Collapsed Mexico Housing Plan Hits US Investors Jonathan Levin and Ben Bain - Bloomberg
go to original December 7, 2013

Hundreds of town houses in the Parque San Mateo complex outside Mexico City lie unfinished and abandoned. (Alejandro Cartagena/Bloomberg Markets)

Three years into her home-ownership dream, Martha Orozco has had enough. Stuck in a government-sponsored complex called Parque San Mateo that’s two hours away from her $8,000-a-year job as a hospital secretary in Mexico City, Orozco sees only broken promises and blight all around her.

Power outages drag on for hours at a time. Neighboring townhouses lie abandoned by the hundreds, giving criminals a growing foothold in the community. The stench of overflowing sewage permeates the development. And then there’s the commute: Until Orozco started driving to work, it was a van-to-train-to-bus odyssey whose cost consumed 20 percent of her pay.

Orozco, a 52-year-old widow, is looking to leave her $18,500 house and move with her daughter and granddaughter closer to Mexico City. If she does, she’ll join an army of disenchanted homeowners who moved in the past 10 years to the sprawling new towns that have sprung up in most of Mexico’s 31 states. The buyers all signed up for a government-backed program that helped finance construction of millions of homes. The complexes ring the country’s major cities from Veracruz to Mexico City to Tijuana.

The program has been a disaster. Hundreds of thousands of homes are now derelict after buyers such as Orozco concluded they were located too far from city centers and moved out.

... In 2013 alone, the industry’s collapse wiped out $1.69 billion in the combined market value of the three biggest developers. All three builders have defaulted on their dollar-denominated bonds, many of them bought by U.S. investment firms.

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