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The impact of subsidies on house prices in Mexico's mortgage market for low-income households 2008–2019

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  • Ramírez Sierra, Gabriel Darío
  • González Martínez, Alayn Alejandro
  • Monroy Cruz, Miguel Ángel
  • Zapata Barrientos, Luis Gerardo

Abstract

We estimate the effect of Mexico's primary house-purchase subsidy program for low-income individuals on house prices between 2008 and 2019, using administrative records from Infonavit, the nation's largest mortgage originator. We employ a fuzzy regression discontinuity design that leverages the existence of a threshold on the borrower's income that determined access to the subsidy program to identify the effect on house prices. Our estimations yield statistically significant evidence that the subsidy led to an average increase in house prices of 863 US dollars for the program participants at the threshold during those years. This effect represents 28.9 % of the average subsidy amount and 5.4 % of the average house price. The estimations control for individual, house, and location characteristics. Furthermore, we find evidence that when an intermediary is involved in the mortgage application process, there is a statistically significant price difference of 867 dollars for subsidy recipients. On the contrary, this impact disappears when no external broker is involved. These intermediaries are primarily real estate developers that build and sell the houses associated with the mortgages. These findings shed light on how market structure could have nonnegligible impacts on equilibrium outcomes and on the welfare effects of economic policy.

Suggested Citation

  • Ramírez Sierra, Gabriel Darío & González Martínez, Alayn Alejandro & Monroy Cruz, Miguel Ángel & Zapata Barrientos, Luis Gerardo, 2024. "The impact of subsidies on house prices in Mexico's mortgage market for low-income households 2008–2019," Journal of Housing Economics, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:jhouse:v:63:y:2024:i:c:s1051137723000578
    DOI: 10.1016/j.jhe.2023.101970
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    References listed on IDEAS

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    1. Sebastian Calonico & Matias D. Cattaneo & Rocio Titiunik, 2014. "Robust data-driven inference in the regression-discontinuity design," Stata Journal, StataCorp LP, vol. 14(4), pages 909-946, December.
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    4. Mark J. Garmaise, 2004. "Confronting Information Asymmetries: Evidence from Real Estate Markets," The Review of Financial Studies, Society for Financial Studies, vol. 17(2), pages 405-437.
    5. Sebastian Calonico & Matias D. Cattaneo & Max H. Farrell & Roc ́ıo Titiunik, 2017. "rdrobust: Software for regression-discontinuity designs," Stata Journal, StataCorp LP, vol. 17(2), pages 372-404, June.
    6. Alvin Murphy, 2018. "A Dynamic Model of Housing Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 243-267, November.
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    More about this item

    Keywords

    Housing market; Mortgage market; Housing subsidies; Price discrimination;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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