Earthquakes, reconstruction programs and housing markets in central Mexico City, 1987--2000

The main research goal is to assess and explain the manner in which a massive reconstruction-housing program, led by the Mexican government, has changed and shaped the structure and functioning of the housing market in Mexico City's central district between 1987 and 2000.; The research has its roots in 1985 when two powerful earthquakes destroyed thousands of homes in Mexico City. To help rebuild the City, the Mexican government launched one of the most important housing programs of its entire history, building, in record time, approximately 90,000 units in under two years to house over 250,000 people.; The key research problem was to learn how massive changes in housing supply affect the current functioning of the real estate market in a certain area of the City. Our hypothesis was that the construction of the new housing units was going to produce a positive effect on the value of the existing real estate property located near the new construction, specifically by increasing the prices.; Our results revealed exactly the opposite. We began seeing how real estate prices dropped as the number of the new housing units increased. Relying on three observation moments (1987, 1990 and 2000) we found that the construction of the new housing units real estate transformed the market structurally by introducing an important component previously nonexistent. The new housing units estate boosted the market and introduced a significant mass of owners into it. A mass supply of public housing at prices below market ones means that prices that are highly subsidized will tend to reduce prices in similar real-estate submarkets located in neighboring areas.; If a housing program intends to impact real estate property prices directly via mass investment, then we can way that not only will this not happen, rather the contrary will take place, specifically with comparable real estate. Thus, future programs need to bear closely in mind that mass investments will have specific effects in various submarkets, particularly on similar types of real estate.