For six decades, migrants have been pouring into the cities of Latin America and the Caribbean, boosting the percentage of the urban population from 50% to 80%, and delivering large benefits, including greater specialization, competition, innovation and entrepreneurship, to the region’s metropolitan centers.
But while migration to cities often results in significant gains, it does not come without its share of challenges, not least the impact on housing prices and on the residential conditions of the migrants themselves and the neighborhoods where they settle.
As we point out in our recent report on urban migration, these challenges need to be effectively addressed to fully reap the benefits of urban migration.
Lower Rates of Homeownership
Owning a home often helps families generate wealth and achieve financial stability, as they accumulate equity through mortgage payments, invest in their properties, and lay down strong social ties within their communities. It has also been linked to better mental and physical health. Homeownership rates, however, are substantially lower among migrants than among long-term residents.
To improve our understanding of this home ownership gap (HOMG), we examined the role of demographic factors in shaping this difference. The analysis, depicted in Figure 1, presents both the “raw” and “adjusted” homeownership gaps over time. The data reveal that migrants remain significantly less likely to own homes compared to residents, even after discounting the effects of demographic factors. The homeownership gap between residents and migrants in Ecuador, for example, was close to 0.45 percentage points. While migrants are generally younger and have lower incomes than residents, we found a significant gap of 0.32 percentage points even controlling for demographic characteristics, like income, age, and marital status.
Figure 1. Homeownership Gap by Migratory Status
Notes: This figure shows conditional and unconditional homeownership rates in Latin American countries by migrant status. The countries included are Argentina (ARG), Bolivia (BOL), Brazil (BRA), Chile (CHL), Colombia (COL), Ecuador (ECU), Guatemala (GTM), Nicaragua (NIC), Peru (PER), Paraguay (PRY), and Uruguay (URY). Unconditional gaps simply reflect the difference in homeownership rates between residents and migrants. To compute conditional rates, in each country we estimate a linear probability model where the outcome variable equals one if the household owns the housing unit where it resides, and zero otherwise. Explanatory variables include the household’s income, the head of the household’s age, gender, marital status, and education, and an indicator for migrant status. The coefficient on migrant status is the conditional homeownership gap. Results were similar when estimated only for international migrants.
Migrants also tend to experience worse residential conditions relative to non-migrant residents. They often reside in smaller spaces, with fewer rooms and bedrooms, more crowding, and less access to exclusive cooking areas. As shown in Figure 2, they also have less access to drinking water and good quality sewage in some countries. These deficits make a big difference: they are a drain on public health, environmental sustainability and economic development.
Figure 2. Public Water and Sewerage Access in Latin American and Caribbean Cities by Migratory Status
Better Rental Markets for Better Housing
These findings highlight the key role that the local rental market has in helping cities accommodate migration surges and point to potential areas of reform.
Additional efforts should be made to take advantage of the available housing stock and support the development of rental markets. Rental units are often better located and of higher quality than the average housing unit for sale. By reducing the paperwork and procedures for converting homes into rental spaces, without sacrificing environmental and safety standards, policymakers could enhance overall job accessibility and integration of migrants into the labor market.
In recent years, “platform-based” services offered by companies like Airbnb, Vrbo, and CouchSurfing have surged in popularity for their ability to connect travelers with hosts who offer short-term stays in private homes. Similar methods could be used to assist migrants in finding housing. This would be a boon to all migrants, but particularly beneficial for international ones who often lack the guarantors required for rental contracts. Tourism or business hotspots may not be ideal for such initiatives. Platform-based rental services compete with hotels and other traditional hospitality services in such places and make rents less affordable. But in other areas, less appealing to tourists but nonetheless close to schools, public transportation, and other resident amenities, such efforts could alleviate housing constraints to urban migration while offering an income to homeowners who convert their homes into short-term rental units.
In the long run, cities that are regular migration destinations should also increase the stock of affordable housing, especially in areas close to city centers where migrants can access the best jobs and avoid the informal settlements far from the hubs of business activity.
Helping Migrants to Actively Contribute to Urban Economies
Such initiatives would not only help migrants but urban economies as a whole. Migrants best contribute to the development of cities when they live close to areas where their talents are needed and feel a sense of security and control over their living environment. Becoming a homeowner is an important step in that direction, fostering social ties and community involvement, including volunteering and voting. But acquiring a home does not happen overnight. Until they achieve the job stability and savings need to buy a home, migrants will benefit from the elimination of red tape and the development of rental markets. To the extent that policymakers act with that reality in mind, migrants can not only become more productive, but also better contribute to increasing aggregate productivity and prosperity in the cities in which they live.
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