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CONNECTKaro 2015 - Session 3 - Stories to Watch from Around the World - Infonavit


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Speaker - Mr. Gerardo De La Pena Hernandez, Deputy General Director, Infonavit, Mexico

Published in: Government & Nonprofit
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CONNECTKaro 2015 - Session 3 - Stories to Watch from Around the World - Infonavit

  1. 1. INFONAVIT’S ROLE IN TRANSFORMING MEXICO’S URBAN AND HOUSING DEVELOPMENT ABRIL 2015 GERARDO DE LA PEÑA HERNÁNDEZ “First we shape the cities, then they shape us” Jan Gehl, Cities for People ConnectKaro 2015
  2. 2. Who are we?
  3. 3. INFONAVIT - MORE THAN A MORTGAGE LENDER Mortgage Lender: largest in Latin America Based on the size of its portfolio and its origination level >1.2 Million mortgage and home improvement loans originated between January 2013 and December 2014 8million loans throughout its history Infonavit is a strong financial institution that manages workers’ savings and finances social housing MEXICANS LIVES IN A HOUSE FINANCED BY INFONAVIT 1OF EVERY 4 1st Mandate: Ensure access to a suitable and adequate housing to Mexican workers 2nd Mandate: Provide secure and responsible management of the Retirement Savings Fund
  4. 4. Mortgage investmentsHousing savings fund Mortgage credit collection • 4.4 million mortgage loans in our balance • 1.2 million off balance-sheet loans • ~5 GBP billion to invest in 2015 • Mexico´s biggest complementary fund for retirement • ~33 GBP billion in the Retirement Savings Fund • ~21% of all assets registered at the Retirement Savings System (AFORES)** • ~ 17 million active affiliates • Annual return of 6.5% ~ to SB1 pension funds - Non Performing Loans : 5.3% vs. 3.4% of private banking - Credit collection ~4 billion ~2.6 GBP billion in employers’ contributions for 2015 Infonavit has a social orientation and contributes to economic development *Subcuenta de Vivienda (SCV) ** As of January 2015, CONSAR National Housing Fund 54 million accounts Employers’ Contributions of 5% INFONAVIT’s administration costs
  5. 5. Infonavit tailored its model to respond to different challenges throughout its 42 years of history Infonavit participates both in construction and housing financing • Due to lack of supply • From buying land to its selling Leaves construction and consolidates as a social mortgage lender • Finances finished dwellings instead of construction Develops and implements Dwelling Construction Rules • Detailed Building Code Financial consolidation process initiates… • Catalyzes its role as a loan provider … and canalizes governmental subsidies • Massifies housing supply Normative role passes to States/Municipalities Evolving its institutional framework and strategy to boost workers’ social security: • Attend housing needs through financial solutions that improve quality of life • Pay efficient returns to right-holders’ retirement savings • Housing model oriented to the development of competitive cities 90's Social mortgage lender 70's – 80's Market creator 2001 – 2012 Fighting the housing deficit 2013… Social security booster
  6. 6. Diagnosis
  7. 7. In 2013, a deep diagnosis was conducted to understand the challenges and opportunities in three dimensions 1. Lack of adequate regulation 2. Massive production of housing solutions (an average of 453k mortgage loans from 2006 to 2012) 3. Distant and isolated housing developments (abandoned houses represented ~3% of total loan portfolio) 4. Deterioration of old housing units, lack of maintenance and public goods 1. 99% of total loan portfolio linked to minimum wage increase (~4.3 million loans) 2. Previous maximum credit limit underserved demand needs (955k affiliates suitable of receiving a higher loan) 3. Lack of diversity, housing solutions heavily dependent on mortgages 1. Lack of inter-institutional coordination. Housing policy out of the cabinet’s agenda 2. Strong financial indicators that allow the implementation of innovative actions Supply Demand Institutional
  8. 8. Infonavit’s strategic focus on property value appreciation guarantees viability in the long run and higher social impact Strong collateral Quality of life Social mobility Competitive cities Appreciation of property values = Sustainable net- worth
  9. 9. Actions
  10. 10. An institutional transformation was initiated to build competitive cities Enhanced coordination of urban planning and housing institutions Move towards sound and sustainable urban development models Reduce the housing deficit in a responsible manner Procure appropriate and adequate housing solutions 1) Creation of Ministry of Agrarian, Territorial and Urban Development 2) The institutional strategy is aligned with the four pillars of the National Housing Policy and consolidated in the financial plan 3) Improved scheme for granting subsidies: • No subsidies outside urban contention perimeters • Inclusion of affiliates with income up to 5 minimum wages (MW), previously up to 2.6 MW • 2014 was the year with the highest amount of subsidies granted 385 GBP million • 87% of subsidies target workers with earnings below 2 MW (174 GBP) 1 2 3 4 Lack of inter-institutional coordination. Housing policy out of the cabinet’s agenda1 INSTITUTIONAL SUPPLY DEMAND
  11. 11. Incentives were established to optimize land use, increase density and build sustainable housing Promoting verticality and re-densification Introduced regulation to contain urban sprawl (urban contention perimeters) Massive production of housing solutions Distant and isolated housing developments 2 3 INSTITUTIONAL SUPPLY DEMAND Lack of adequate regulation 1
  12. 12. Incentives for housing developers ensure quality of dwellings and correct industry practices for the benefit of workers Now there are more than 2,800 participants Before 5 firms represented 30% of the market Now 20 firms cover the same percentage All new housing developments are required to hire coverage for structural damage and waterproofing Now appraisals are monitored systematically to identify market deviations and prevent misconduct 2,000 daily appraisals 60% of them are new houses About 200,000 houses £ 48 million investment Deterioration of old housing units, lack of maintenance and public goods4 INSTITUTIONAL SUPPLY DEMAND Supported the restructure of the three major housing developers Quality insurance New appraisal’s platform Housing developments with difficulties
  13. 13. A set of innovations were implemented to our housing finance model delivering important benefits for workers Increase in the maximum loan amount New peso denominated mortgage loans Diversification of housing solutions 99% of total loan portfolio linked to minimum wage increase (~4.3 million loans) Previous maximum credit limit underserved demand needs (955k affiliates suitable of receiving a higher loan) Lack of diversity, housing solutions heavily dependent on mortgages • The loan balance decreases with every payment, fixed rate, and fixed payment • Additional elimination of mortgage origination & notary expenses (benefits 72k credit holders) • Pilot program to convert previous loans to Pesos • 76% increase going from 21K GBP to 37K GBP, provides access to better housing • Arrendavit: rental solutions • Mejoravit: 450K home improvement solutions during 2013 and 2014 • Urban regeneration programs 1 2 3 INSTITUTIONAL SUPPLY DEMAND
  14. 14. Integral housing solutions were diversified to satisfy affiliate’s different housing needs, along their working life cycle Mejoravit: home improvement loans Arrendavit: rental program Urban and social rehabilitation programs Improving the Unit Painting Mexico Urban furniture Public libraries Playgrounds Reforestation Housing units had been urban and social intervened nationwide in 2014 Accessibility Waterproofing Mural painting and street art Access to drinking water Free Wi-Fi and electronic tablets INSTITUTIONAL SUPPLY DEMAND
  15. 15. Tracking success
  16. 16. Infonavit invested in the design and implementation of KPI’s to monitor and evaluate strategic performance Homeowner Satisfaction Provides insights of homeowner satisfaction on the quality of new homes and the service they receive before, during and after moving in Comprehensive Home Evaluation Provides information about the overall quality of the house and its urban environment Quality of Life Related to Housing Shows the change in quality of life of the right-holder at the time of receiving the mortgage According with the Comprehensive Home Evaluation (ECUVE) the quality of houses has increased steadily since 2012 11% 7% 5% 3% 24% 27% 28% 30% 2012 2013 2014 Jan 2015 Percentage of homes with low ECUVE Percentage of homes with high ECUVE The components that show more improvement are the availability of urban infrastructure and services (e.g. schools, health centers) and the proximity to primary road networks and public transportation hubs
  17. 17. Evidence shows that the model has been successful in reshaping our urban landscape - In the past 5 years, construction of vertical housing increased from 8 to 27% - Housing developments located within urban contention perimeters increased from 35% (2012) to 67% (2014) - 98,426 peso denominated loans equivalent to 1.4 GBP billion after 6 months of operations - 6,174 larger loans equivalent to 183 GBP million after 28 weeks of operations (221 credits / 6.5 GBP million per week) - Since July 2014, all new dwellings financed by Infonavit benefit from quality insurance coverage - 1.8 million credits granted, roughly equivalent to the mitigation of 1,175,297 trees and 111 GBP in annual household savings Vertical housing Contention of urban sprawl Quality insurance Mortgage loans: - New loans are Peso denominated - Increase of maximum amount of mortgage loans Green mortgages
  18. 18. We don’t work alone
  19. 19. This transformation is possible with the support of specialists from several academic and international organizations