The Challenge of Housing Puerto Peñasco’s Emerging Mexican Middle Class

Visitors to Puerto Peñasco (Rocky Point) often comment on the wide disparity between the new condos being built on the beach for wealthy American vacationers and the existing lower-income housing stock (much of which would be described as “shacks” by Americans) lived in by local Mexicans in town. They ask when the new housing for Mexicans is going to be built. The answer is complicated.

Americans are used to identifying neighborhoods as “wealthy,” “middle-class” or “poor.” Those who earn more money, move to better neighborhoods. A young American city usually expands over time as wealthier families move “up and out” of older neighborhoods to brand new subdivisions on the outskirts of the city. As traffic worsens and commute times from the suburbs to the central city get longer, people will eventually start to move back into the central city, buying up older housing stock and refurbishing it or tearing it down to build new homes (often referred to as gentrification).

Driving through many parts of Puerto Peñasco, one will find something that looks like the beginning of a gentrification phase – occasionally seeing a newer and larger Mexican home located right next to lean-to shacks. However, in Puerto Peñasco this is not occurring because a different class of people is moving into the neighborhood. Instead, families who have living in a neighborhood for years have been able to increase their incomes through the tourism boom or have made money from selling family land to developers. Instead of moving “up and out” to new neighborhoods, these families have simply expanded their homes or built new ones in their current neighborhoods.

This phenomenon is partly cultural – with families sometimes reluctant to leave a piece of land owned for many years. But it also stems from a lack of new housing communities in Puerto Peñasco in a price range that this upwardly mobile class of Mexicans can afford. Better access to credit and the many new tourism-related jobs in Puerto Peñasco combined with the influx of new Mexican professionals working for the resorts has continued to fuel the growth of this emergin middle class that is demanding these new homes. So the question must be asked, what is keeping these new homes from being built?

In larger Mexican cities, one will find large new subdivisions of “move-up” housing for the growing Mexican middle class, priced between approximately $20,000 and $50,000 USD. In Puerto Peñasco, the challenge facing developers in providing this “move up” tier of homes continues to be the lack of infrastructure, the high price of land and high construction material cost (due to Peñasco’s remote location). The city is working hard to rectify the infrastructure situation, with a major water works refurbishment and expansion of its electrical capacity. But the price of land and construction materials have remained high enough that building this “move-up” housing in Puerto Peñasco at an affordable sales price for the Mexican middle class is virtually impossible. Therefore, the new housing subdivisions such as San Jorge Privada, Country Garden Estates, Los Agaves and Las Gardenias are all priced much higher than standard Mexican “move up” housing – ranging from $85,000 and $150,000 USD per home. Many Mexican families simply can’t yet afford these prices and find it more economically viable to just improve their current home and stay in their old neighborhood.

In some respects this “problem” is good for the town. If everyone who makes money simply moves to a new subdivision, the neighborhood left behind remains poor. Instead of leaving their lower-income neighborhood behind, the emerging middle class of Mexicans in Puerto Peñasco are staying put and therefore improving the housing stock in their existing neighborhoods (thereby improving the overall neighborhood).

But Puerto Peñasco is not only working to improve its current Mexican housing stock – it also is working to provide additional housing for the many new arrivals to town. Mexican professionals moving to town today usually have a very difficult time finding adequate housing to rent and are often unable to buy. By some estimates, the city is expected to triple in year-round population over the next five years, adding up to 100,000 more people. Many of these new arrivals will not be able to afford the new housing currently on the market (previously mentioned) and there are few spots left in the existing housing to put all of them.

There have been efforts by the Sonoran government to reach agreements with some of the larger landholders in town to subsidize land or provide enough tax benefits to make this new lower-priced “move-up” housing possible. But to date, I am not aware of any definitive deals that have been cut to accomplish this.

So it remains to be seen whether developers and the government will manage to solve this puzzle of providing adequate new housing in Puerto Peñasco for the expected local population growth and the emerging Mexican middle class. In the meantime, a good investment in Puerto Peñasco should continue to be existing local housing that can be rented to new arrivals in town.

Used with permission from Paul P. Kingsley. Mr. Kingsley is a founding member of The Primestone Group LLC (http://www.primestonegroup.com) and writes a business, real estate and

tourism blog about Puerto Peñasco at http://www.puertopenascopost.com). 

 

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