Renato, you are an architect and urban planner. What’s the role of housing in the prosperous development of a community?
In our cities 70 to 80% of the land is dedicated to housing. With such a ratio, it is clear that how we distribute and design housing is key for the prosperity - or the lack of prosperity - of a community.
In cities that are compact, accessible, with amenities in walking distance, with diverse neighbourhoods, for example, people use cars less and have shorter commutes. In sprawling cities where people need to drive more, there is an obvious impact on health and quality of life. There’s a direct relationship between prosperous communities and a responsible way to plan cities and distribute housing.
You co-founded FICA in São Paulo, Brazil. What does the situation look like in your city?
São Paulo is a megacity with over 20 million inhabitants. Commuting is a highly critical issue. Most of the focal points for its inhabitants – jobs, services, infrastructures – are concentrated in the city centre. Housing in central areas allows access to better public schools, cultural centres, libraries, parks and much more, which means access to opportunities for economic and social development. With that comes also a more diverse social network which increases social mobility.
Living in the outskirts can easily mean a two to three hour commute to the city centre – one way. This impacts the real estate market: the areas closest to the better paid jobs become very expensive. Living in a well-located area is a privilege for very few. Those who cannot afford it, pay with their time, quality of life and – ultimately – missed opportunities. If you think that in São Paulo 1% of landowners own 45% of properties, it is clear how opportunities remain exclusive for very few. Informality is also a big issue. At least 30% of the city’s housing was built without authorisation – so-called informal settlements.
This represents a huge challenge. Besides their very poor quality, these settlements are highly inefficient. If a resident starts living in a building before it is properly finalised for housing purposes, it is much more expensive to set up the infrastructure afterwards. Low-income families unable to show the required bank guarantees for a rental contract are legally unprotected and find themselves in extortive housing situations. In São Paulo, the so-called let-and-sublet system is common: a tenant sublets their apartment unofficially to multiple families, at an exorbitant price. Usually it’s one family per room with a shared bathroom. The buildings – known as ‘cortiços’ – are often derelict. These families end up paying a higher rent per square-metre than the middle and upper class do in the formal market.
What trends and best practices can be seen in the area of fair housing?
On a negative note, after the pandemic we saw many people giving up their urban spaces. Working from home is the privilege of a few. Workers in cleaning services, or manufacturing plant workers, for example, cannot work from home. ‘Smart working’ is essentially for managerial, usually better paid jobs that allow for working remotely. Hence, we witnessed a flow of the elite towards smaller areas outside cities. This is worrying, because when the elite detach themselves from the city, they lose empathy, understanding and involvement in the city’s problems, leading to even greater separation and silo-effects.
On the other hand, we are seeing more examples of non-speculative properties. After decades of speculation, gentrification and evictions, there is greater awareness of the many layers of inequality connected with real estate. Some groups are working to secure areas of urban land and cancel out speculation. Thriving, contemporary realities include cities like Zurich, Switzerland, where 18% of housing is cooperative, ensuring fair housing for people that cannot afford speculative market prices. The local authorities simply understood that privatising housing would not have helped to make Swiss society better and more democratic. Another example is the Fuggerei, in Augusburg, Gemany. Established in in 1521 by the Fugger brothers, it is the oldest existing social housing complex in the world. 150 catholic-faith needy live there, committing to an annual base rent of €0.88 and three daily prayers. The model thrives as it is financed through investment in forestry made by the Fugger family. In Latin America, the only relevant example is Uruguay, which has been investing in affordable housing since the ‘60s. Brazil is far behind. Hence we decided to found FICA.
‘Things that work’ in fair housing
Y Foundation, Finland
In 1985, Finland’s government decided to address its homelessness problem by increasing the amount of affordable rental housing. The Foundation builds, renovates and leases buildings across Finland, amounting today to 18,500 homes in 60 locations offering housing to 26,500 residents. Proper, beautiful, housing, which is integrated in the cities, close to work opportunities, amenities and support services helps the residents develop their social network and improve their life prospects.
Vienna, the ‘affordable housing paradise’
An estimated 62% of citizens in Vienna live in some form of social housing. The success of the formula has helped Vienna stand out as one of the most affordable major cities in the world.
How is FICA tackling São Paulo’s housing and inequality problem?
FICA is a non-profit organisation that we established in 2015. In Portuguese, FICA means ‘stay’, conveying the sense of stability that we want to provide to the groups that we address with our work. Our strategy is to acquire extortive or potentially extortive real estate in central São Paulo and repurpose it into affordable housing at cost price. Our work starts with the acquisition of properties. In some case we receive them through donations, like the first apartment that we managed where a family with three children has been living since 2019. In other cases, we buy through crowdfunding, or we rent at a low price and sublet. Then we renovate, select and support the tenants, take care of administration and maintenance.
So far, we have raised over R$ 8 million (€ 1,425,000). We are currently handling eight properties, which are now protected from speculation and where 29 families are living safely, paying rents up to 60% lower than the market price. Recently, we received donations of R$ 3,300,000 to manage a housing project for low-income families, and we are negotiating a purchase of a building worth R$ 4,000,000 by a family who asked us to develop a housing centre for low-income students. To onboard individuals, families or institutions interested in investing in affordable real estate, we have developed an impact investment mechanism, delivering a return of 4% per year over 10 years.
You mentioned investors and donors supporting FICA’s cause. What motivates them and why should others join?
There are different drivers. Many wealthy Brazilians are becoming uncomfortable with the increasing social inequality in our country. They are concerned and start voicing their discomfort: “I do not want my money to keep shaping a world in which I do not believe”. They start questioning basic things, from the quality and sustainability of the food they consume, to how they enjoy their vacations. When you start this journey, the next question is ‘what’s going on in the property market? How are my choices affecting the people around me?’.
Those who own real estate often happen to have more than they want and need, which sometimes can be a burden. For example, inherited properties in third generations are often highly fragmented, presenting succession and administrative challenges. They require maintenance and management of the tenants, as well as taxes. FICA can handle this complexity: the owners can free themselves from time consuming obligations, and we can turn a burden into an invaluable asset for those who need it. There’s more: the added value they see in collaborating with FICA is to support a non-profit that does not spend money, but stewards wealth towards properties creating long-term social value. The project matches their ambition to see their fortune serve and last long term for a greater interest that benefits society as a whole.
What are your plans for the future?
We started developing the concept of social property in Brazil. Now, we want to upscale it. We hope we can inspire other groups in civil society to copy and replicate our model. If we provide social housing for 50 families by 2030 and become a trusted model for the state to use as a basis for their future housing policy, I will be very proud.
Do you want to make a difference?
Your contribution can change the life and prospects of a family in São Paulo. The options are multiple:
- Learn more about FICA and/or connect with the team if you have a property which is not serving you
- Contact the Julius Baer Foundation for further information on impact investing (foundation@juliusbaer.com)