Article:

Are Mortgage Loans the New Toasters? The Roles of Housing Demand and Political Patronage in Mexican Housing Finance

Authors: Jenny Schuetz

Start Page: 1
End Page: 31
Volume: 11
Issue Number: 2
Year: 2008
Publication: International Real Estate Review

Abstract:

This paper tests for evidence of political manipulation in the allocation of subsidized mortgage loans in Mexico during the 1990’s. First, I develop a baseline model of loan allocation across states as a function of housing need, eligibility for lending programs, and administrative capacity to deliver housing. Then, I add measures of political competitiveness to the model. Empirical results suggest that the two largest lenders generally allocated loans according to their eligibility criteria, granting more loans to states with more income- and employment-eligible households and poorer quality housing. Tests for political manipulation suggest that more loans were, in fact, granted in federal election years and in states where the ruling party did not perform well in the previous election. However, the numbers lack statistical significance. As a result, it can be assumed that political motivation played a relatively small role in the allocation of loans.
 

Back to Previous Page