Housing has always been a staple of the economy, an important driver of the economic infrastructure and a key indicator of health and welfare in communities. Although the US has seen a drastic slump in housing over the past few years, housing in other nations of the world – particularly heavily populated regions – has strengthened and become an important economic and social stimulant. In the past year the housing slump, in new builds and resales, was both a cause and effect of the credit crisis in the US market; and there was a spillover effect of the US’s economic challenges to other nations of the world. But despite this, housing has thrived as a means of rejuvenation and societal growth.
Take Mexico, for example, where President Felipe Calderon has pledged to improve housing conditions in the country and help unlock a pent up demand for quality, affordable housing. This, of course, has been crucial to society and an important part of our success at Homex. Working in a public/private partnership environment, Mexican homebuilders have been encouraged, with the government’s mortgage market support, to continue building much needed homes despite the economic slowdown. In fact, the industry can’t meet the demand because there aren’t enough builders capitalised well enough to invest in this growth opportunity.
For many people, homeownership is a means of improving health, education and socio-economic status. In places like Mexico, overcrowding has been a serious concern, with multiple generations living under one roof. It is a fact, for example, that infants living in overcrowded conditions are four times more likely to get sick or die during childhood than those living in single family dwellings. Yet there are many families who still live in substandard conditions, in some cases without access to electricity or water.
There are also strong economic arguments for a well-supported housing industry, as on average, homeowners are ten times wealthier than non-homeowners. At the same time, the industry also assists with job creation, as every home that is built in Mexico creates approximately four jobs. This provides for immeasurable benefits to the greater economy.
It is no surprise that this year the economy has presented a challenge for Mexican homebuilders. Cash flow and mortgage financing constraints have negatively impacted middle income and high-income housing starts. At the same time, smaller, less well-capitalised builders are facing an increasingly constrictive capital market. Consumer confidence has dropped as a result of unemployment, which in Mexico had hit a 14-year high in September of 6.28 percent. All of these factors have hurt homebuilders as a whole.
But, in the affordable entry-level sector, demand still far outpaces supply, and with the help of well financed and dedicated mortgage finance entities and government subsidised mortgage programmes, a large number of eligible subscribers, many of them first time homeowners, have been able to obtain mortgages and purchase homes, and they are lining up to do so.
Under President Felipe Calderon’s administration, the government has pledged to make six million mortgages available over his six-year presidential term. This has been an important step for Mexico, where an estimated 21 million additional houses are needed to meet the demand over the next 25 years, which translates to approximately 633,000 homes, recognising an existing shortage of 2.3 million new homes, according to the Mexican Housing Commission (CONAVI).
Mexico’s two dedicated mortgage finance entities, INFONAVIT and FOVISSSTE, facilitate mortgage access for many first-time buyers. In 2009 alone, INFONAVIT planned to offer 450,000 mortgages, while FOVISSTE (a programme for Federal employees) targeted 100,000 throughout the year. The commitment from these agencies has been important as many commercial banks and sofoles (non-bank financial institutions supervised by the National Banking and Securities Commission) were restricted by the softer economy. Most of these mortgages are in the affordable entry-level segment, which provides an opportunity for well-capitalised homebuilders, such as Homex.
A recent USD 50m investment in aluminum mold construction technology has served Homex in cutting costs and speeding up time-to-completion in its projects. Aluminum molds have never been applied to detached homes in Mexico, until now.
In Brazil, where Homex recently invested in its first entry-level housing project beyond Mexico, the government has launched its one million homes Federal Housing Subsidy Program, designed to provide one million mortgages to eligible families. The country also provides financing through Caixa Economica Federal, the federally controlled savings bank, reaffirming the Brazilian government’s strong support for the housing industry. Demand for this programme is high and Homex has sold more than 65 percent of its 700 units in less than six months.
Social responsibility
Besides providing financial support, the Mexican government recognises a variety of sustainable, environmental and socially friendly attributes under its Integrated Sustainable Urban Developments (DUIS) initiative. This encourages builders to improve the quality of life for Mexican families as part of the urban planning process. Under the initiative, parks, community centres, orderly trash management, environmental care programmes and urban design are addressed, while providing efficiently for commercial space and transportation.
To leverage the DUIS initiative, Homex has embarked on several education and health programmes, including vaccinations and even organised sports in its communities. Integral to each neighbourhood, homebuilders have a unique opportunity to address the need for societal growth through better education and enhanced social services. A commitment to social initiatives is an important responsibility that provides for the greater good, not only for the community but also for the entire country.
Common areas such as sports fields and playgrounds help to provide a better sense of community for residents. This neighbourhood infrastructure encourages community interaction and increases the residents’ commitment to the area. In some communities, Homex has organised competitive sports programs, such as soccer tournaments, and at the end of 2008 there were 124 soccer teams competing enthusiastically throughout the country.
Programming needs to focus on both children and adults within developments. As an example, youth education programmes in the region are a joint venture between Homex and the Altius Foundation in Mexico, while other programmes focus on adults who wish to advance their education. Homex has successfully worked with the National Institute for Adult Education (INEGI) to launch schools within its communities, teaching basic literacy as well as elementary, middle and high school curricula. Thousands of individuals are currently benefiting from this program throughout Homex developments.
Furthermore, community centres are shared areas where neighbours can attend high school classes, improve computer literacy and take online training for a number of different jobs. The availability of internet access and other multimedia resources encourages sharing and education among community members.
Undoubtedly, housing is an individual and societal need. And for the less fortunate and populous developing countries of the world, the housing industry needs the support and cooperation of a public/private partnership to succeed. Success in homebuilding doesn’t just come from superior production and technological advancements; it also includes a sense of community that focuses on larger socioeconomic needs creating communities that enhance the basic needs and welfare of society.
Gerardo de Nicolás is CEO of Homex
