Decreasing Investment and Prolonged Permit Processes Exacerbate Housing Shortage
At the end of the third quarter in 2025, the available inventory in Mexico City totaled 19,587 apartments, marking a 23% annual decrease. This shortage, combined with increasingly lengthy permit processes, puts more pressure on housing prices and reduces availability for those seeking a home in the capital.
Key Players and Their Perspectives
Federico Jiménez, regional partner MX-Centro of 4S Real Estate, stated, “Demand exceeds housing supply despite some developers and investors delivering new products; they don’t meet the actual need. We’re at a critical point.”
Long Permit Processes Deter Investment
The main bottleneck for housing in Mexico City has been administrative processes. Enrique Téllez, co-director of Desarrolladora del Parque, explained that obtaining construction permits has become more complex over the past six years, altering investment decisions for many sector players.
“Many developers have decided to move their investments to other cities. Once demand stabilizes, capital may return, but producing new inventory will take time,” Téllez declared.
According to Téllez, large housing projects can take between two and three years just to secure government-issued permits. The construction process itself can extend up to four more years.
“Smaller projects will continuously enter the market, but they won’t meet housing demand. To have mid-sized and large projects available for sale, it will take around six years,” he added.
Activity in the Periphery
In 2025, housing inventory in the Mexico City conurbation showed more dynamism due to permit releases in some areas away from the city center.
For example, Zumpango saw 650 new units in the third quarter of 2025, with average prices at 710,000 pesos, according to 4S. In Mexico City, areas like Reforma Iztaccíhuatl, Obrera, and Lindavista maintained activity with 400, 274, and 195 new housing units, respectively. Prices ranged from 2.6 million to 4.1 million pesos in these corridors.
Shrinking Square Footage, Expanding Common Areas
The pressure on costs has forced developers to reconsider project designs. Balancing the buyer’s budget with available square footage has become crucial.
“Square footage is reduced to control costs, but common areas are emphasized since salary increases have been minimal in recent years while construction costs saw extraordinary rises during the pandemic that haven’t retreated,” Téllez explained.
4S’s spokesperson also highlighted that the financial environment will be crucial for the sector’s evolution. The reduction in interest rates is expected to play a key role in 2026, as it will facilitate access to home loans for buyers and improve financing conditions for developers through bridge loans.
Key Questions and Answers
- What is causing the housing shortage in Mexico City? Decreasing investment for new housing projects and prolonged permit processes have exacerbated the shortage.
- How long can it take to complete a housing project in Mexico City? Large projects can take between two and three years just for government-issued permits, with the construction process extending up to four more years.
- What factors influence housing prices in Mexico City? Pressure on costs, administrative processes, and the balance between buyer budgets and available square footage all impact housing prices.
- What role do peripheral areas play in addressing the housing shortage? Permit releases in some areas away from the city center have contributed to more housing inventory and activity.
