The Rise and Fall of EcoHouse

Published: Sunday, December 7th, 2014 by Aaron Leaf

Photo via Flickr: Fotos GOVBA

An unfortunate story now being picked up across global media is the saga of EcoHouse Group, the British based property developer that has been accused by various agencies of using Brazil’s social housing program, Minha Casa, Minha Vida to defraud would-be investors.

The housing scheme is a partnership between Brazil’s government, state banks and private sector contractors to build upwards of 3 millions units of affordable housing in an effort to close Brazil’s massive housing gap.

Anthony Armstrong Emery, the British businessman behind EcoHouse, has raised international investor money for construction projects in various parts of Brazil. He invested in and directed the operations of the Alecrim soccer club in Brazil’s northeastern city of Natal to promote EcoHouse in the runup to the World Cup.

Armstrong Emery established EcoHouse to raise funds overseas for Minha Casa, Minha Vida projects and apparently promised very high returns. Some of the advantages claimed by EcoHouse of investing in according to their website were:

  • Returns of up to 17.5% in 12 months

  • Low entry level investment of just £21,000

  • A track record of £4,000,000 already returned to investors

But with claims of impropriety mounting, the British newspaper, the Financial Times used a freedom of information request from the Brazilian government and found that EcoHouse Group is not on a list of participating construction companies.

According to FT, Brazil’s federal police and tax authorities are now investigating EcoHouse Group for money laundering, tax evasion, tax-related crime and criminal conspiracy on funds totalling $59.6 million handled over five years. Not only was the company not part of the official government program but was unknown to the Brazilian state banks they claimed to be affiliated with. EcoHouse claims to be a victim of malicious prosecution.

This story brings up a lot of questions for investors around the investability of affordable housing in countries like Brazil. The biggest question is how a company like EcoHouse, with its public profile, could manage to operate with impunity for so long. This should spur governments and impact investment funds to create vetted, transparent investment vehicles to facilitate responsible capital into affordable housing.