The Rental Market Disparity
According to proptech firm Morada Uno, the lower income sectors face significant challenges in renting a home in Mexico City, where housing needs are most pressing.
Only 4% of the population from the lowest income deciles (1 and 2), earning an average family income of 8,200 to 13,400 pesos per month, rent a home in the capital.
In contrast, 43% of the population from the highest income deciles (9 and 10), earning between 59,200 and 113,000 pesos per month, rent in the city.
This disparity is reflected in the market structure, with 53% of the 671,226 rental properties in Mexico City having a monthly value over 15,000 pesos.
In these cases, the minimum income of families occupying these properties is 43,000 pesos per month, significantly restricting access for lower-income households.
Overcrowding and Informality
Faced with the inability to cover rental costs, people resort to alternative living arrangements. Santiago Morales, General Director of Morada Uno, notes that many live with their families or in the homes they grew up in, fostering overcrowding. Another common option is self-construction.
“It’s possible that lower-income individuals rent more informally due to the cost of rentals. These families may rent a room or two in someone’s house because of the high cost,” Morales commented.
Informality poses a significant risk to the housing rental market. According to INEGI, only 54% of the 6 million rental households in Mexico have a rental contract.
The rest operate outside of formal agreements, exposing both landlords and tenants to legal conflicts and more vulnerable conditions.
Rental Costs as a Key Factor in Housing Crisis
Experts at Morada Uno suggest that cities facing similar housing crises have made progress by building more housing. However, in the Mexican context, this strategy seems distant due to the lack of legal certainty.
Diego Llano, co-founder of Morada Uno, believes that rental models can be a solution driver for this deficit, which is why it has started to grow in various parts of the country beyond Mexico City.
“This model allows for large-scale housing generation, but care must be taken to ensure policies don’t discourage private investment. This should be a public-private partnership; there’s no other way,” Llano emphasized.
Morales added that various factors affect the development of rental properties, including permits, land use, labor conditions, construction costs, and market control by authorities.
“All these policies and regulations eventually impact the attractiveness of cities for investment. However, we hope that, as seen in the past decade, rental housing continues to grow,” Morales said.
Llano stressed that legal certainty is crucial for investors, which depends on the rule of law. He warned that initiatives like judicial reform are disconnected from private investment.
“If developers raise capital but regulations change and alter their financial plans, halting construction and forcing them to pay bank interest on bridging credit, it becomes too risky. They may decide not to proceed,” Llano stated.
Innovative Financial Solutions for Landlords
To innovate and drive the rental market towards 2026, Morada Uno proposes a new solution for landlords: advance rent payments.
This scheme allows converting up to six months of future rental income into immediate liquidity without traditional bank loans.
The advance rent payment involves a one-time commission of 16% and offers approval times between 24 to 48 hours.
Key Questions and Answers
- What is the main issue in Mexico City’s rental market? Rising rental prices are limiting access to affordable housing, particularly for low-income families.
- What percentage of lower-income families rent a home in Mexico City? Only 4% of the population from the lowest income deciles (1 and 2) rent a home in Mexico City.
- What are the consequences of informality in the rental market? Informality exposes both landlords and tenants to legal conflicts and more vulnerable conditions.
- How can the housing crisis be addressed in Mexico? Experts suggest building more housing, but legal certainty is a significant hurdle.
- What innovative solution does Morada Uno propose for landlords? Morada Uno proposes advance rent payment, converting future income into immediate liquidity.
