Introducing the New Housing Entrepreneurs: WUF7 in Medellin

Published: Friday, May 30th, 2014 by Lenora

“We are giving these working families a choice when they buy a home, and that’s a very new approach for affordable housing.” – Roberto Moreno, President, Amarilo

“We are building housing and infrastructure of course, but our model is different because community is at the center. And our communities are building their own capital.” Juan Carlos Franco, Director General, FMSD

“Informal workers in peri-urban areas need houses that will work for them and generate income for them. These houses pay for themselves.” – Amanda Bower, Chief of Staff, DomoGeo

These distinctive statements mark three novel approaches to affordable housing in the emerging and developing markets. Our World Urban Forum 7 panel, “The New Housing Entrepreneurs: Business Models That Integrate Inclusion, Well-Being and Sustainability,” highlighted promising business and social enterprise approaches to affordable housing. This four-part series transports back to our WUF7 panel and highlights more information about these emerging models:

  • Lenora Suki of Smart Cities Advisors set the stage for the panel with a tour of the changing landscape for affordable housing enterprise models – some daunting, other elements promising.
  • Roberto Moreno, President of Amarilo, talked transformation, turning a strictly for-profit model into a long-term commitment and a competitive effort to improve the quality of the affordable housing community “product.”
  • Juan Carlos Franco, Director General of FMSD, moved into the vision of a progressive non-profit developer that empowers residents across the spectrum of community building with self-governance, a social capital fund and a comprehensive approach to supporting livelihoods.
  • Amanda Bower, Chief of Staff of DomoGeo, discussed a highly targeted focus on meeting the needs of peri-urban dwellers and home-based entrepreneurs with well-designed, sustainable live-work spaces that pay for themselves by supporting income generation.

Affordable housing at a turning point. Recent challenges to affordable housing in the emerging markets form the backdrop of the panel. Public debt defaults of $1.5 billion by Mexico’s major housing developers in 2013 should remind housing professionals of the occasionally tragic social, financial and environmental consequences of poorly planned and implemented policies. Mexico’s crisis also serves as a reference point for what has to change. All the stakeholders, especially commercial developers, have to collaborate to avoid another repeat.

(Photo credit: Livia Corona from Two Million Homes for Mexico, www.liviacorona.com)

Business model innovation. Model innovation in affordable housing and housing finance seems to be catching on. So are investors, thanks to the explosion of interest in social business or social enterprise and sustainable, responsible and impact investment. High impact urban enterprise innovation includes new affordable housing development for purchase, rent and lease-to-own, urban regeneration projects, green rehabs and retrofits, heritage revitalization, transit-oriented development, and waterfront and brownfield redevelopments. Sustainably-designed temporary and self-built structures have also introduced immediate solutions for upgrading communities in situ. Investment funds have been launched in the past couple of years by International Housing Solutions and Habitat for Humanity International. Urban services and IT-enabled urban management solutions are also part of the “smart cities” wave.

More than infrastructure. With the resurgent interest in housing enterprise models comes a new recognition that home and community are more important than houses. Residents and developers both want to ensure that a new housing development stands the test of time and reputation. To do this, they are working on the economic, social and cultural pieces of “community.” Community engagement and participation has become common as developers are supporting residents’ associations, for example, and sponsoring neighborhood activities. Incremental building, community rehabilitation and cooperative management are starting to enter the picture as well. The overall message is that place and social networks are as important as land, credit, and physical infrastructure.

Back to the core. The final challenge to Mexico’s affordable housing markets was struck with the new Mexican government‘s shift in urban policy emphasis to support projects closer to urban economic activity (e.g. jobs, markets, social infrastructure, etc.). Independent of government housing policy, the pendulum had already started to swing back towards neighborhoods closer to the center in places like Rio, Sao Paulo, Quito, Bogota, Johannesburg and Cape Town in the past several years, reversing decades of neglect. As in developed markets, the emerging markets downtown renaissance has started to attract new housing, services and commercial development.

A Network and Peer Learning Answer. The Developing Smart Cities platform was designed as a response to renewed enthusiasm for market-led affordable housing solutions in emerging and developing urban markets. This community of professionals, all working to make a difference in their cities, can influence housing and urban regeneration in their communities by drawing on the knowledge and interest of like-minded leaders tackling similar issues all over the world. This video illustrates the features of the Developing Smart Cities site:

In the next three parts of this series, the story of affordable housing development moves from a formal market-driven solution to community-building for informal sector workers to a hybrid enterprise-housing response for peri-urban communities.

Coming up next: Amarilo and its master developer approach to large-scale affordable housing