Mexican Government Announces Radical New Housing Plan To Add 1,000,000 Affordable Homes At Zero Percent Financing

Contrary to popular belief, the United States is not the only country suffering through a housing crisis. Mexico, America's neighbor to the south, also has housing affordability and availability issues. However, Mexico has just announced a plan to remedy its housing crisis with a program that will add 1,000,000 units and sell them to buyers with zero percent financing. Benzinga looks at the plan and whether it could work in America.

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No matter your country, housing availability and affordability go hand in hand. If there is a lack of housing stock, the prices for homes that hit the market will invariably spike. This creates an affordability crisis because, as home values rise, more people get priced out of the market until they give up.

The net effect is that demographic groups who could most benefit from homeownership are locked out of the process. In the long term, that hurts the economy, so Mexico's new president, Claudia Sheinbaum, has sprung into action. Adding 1,000,000 units to the country's housing stock is one thing, but offering zero percent financing is a powerful incentive for would-be buyers to enter or reenter the housing market.

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This plan, formally known as the Housing and Regularization Program, is part of a campaign promise by Sheinbaum to bring a more equitable brand of real estate development to Mexico. The country has seen an influx of foreign buyers with deep pockets gobbling up real estate. This spurs luxury development, which is lucrative for developers but does little to alleviate the housing issues at the other end of the economic spectrum.

In a press conference announcing the program, Sheinbaum said, “The focus of this program is to provide affordable housing to those in greatest need, especially young Mexicans.” The program's primary beneficiaries will be senior citizens, Mexico's indigenous population, young people and family units with single females heading the household.

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Although Mexico has undergone large building efforts in the past, Sheinbaum's administration noted that they have primarily targeted wealthy buyers and become quasi-private partnerships with real estate developers. The Housing and Regularization Program has an entirely different focus. It operates on the principle that housing is a fundamental right and providing it is an essential government function.

The location of the homes being built under Sheinbaum's plan is also a departure from past developments. Whereas previous developments were put in more rural areas, these homes will be concentrated in cosmopolitan areas where people live, work and attend school. With that said, the most appealing aspect of the Housing and Regularization program is the zero-percent financing for eligible buyers.

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High interest rates in America have severely curtailed the buying power of everyday Americans and the recent cuts by the Federal Reserve haven't been nearly deep enough to get Americans back into the housing market. In Mexico, qualified buyers can finance their purchases for 30 years at zero percent interest, an incentive that could save borrowers hundreds of thousands of dollars in interest payments over the life of the loan.

North of the border, millions of Americans are looking at this program and thinking, "Why can't we do something like that here?" The incoming Trump Administration has not signaled an intent to undertake a similar plan, but housing remains a pressing priority. In the meantime, Americans' best hope for reduced housing costs is continued interest rate cuts from the Federal Reserve. 

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