Article Estudios Fronterizos, vol. 7, núm. 13, 2006, 43-62

Land Markets and its Effects on the Spatial Segregation: The Case of Ciudad Juarez, Mexico


Mercados Inmobiliarios y sus efectos en la segregación espacial: el caso de Ciudad Juárez, México


César M. Fuentes* Luis E. Cervera**


* El Colegio de la Frontera Norte, Ciudad Juárez.
E-mail: cfuentes@dns.colef.mx


** El Colegio de la Frontera Norte, Ciudad Juárez.
E-mail: lcercera@colef.mx


Abstract

The objective of this article is to analyze the land market imperfections and its effect on spatial segregation. It uses a spatial approach through the construction of socio–spatial segregation, and infrastructure deficit indexes. The principal component analysis was the main methodology applied to estimate the socio–spatial indexes at the AGEB's scale. The data used to calculate the indexes were the XII Population and Housing Census at census tracts level. The result shows that the city suffers of spatial segregation caused mainly for the imperfections of its land market. The land market is not able to ensure an adequate supply at affordable prices and as a result the worst sufferers have been the urban poor. The lack of access of urban land has pushed the low income inhabitants to the edge of the urban core, in low value areas without public infrastructure.

Keywords: urban spatial segregation, land market, Ciudad Juarez.


Resumen

El objetivo del artículo es analizar las imperfecciones del mercado del suelo y su efecto en la segregación espacial. El estudio tiene un enfoque espacial mediante la construcción de los índices de segregación espacial y déficit de infraestructura. Para la construcción de los mismos se utilizó el método de componentes principales. La información usada para el cálculo de los índices fue el XII Censo de Población y Vivienda (INEGI) a nivel de AGEB. Los resultados muestran que la ciudad sufre de segregación espacial causada principalmente por las imperfecciones del mercado del suelo. Éste no es capaz de asegurar una oferta adecuada de suelo a precios adecuados y como resultado la más afectada ha sido la población urbana pobre. La falta de acceso al suelo urbano ha empujado a los habitantes de bajos ingresos hacia los extremos de la ciudad en terrenos de bajo costo sin servicios públicos.

Palabras clave: segregación espacial urbana, mercado de suelo, Ciudad Juárez


Introduction

In Ciudad Juarez, a quintessential case of urban spatial segregation with its inherent positive and negative consequences is currently underway. The city suffers of spatial segregation caused mainly for the imperfections of its land market. It is characterized largely by dramatic social inequalities, particularly in the access to urban land and services. These inequalities are expressed in urban land prices differentials that are associated with the process through which land value increments are generated, appropriated and used.

The land prices differentials are caused mainly product for supply and demand factors. The supply of land depends on the amount that is newly serviced (produced) per year, the amount that is retained from the market, and intensity of the use of the existing serviced land. The demand depends on the annual rate of formation of new households, adjusted by their income and/or purchasing power, their preferences and the prices of other items in their budgets. Beyond these conventional arguments about supply and demand, one may also consider the dynamics or interdependency of formal and informal urban land markets as a factor contributing to high land prices. Specifically, the high prices for serviced land in the formal market seem to affect the relatively high prices of unserviced land in the informal market, and viceversa.

These actions have generated overvaluation of the urbanized land and as a result the scarcity of urban land for poor inhabitants of the city. The lack of special programs of cheap land for low–income people has been responsible for the proliferation of irregular settlements or marginal neighborhoods. Most of them growing at the edge of the urban core on real estate, which is easily accessible to the urban poor due to its low value and undesirable topography.

The spatial segregation is characterized by households with incomplete or deficient access to public network or services, lack of integration with the remainder of the city, and irregular tenure.

This essay uses a spatial approach through the construction of socio–spatial segregation, and infrastructure deficit indexes. The principal component analysis was the main methodology applied to estimate the socio–spatial indexes at the AGEB's scale.

This essay is divided into four parts. The first presents the methodological note. The second describe the rapid urbanization process of Ciudad Juárez. The third provides an analysis of the characteristics of Ciudad Juarez's land market. The fourth presents the socio–spatial effects in Ciudad Juarez.


I. Methodology

1) Principal Component

a) Socio–Spatial Hierarchy Index

The methodology used to construct the Socio–Spatial Hierarchy Index is the following:

The method creates in a separate way the poverty and wealthy indexes for each census tract (AGEB) to finally integrate it in only one index. In order to get only one index of socio–spatial hierarchy, the poverty index must be multiply for (–1). Finally, the arithmetic mean is calculated for the new index. The resultant values will determine the hierarchical position of each AGEB.

The index is calculated in two steps: 1) calculate the principal component that represent the best set of variables through factor analysis. It has different level of correlation with the variables. The value of these correlations are the weight of each variable in the component and it is the weighting factor to estimate the hierarchical location of the AGEB according with this variable.

where:

ISj = poverty or wealth indexes of each AGEBj
FPj = weighting factor of the variable i that comes from the factor analysis
Xij = value of the variables i in the AGEBj
= the urban average of the variable i
δ = standard deviation of the variable i

The second part of the calculation includes the construction of the index. It consists of the sum of the distances of the variables' values with the weighting mean according to the weight of each variable.

where:

JSj = socio–spatial hierarchy of each AGEBj

Variables:

The variables used in the calculation of the poverty and wealthy index includes variables of income (V1,V8), working conditions (V2,V3, V9, V10), education level (V4,V5,V6,V11,V12,V13), and health (V7,V14). The data correspond to the 2000 Population Census at census tract level.

Variables of the poverty index:

V1 = % of the EAP with income lower than 1 minimum wage
V2 = % of the EAP not working
V3 = % of the EAP that is peasant
V4 = % of the population with 6 years old who does not attend the school
V5 = % of the population with 15 years old and more illiterate
V6 = % of the population with 15 years old and more without middle school
V7 = % of the population with less than 60 years old

Variables of the wealthy index:

V8 = % of the EAP with income lower than 5 minimum wages.
V9 = % of the EAP working
V10 = % of the EAP that is entrepreneur
V11 = % of the population between 6 and 14 years old who does attend the school
V12 = % of the population with 15 years old and more, literate
V13 = % of the population with 15 years old and more with middle school
V14 = % of the population with more than 60 years old.


b) Infrastructure Deficit Index

The index is an indicator that represent to the set of deficits. Its estimation consists of two steps: 1) through factor analysis the principal component is determinate, that represent better the set of variables. It has different correlation levels with the variables. The values of the correlations are the weight of each variable in the principal component and it is the weighting factor for each variable; 2) is the calculation of the index.

where
IDj = infrastructure deficit of each AGEBj
FPj= weighting factor of the variable i that comes from the factor analysis
Xij= value of the variables i in the AGEBj
= the urban average of the variable i
δ = standard deviation of the variable i

Variables

The variables are constructed through the data gathered of the public utilities. The variables are the proportion of urbanized area not served with water, swage, electricity, pave roads, and transportation.1


Urbanization Patterns: The Case of Ciudad Juarez

Historically, Ciudad Juarez has experienced one of the fastest rates of population growth in the entire country. From 1856 to 1960, the city remained relatively compact. It is characterized by a higher population density and less vacant land than cities north of the border (Arreola and Curtis, 1993). In 1856, Ciudad Juarez's population density was very high for the small city (482 inhabitants per hectare).2 After the Mexican revolution, the city began to experience population pressures as a product of immigration flows from central Mexico. In 1921, Ciudad Juarez's population was growing at a rate of 5.5%, reaching 19, 457 inhabitants. In the 1930's its population reached nearly 40,000 and the urban area encompassed 471 hectares. The city experienced a high population growth rate and a lower population density. In the 1940, these indicators slowed their pace. Ciudad Juarez's population growth rate was only 2.0% and the urban area only increased by 92 hectares over the decade (Fuentes, 2000).

Beginning in the 1950s, the city embarked upon a phase of spatial expansion. Ciudad Juarez experienced the highest population rate of growth in its history in 1950 (9.2%) and its urban area totaled 800 hectares. As a result of immigration flows, the city became relatively densely inhabited (164 inhabitants per hectare). The city continued to grow at a high population rate of 7.2% in 1960 and its urban area reached 1,894 hectares.

Ciudad Juarez experienced two periods of expansion during this era. The first, from 1856 to 1930, is characterized by a high population growth rate and physical expansion. The second, from 1931 to 1960, began with a decrease in population and population density. Throughout the entire period, however, Ciudad Juarez could be characterized as a relative compact city (see table 1).

The city's urban growth is also impacted by intense immigration flows and the location patterns of the industrial parks. The great supply of jobs generated by the maquiladora industry attracted a large number of workers who eventually became integrated into the city. The city's number of inhabitants grew from 276,995 in 1960 to 424,135 in 1970. The urban area increased from 1,894 hectares in 1960 to 5,608 hectares in 1970, having a growth rate of 10.8 %. The population density decreased from 146 inhabitants per hectare in 1960 to 75 inhabitants per hectare in 1970. In others words, during this decade the city inaugurate an extensive pattern of urban growth.

The first industrial park was established in 1967 on the northeast side of the city, it has an extension of 174.2 hectares (Fuentes, 1992). Previously this land has been used for irrigated agriculture3 purposes, primarily to grow alfalfa and cotton. In the early 1970s, two new industrial parks were opened and occupied 125.8 hectares, but only 81.8 hectares had previous agricultural use. The commercial land use represented 305 hectares, all of them located in the central business district and on the main arterial network.

The population growth has transformed the dimensions of the city, pushing urban landscapes into previously fringe zones. During every year since 1986, Ciudad Juarez has added as much as 300 acres (Cabral, 1991). Growth on the periphery has occurred primarily west up the lower flanks of the Sierra Juarez, south along the railroad and Pan American Highway corridor to Chihuahua and east into previously cultivated land. The expansion west and southwest is primarily in residential areas, organized in a one–to three–mile radius from the central plaza and populated by squatters who have invaded public lands since 1960 (Ugalde, 1974; Valencia, 1969). The city's irregular settlements cover approximately 35% of the urban land (Caraveo, 1993). Most of them were located towards the northwest and southwest.

The growth east and southeast is similarly one to three miles from the center but is mostly middle –to upper– income, residential development (Lloyd, 1986).

Many of the existing irregular settlements that needed regularized owe their origin to the irresponsible complacency of politicians turning a blind eye to the irregular occupation of public or unsuitable areas, or, which is worse, who ceded public land for electioneering purposes.

The next decades the city continues growing a very high population growth. However, the urban area grew at higher rates than the population did, having as a consequence that the city continued reducing the population density. It passed from 567,365 inhabitants in 1980 to 798,499 inhabitants in 1990. The urban land reaches 9,395 hectares in 1990 and the population density continued reducing to 57 inhabitants per hectare. In 2000 the population growth rate is similar than the urban area growth, having as a result the stabilization of the extensive pattern of urban growth. The spread of the settlement has resulted in lower densities in the city. Table 1 showed that the densities of the city had declined. The decline is partly demographic –the reduction of household sizes and partly the result of new perimeter development. With shifting densities and the outward spread of development, there has been a significant shift in the location of rich and poor.


III. Land Use Patterns

Cities with growing populations, whether they are increasing through high rates of natural increase or net–in migration, like Ciudad Juarez, require additional space to support housing, commercial and industrial and public activities.

In 1980 the city limits had an encompassed 15,227 hectares, of which 9,385 hectares were urban land. The residential use occupied 6,061 hectares, industrial use 378, commerce and service 688, open spaces 401 and internal roads 1,857. Four years later, the urban area reached 13,170 hectares, with 6,452 hectares to residential use, 681 industrial, 380 commerce and service, 461 open space, 1,529 urban vacant land, 2,150 internal roads, and 656.5 other uses (see table 2).

The industrial growth toward the northeast and southeast also demanded the establishment of residential and commercial areas. From 1984 to 1988, the land with residential and industrial uses increased by 337.49 and 159.13 hectares respectively. For 1988 existed four new industrial parks that occupied 175.8 hectares more, all of them were established southward and had a smaller size.

In 1995 the urban land represented 18,767 hectares, the residential use reached 8,416 hectares, industrial use 1,209, commerce and services 1,075, mixed use 617, open spaces 446, internal roads 4,785 and vacant urban land 2,219.

The land use of the city has not modified substantially since 1995. The residential use corresponds to 45.17% of the urban area; the roads system has reduced its percent in three points with respect to 1995 (22.78%); industrial land use has increased its proportion from 6.44% in 1995 to 8.34% in 2001; the commerce and service land area has increased to 7.40% (see table 2).

Table 2 shows that in relative terms the residential use of land has been participating in similar proportion since 1984. However, land used for industrial purposes has been increasing from 5.7% in 1984 to 8.3% in 2001. Since 1995, nine industrial parks were added, representing a total of 23. It is important to mention that the last nine industrial parks are located near the working class neighborhoods and main roads.

The traditional pattern of centralization in commercial and service land use is modified as a result of four processes: 1) greater competition between regional, national chains of commerce having as a result the southward relocation of warehouses near residential areas, 2) deficient public transportation, 3) huge investment in freeways, and 4) exhaustion of the agglomeration economies of the central business district (Fuentes, 2001).

In summary the plan of the Junta Municipal de Agua y Saneamiento (JMAS) notes that the part of the irrigation district closest to Ciudad Juarez has seen a decline of more than 1,000 hectares (2,471 acres) as a result of conversion to urban use.

The Municipal Institute of Planning and Research's4 (MIPR) forecast the use of urban land in Ciudad Juarez to total 32,421 hectares by 2020. Compared to today's total of 21,572, future expansion will add 10,848 new hectares of land to urban development. MIPR estimates that about one quarter of that new urban land will be converted from land previously in agricultural use.

How land is urbanized greatly affects the quality of urban environment, the cost and location of housing, the accessibility of jobs and the flow of traffic. An obvious question is how efficient is the process of urban land conversion in Ciudad Juarez. Shortages of land or development restrictions can greatly increase the land prices and housing cost.

The price of serviced land, like prices in other markets, is determined by supply and demand.5 The supply of land depends on the amount that is newly serviced (produced) per year, the amount that is retained from the market, and intensity of the use of the existing serviced land. The demand for housing expands due to increase in household formation and income. High population growth and household formation rates increase the demand for housing. Table 3illustrates housing formation and housing production trends for the Mexican border cities. It shows the rapid increase in household formation that is common in fast–growth cities. For example, annual rate of household formation in Ciudad Juarez is 4.9% per year. The city fails to keep pace with burgeoning demand the annual rates of housing production exceed 112% of annual household formation.

The income of the Mexican border cities is higher in average than the national average, and the affordability of a house depend of the familiar or individual income. In order to qualify for most of the government housing programs, the workers need to have an income equal or higher than three Monthly Minimum Wage (MMW). Although Ciudad Juarez has a higher percentage of economic active population that earns an income higher than three minimum wages, most of the workers do not qualify for a government program or bank credit (see table 4).

Besides, many families, even those with relatively high incomes, work in the informal sector and are excluded from the market because they lack the credentials required by financial agencies to apply for a loan. The need of self–finance housing production on a piecemeal basis through non–traditional funding sources extends the time between acquisition and occupation of land, thereby adding to both the cost of financing and the overall demand for land. Further, the legacy of high inflation, ill–developed or inaccessible capital markets, and limited participation in the social security system are responsible for nurturing a well established culture and preference by lower income sectors to use land as a reserve land and as a popular meaning of capitalization, which also adds to the demand for land. In other words, holding the undeveloped land and the culture of land speculation are not excessive to high–income areas.

On the supply side, property taxes, a major potential source of revenue to finance the production of service land, are ridiculously low. The substantive observed land value increments resulting from investments in urban infrastructure and services are basically neglected as a revenue source to finance such investments, due to weak sanctions on capturing land value increments or simply holding improved land from the market (Smolka and Furtado, 2001).

Beyond these conventional arguments about supply and demand, one may also consider the dynamics or interdependency of formal and informal urban land markets as a factor contributing to high land prices. Specifically, the high prices for serviced land in the formal market seem to affect the relatively high prices of unserviced land in the informal market, and viceversa. In addition, the disposition of considerable amounts of land is controlled by agents that do not follow strict economic rules (some public and private agents). In Ciudad Juarez, land speculation continues as an important practice. According to the 1984, 1995 and 2002 urban master plans, the urban land vacant have been increasing passing 1,529 hectares in 1984 to 2,219 hectares in 2002. This situation generates overvaluation of the urbanized land and as a result the scarcity of urbanized land for poor inhabitants of the city. In effect, usually the provision of public services raises the land prices in an amount superior to the cost of the public services. The lots of land considerate urban are valued in $20–30 US dollars per meter² (m²). The provision of the public services cost $20–30 US dollars per m² approximately, but the commercial price can reach $50–100 US dollars per m². In this context, the urbanized land prices of 150 m² is equal at least the triple of the annual income of most of the maquiladora workers.

The acquisition of urban land by rich entrepreneurs and families is an old practice, and actually become more frequent among industrials and political groups during the last 22 years following the urban boom produced by the maquiladora industry (Stoddard, 1987). Overall, the most important beneficiaries of this process of land accumulation in the city have been former politicians, industrial entrepreneurs and members of the richest families who have taken advantage of their economic power or political positions to amass urban land (Velazquez and Vega, 1993).

The politics also help to the industrial park promoters to concentrate great portions of land. For example, four families –Villegas, Bermúdez, Zaragoza and Quevedo– own about 78,777 acres of land (Velazquez and Vega, 1993). The vast properties, equivalent to double the size of the current urban area, have left the city without vacant land toward the west and southern for future urban growth (Llera, 2001). This situation has forced the local government to expropriate land from two groups of investors and to negotiate with them about the future urban plans and urban projects for the city.

The extremely restrictive and exclusionary nature of the land market obliges many families to look for alternatives outside the formal market. In Ciudad Juarez, an estimated 30% of the population lives below the poverty line with average monthly incomes of US$ 250 (INEGI, 2000). There are definite economic barriers impeding access to the housing market, even under optimal conditions. However, in addition to the economic limitations, the structural barriers of the land market make the housing market even less accessible. In addition, for those families facing the greatest number of barriers, few economic programs are available; those that exist have not yet reached the dimensions necessary to successfully address the problem, not are they effective in the targeting of beneficiaries. With little no real access to urban land and an equally difficult access to the rental market, alternative strategies for satisfying shelter needs, namely land invasions are adopted.


VI. Spatial Segregation: The Case of Ciudad Juarez

This case of socio–spatial segregation6 is particularly compelling because of the extreme nature of the physical segregation (families are being resettled at a great distance from the downtown) as well as the clarity of three sets of variables influencing the resettlement sites: land market forces, institutional mechanism and the political and social pressures that emerged since the maquiladora program.

In this land market the city has followed the same trend, although perhaps more intensely, as that of many Latin American cities, with informal settlements or marginal neighborhoods. Most of them growing at the edge of the urban core on real estate, which is easily accessible to the urban poor due to its low value and undesirable topography. The marginal neighborhoods in Ciudad Juarez, which are often time found in areas with excessive slope, are characterized by an improvised settlement pattern, a lack of integration with the remainder of the city, and irregular tenure.

The socio–spatial index shows that the northeast of the city has the highest values, that mean that this part of the city present the best indicators in terms of education, income, and health. In contrast, if we move to the south and west we can find lower values of the index. The extreme northwest is one of the areas of the city with the lowest values of the index. This section was developed mainly through land invasion as a result of the elements described in the previous section.

The spatial segregation is characterized by households with incomplete or deficient access to public network or services, as well as irregular land tenure commonly characterized by an original land invasion which may later submit to a process of legal regularization. Despite these deficiencies, the population of the marginal neighborhoods maintained relatively ease access to the urban economy, including jobs, consumer markets, financial and transportation services, etc. There the nature of the segregation is based on the physical distance separating these residents from the urban economy.

The infrastructure deficit index shows a pattern similar to the socio–spatial index: the northeast part of the city has the lowest deficit of infrastructure. From there to the northwest and southwest, the deficit is getting worse.

The fundamental element of access in each of these scenarios suggests a preliminary operational definition of urban spatial segregation: unequal access to either public networks of services or private networks of the market place. In Ciudad Juarez, urban spatial segregation is furthermore results of existing legal and institutional frameworks that are unable to prevent the proliferation of spatially segregated human settlements or effectively mitigate their negative consequences.

The poor people who live in squatter settlements end up paying a higher price for land than the inhabitants of other parts of the city, and pay more for services like potable water, construction materials, food, etc. Even worse: the risk to contract diseases is higher given the hygiene conditions of their environment and the limited access to public services.

In the absence of policy and legal reforms, these forces provide a context whereby spatial segregation will continue to occur and, under particular circumstances, become exacerbated, as has been demonstrated by the present case. In this context, the municipal authorities of Ciudad Juarez (1992–1995) decided to participate in the local land market through the following measures: 1) Avoiding the negotiation with the invasions' leader, with this measure the occupied land has been started to regularize directly with the invaders, and as a general rule, the municipal government negotiates with the invaders and the landowners. The irregular settlements' inhabitants pay the land to the municipality and it pay to the landowner. This strategy seeks to reduce the land price avoiding intermediate participants and the political control. 2) Given the fact that the local government did not have a land reserve for low–income population, and the private landowner did not want to sell land, push the government expropriate 1,200 hectares of land –lote Bravo– (Guillén, 1995).


Conclusion

Like any other Latin American cities, Ciudad Juarez offers clear evidence that pervasive and persistent informality in land markets is both an effect of and a major contributing factor to spatial segregation. The exclusion is directly related to land speculation, the highly regulated legal housing market, the concentration of infrastructure investment, housing financing problems and construction productivity.

This situation takes worse outcomes in the case of Ciudad Juarez given the characteristics of its land market. As a border city, exist a huge demand for urbanized land for industrial parks, residential areas and commercial districts. The maquiladora industry became an organizing element of the urban structure as its presence meant increased competition for access to public infrastructure, ports of entry, and main arterial network. In this economic context, others activities like services, commerce and middle –and upper– income populations have the possibility to compete with industrial promoters for land that comprises the city's resources located east of the city. However, low–income population, the majority of which was attracted by the great supply of jobs that the maquiladora industry generated, are being resettled to the edge of the urban core product of inability to compete with other sectors for urban land.

This mechanism operates through the close relationship between landowners, industrial park promoters and politicians, who have used their economic support and political membership to influence the elaboration of local policies and encourage urban expansion towards their properties to speculate with urban land. Besides, they concentrate a high percentage of the land reserves creating land monopolies. These actions have generated overvaluation of the urbanized land and as a result the scarcity of urban land for poor inhabitants of the city. As result, working class people do not have access to the land market generating low density's housing away from the urban center.

In the land markets area, recognizes the need to reviewing the existing regulatory environments in Ciudad Juarez land policy agenda to design new urban norms and regulations that can be complied with more realistically by low–income sectors. This means adequately assessing the effects of alternative regulations on the pattern of land uses, specifically on the access to land and urban services by the poor.


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Footnotes

1 The methodology was taken from Tito Alegría, "Consideraciones teóricas y metodológicas de estructura urbana", in T. Alegría y R. Sánchez (coords.), "Las ciudades de la Frontera Norte", research report, El Colegio de la Frontera Norte, Tijuana, 1993.

2 One hectare is 2.47 acres.

3 The watering district 009 has a total area of 61,100 acres.

4 Instituto Municipal de Investigación y Planeación (IMIP).

5 Conventional economics argues that free market prices reflect the level at which a buyer's ability and willingness to pay matches a supplier's ability and willingness to sell, but in practice no assurance is given with respect to meeting social needs. That is, the market for serviced land may be functioning well, even though many families (even non–poor ones) are unable to access such land, and some existing urbanized lands are being kept vacant intentionally.

6 This topic is analyzed through the construction of the socio–spatial segregation.