relative to other OECD countries; ii) the country’s rapid urbanisation rate, which has increased opportunities for city dwellers but meanwhile has not translated into expected productivity gains; and iii) the range of policy challenges facing cities.

This chapter examines Mexico’s urban policy within a broader context and makes recommendations for a range of actors – including the Ministry of Agrarian, Territorial and Urban Development (SEDATU), the Ministry of Finance and Public Credit (SHCP), the National Bank of Public Works and Services (BANOBRAS), as well as states and municipalities – to contribute to the development of more competitive, sustainable cities. The chapter discusses the country’s “accidental” urban policy of the past as a background for the new directions for urban development currently underway. Strategies for “getting Mexican cities right” – that is, developing a more strategic, integrated approach to urban development – are proposed, along with concrete tools to achieve better urban outcomes.

Urban issues have emerged as key features on national policy agendas. The importance of cities and their corresponding metropolitan areas to the national economy makes them critical players in the international marketplace. This in turn leads governments to renew their support to cities. At a time of increasing globalisation and international competition for investment, urban regions have become the focus of a wide range of public interventions. Throughout OECD member countries, these policies encompass plans to solve traditional urban problems – urban sprawl, abandoned districts and poverty – and newer issues such as competitiveness strategies, city marketing, environmental sustainability and innovation.

Since the signing of the “Pact for Mexico” (Pacto por México) in December 2012, Mexico has undertaken an ambitious, cross-cutting structural reform agenda – encompassing labour, fiscal, financial, energy, education and telecommunications reforms – that is aimed at boosting the country’s competitiveness and economic growth. Housing and urban policy is considered a priority within this reform agenda. The authorities seek to reduce the housing deficit that affects roughly 31% of Mexican households and to correct the inefficient development patterns of recent decades. This new approach to housing and urban policy differs from those of the recent past by shifting from quantitative objectives for housing to a more qualitative focus on housing and the urban environment. These objectives are made explicit in the National Housing Programme for 2014-18, which aims to: i) provide decent housing for Mexicans; ii) responsibly address the housing gap; iii) transition toward a smarter, more sustainable urban development model; and iv) improve inter-institutional co-ordination. The National Urban Development Programme (Programa Nacional de Desarrollo Urbano 2014-2018, PNDU), released in parallel, includes objectives to control urban sprawl, promote well-being and sustainable mobility, and avoid the development of irregular and informal settlements, among others.

This chapter explores housing policy, focusing on the role of INFONAVIT in the housing transition that has taken place in Mexico over the past four decades and the ways in which INFONAVIT can support the federal government’s objectives toward more sustainable housing and urban development. The chapter: i) examines the peculiarities of housing in Mexico from a comparative perspective; ii) discusses the costs and benefits of the past housing model; and iii) explores the country’s transition to a new housing model and the role for INFONAVIT in contributing to its realisation. While INFONAVIT cannot act in isolation in the pursuit of more sustainable housing and urban development, neither will it be possible to shift toward a more sustainable model without INFONAVIT.

This chapter focuses on the governance of housing and urban development. The chapter assesses the bottlenecks that currently impede better co-ordination among ministries and across levels of government and proposes strategies for enhancing co-operation and collaboration. It also addresses capacity gaps – fiscal, technical and human – at all levels of government for housing and urban policies, with a particular focus on strategies for strengthening some of the sector’s most important actors: INFONAVIT, SEDATU and municipalities. The chapter concludes with proposals to transition toward a more strategic framework for housing and planning.

This chapter discusses the ways in which INFONAVIT can help to resolve Mexico’s pension challenge, proposing strategies to strengthen the institute’s financial position and improve outcomes for affiliates in light of proposed reforms to the Social Security Law. The chapter: i) assesses the causes of inadequate retirement income in Mexico and proposes possible avenues for future reform; ii) reviews the financial history of INFONAVIT, focusing on the institute’s tendency to prioritise housing finance functions over pensions; and iii) examines the potential impacts of the pending changes to the Social Security Law, focusing on how INFONAVIT might position itself in a new landscape for housing finance, unemployment insurance and pensions income.