Leopoldo Arnaiz
CEO
Arnaiz & Partners
/
View from the Top

Mass Social Housing Can Provide Sizeable Returns

Wed, 11/01/2017 - 14:16

Q: What role does Mexico play in Arnaiz & Partners’ international strategy?

A: In Mexico, we are launching a social housing project in Acapulco that is our most important in the country, although we have developed several real estate projects in Mexico City. We have also dedicated many years to the aspects of technology linked to cities and to urban planning. We believe in the use of technology to facilitate the control of the city and the creation of information. Our goal is to achieve citizen participation in the city and to incorporate technical infrastructure to optimize the functionality of urban controls.

A city has hundreds of different components and urban indicators. Understanding the globality of a city has become a science that Arnaiz dominates. The challenge is to create projects that promote synchronicity between all elements and the players involved, including urban planners, administrators, developers and the end user. In Mexico, we also collaborate with the Federation of Municipalities to propose ideas and solutions in the topics of technology and city planning.

Q: What have been the main challenges you have faced with the Acapulco project?

A: Our project in Acapulco consists of 30,000 units that will be inhabited by 120,000 people. We are practically building a city, which constitutes a new center for Acapulco, and we have to consider all kinds of elements, from amenities to the proximity to work centers. We will invest US$1.5 billion toward land purchase, planning and design, urbanization, implementation and commissioning of the necessary equipment and the construction of housing. We were interested in the idea of developing a social housing project in this municipality because it is recognized worldwide. Other cities of similar size in Mexico would not be so well-known and Acapulco has the advantage of offering added value to our international portfolio.

This development will take place in several stages over five to 10 years. We expect to start construction in one year and to finish the first stage in three years. Each home will have an average cost of between MX$40,000 and MX$45,000. The planning stage for the project has rather long due to administrative changes in the municipality and the impact of weather disasters in the area.

Q: What strategies do you use to mitigate the risks of urban planning and social housing construction?

A: We always seek to ensure an adequate link between the location of employment and the urban core of the project, and we ensure it is covered by all local services, such as schools and health centers, or general services such as universities and hospitals. We also consider safety and waste-management services so that the projects truly become sustainable and environmentally friendly developments.

Territorial planning should include a vision for the municipality in 10, 15 and 20-year time frames. It is also necessary to ensure continuity of projects through a commitment to the authorities. It sounds difficult but it is possible and has been achieved in a short time in other cities around the world. For example, in China there are cities with more than 10 million inhabitants built in less than 15 years.

Q: The luxury home segment accounts for a great deal of the residential investment in Mexico. Why are you choosing to develop social housing?

A: Latin America needs to develop 60 million units of affordable housing over the next 20 years to meet society’s demands. Many developers choose to focus on high-end or luxury homes, as 50 homes in this range can earn the same as 1,000 affordable homes. What we propose is to make large social housing developments with several thousands of units, which entails a fair return, in order to adequately satisfy this real demand for economic housing. Funding is also a challenge since more than 50 percent of the Latin American population does not have access to credit because it is “informal.” This informality implies that many families cannot access housing, although there are several support mechanisms and, above all, international financing for large projects