In the early naughts, inspired by their counterparts in Texas and the Southwest, Mexican officials joined with Wall Street execs to launch a high flying initiative aimed at building low cost residential structures for millions of lower income Mexicans.
The goal was to lift struggling (and hard-working) people out of substandard housing, fulfilling the nation’s constitutional guarantee of “a dignified and decent” home for all. For its part, the World Bank and Inter-American Development Bank pitched in over $2.8 billion dollars.
But from the start, things started to careen off the rails. Which is part of what makes this report so compelling.
Based on visits to 50 affordable-housing developments all over Mexico, it reveals a sobering glimpse into the daily struggles of millions of people who invested their life savings in a deeply flawed initiative that, up to now, has yet to be acknowledged by the Mexican authorities.
The Times reviewed thousands of pages of government and industry documents, and interviewed hundreds of homeowners, municipal leaders, housing experts, civil engineers, construction workers and government officials. Among other details, they discovered that most projects were built on marginal land — wetlands, riverbanks and unstable hillsides — often with scarce access to water and usually far from the job markets. They found that zoning laws were terribly written, and usually approved with little or no review.
The Dream, The Nightmare
Several months after the balloon-filled opening ceremony and lofty promises from politicians about “housing for all”, private contractors started abandoning projects en mass. In every state, there was an exodus, many leaving without so much as finishing the plumbing or wiring. It seemed as though it were all pre-planned, just waiting to happen. In the State of Mexico between 2005 and 2012, for example, contractors completed only 36 of 235 developments, leaving 200,000 to 500,000 people without lights, drainage or usable roads.
Where projects had been started, living conditions quickly broke down. “Rapid decay is evident at developments in or near every major city: Failed water systems. Unfinished electrical grids, wastewater systems and other infrastructure. Parks and schools that were promised but never materialized.”
In tract after tract, people started carrying flashlights to navigate pitch-black streets; burning garbage in vacant lots to fend off rats. The residents of one development, tucked in the barren foothills in Huehuetoca about 40 miles north of Mexico City, changed the name from “Santa Teresa” to “Santa Pobreza” (which means poverty).
“Elderly women stoop for water at curbside spigots. Children chase balls into the rubble of collapsed sidewalks. Raw sewage bubbles up from manholes.” “It’s like a war zone here,” said Jose Merin, Huehuetoca’s water system coordinator, as he walked through an especially blighted part of Santa Teresa where tangled pipes and cables jutted from crumbling streets.”
Given the scarcity of inspectors (who the government failed to hire), nearly every contractor skimped on asphalt, which meant that roads were often pulverized by construction trucks. In developments where faulty designs for storm drains were hastily approved by “engineers”, it was common for heavy rains to wash away curbs and sidewalks, turning streets into rivers.
Marco Lopez Silva, a civil engineer who researched the Mexican housing industry for the Inter-American Development Bank, claims that this systematic failure was repeated in projects all across the country.
The current mayor of Tlajomulco, a suburb of Guadalajara, claims that the previous mayor had approved completely inadequate well water infrastructure for over 300,000 people – and walked away with millions in unaccounted funds. He’s currently on the run, living in extraordinary comfort in Panama or Miami. Meanwhile, tens of thousands of families now receive water just once every other day.
“It was a world of corruption,” said the mayor, who was swept in by voters sick of unprecedented levels of graft. In fact, it was a one-two combination of corruption and incompetence. Extraordinary amounts of money vanished, in extraordinarily diverse ways. Projects were abandoned, shell companies went belly up, materials disappeared (or were replaced by shoddy substitutes). Funds were siphoned. To date, hundreds of millions in construction bonds issued to make repairs and finish infrastructure remain unaccounted for.
In March, the U.S. SEC accused Homex, once Mexico’s biggest developer, of reporting “fake” sales of 100,000 homes, which inflated revenues by $3.3 billion. It is believed to be the largest fraud in Mexican history.
But it wasn’t just Homex; it was everyone else too. If you’re checking in from “first world”, you may wonder how such an enormous and obvious fraud could take place – over the course of so many years – without any oversight. The answer, my friend, is a’ blowing in the halls of Congress, the Tribunals and Commissions that “regulate” Mexican affairs.
To date, not a single hearing or fact-finding commission has been summoned to investigate – despite the catastrophic damage to millions of unsuspecting people. Pablo Rodriguez Mendez, a city official, likens the housing crisis to a natural disaster. “We have emergency plans for hurricanes, but we also need an emergency plan for dealing with all the housing failures,” he said.
But that’s not how things work in Mexico. In fact, efforts by homeowner associations to publicize the immense scale of fraud have been routinely and violently repressed – or bought off. Association leaders have been harassed, threatened and “incentivized” to drop their protests. “Residents of blighted developments over the years have marched on city halls, blocked highways, pelted sales offices with rocks, held sales agents hostage, even set fire to model homes”. The government agencies and constructors involved have yet to respond.
One headline in June about local police breaking up a freeway blockade at a development in the state of Veracruz read: “Homeowners protest for running water. Police respond with punches”.
Mexico’s leading homeowner leader was imprisoned for 2 years without trial on armed robbery charges – even though the charges were thrown out by several judges. Trumped up charges for a trouble maker… a la mexicana.
A Reckoning? Don’t bet the farm.
Thanks to the LA Times, this crisis has now come to light. That said, don’t expect much: Mexican officials may have to squirm in unwanted media attention for a few days. But given the hundreds of millions they made (thanks to shell companies and well-placed cronies), its a small price to pay.
For million of low income people now saddled with mortgages, however, things look quite different. Despite their squalid (and often dangerous) living conditions, payments – typically about 25% of a worker’s salary – are still being deducted each month from their paychecks. The only way many can escape rising debt is to quit their jobs and work in the underground economy.
The cost to these unwitting people is beyond calculation – both to themselves and their families. They’re the ones who ultimately pay the price of incompetence, corruption and impunity. Yet up to now, the Mexican authorities have refused to even investigate.
In a word, welcome to Mexico in 2017 – when corruption and ineptitude are as rampant as ever. ‘“The federal government assumed officials would do their job at the municipal level. That they would have attorneys to review the construction bonds,” said one government official. “They assumed people would make good decisions. All of that failed.’
Maybe this piece will make them squirm – if only for a week or two. At this point, there’s not much more we can expect. The hard part will take generations.