In recent years, leasing market in Mexico has undergone significant changes, driven by economic, demographic and social factors. The combination of increased demand, especially in urban areas, with limited supply and rising prices, has created a challenging landscape for both tenants and landlords.
The combination of these factors has created a challenging landscape for both tenants and landlords. Tenants face increasing difficulty in finding affordable housing, which forces them to spend a greater proportion of their income on rent. On the other hand, landlords also face risks, such as non-payments, due to the economic and employment instability of tenants.
Access to adequate and affordable housing has become a critical issue in Mexico, particularly in densely populated urban areas. This has brought to the fore the need for public policies that encourage the construction of affordable rental housing, as well as measures to protect tenants and landlords from economic volatility.
Are there problems with non-payment of rent on homes in Mexico?
Yes, there is a problem of non-payment of rent in the leasing market in Mexico, and it has intensified in recent years due to a combination of economic and social factors.
Economic factors contributing to default:
- Impact of the pandemic: The economic crisis resulting from the COVID-19 pandemic significantly affected many tenants, who lost their jobs or saw their income reduced. As a result, some people were unable to continue paying their rent on time or simply stopped doing so. Although the economy has begun to recover, many tenants still face financial difficulties that prevent them from meeting their obligations.
- Inflation and rising costs of living: Inflation in Mexico has affected the purchasing power of families. The increase in the prices of food, services and other essential goods has caused many tenants to prioritize their expenses, which sometimes results in non-payment of rent. Added to this are increases in rents themselves, which in some cities have skyrocketed, exacerbating the problem of non-payments.
- Stagnant wages: While living costs have increased, wages in Mexico have had slow growth, meaning that many families are under constant financial pressure. This mismatch between income and expenses creates a situation of vulnerability that affects people’s ability to meet their rental obligations.
Leasing market in Mexico: Legal and structural problems:
- Difficulty in recovering properties: For landlords, recovering properties due to non-payment of rent can be a long and complicated process. In many cases, landlords must go through lengthy legal procedures to evict non-paying tenants. This discourages some landlords from renting out their properties or leads them to be more demanding in the selection of their tenants, further complicating access to housing.
- Lack of formal contracts: A large percentage of leases in Mexico are carried out without formal contracts, especially in less developed areas. This makes it difficult for landlords to take legal action when there are non-payments, since they do not have a clear legal framework that regulates the relationship between both parties.
Measures and solutions to avoid defaults:
In response to this problem in the leasing market in Mexico, some landlords have begun to require additional guarantees from tenants, such as higher deposits or the signing of guarantors.
At KBA we want to talk to you about our KBA.Suite product and explain how it can help you avoid defaults.
KBA.Suite is a comprehensive, white-label software solution that transforms manual tenant screening into a streamlined, digital workflow. Tailored specifically for the Mexican market, KBA.Suite offers out-of-the-box integrations with key data sources, including Buro de Credito de Mexico and Circulo de Credito for credit reports and income verification.
If you want to know all the key features of KBA.Suite you can read this blog post: KBA Expands to Mexico with Launch of KBA.Suite.