Monday, September 17, 2018
Global Housing Watch Newsletter: September 2018
Why social responsibility matters for urban revitalization? How does a developer provide city center affordable housing? How can a developer involve the community in a urban revitalization process? What challenges do developers face? These are some of the questions that Keyes Christopher “KC” Hardin tackles in this interview. KC is the co-founder and CEO of Conservatorio SA—a real estate development company based in Panama City, Panama. He is also a Fellow of the Aspen Institute’s Central American Leadership Initiative, and a Research Associate at MITs Community Innovators Laboratory.
KC Hardin: Conservatorio SA is a real estate development company dedicated to sustainable urban revitalization. We started Conservatorio SA fourteen years ago to fix up a couple of historic buildings in Panama City’s UNESCO Heritage site, and it’s grown into a company that builds just about every category of product you can find in a downtown—hotels, condos, offices, multi-family, even cultural infrastructure like theatres.
We call our brand of real estate “sustainable urban revitalization” which is basically mixed-use, mixed-income urban core redevelopment with a heavy social inclusion component. Within all those categories we also build just about every level. We have hotels that are $17 US dollars per night and hotels that are over $300 US dollars. We build apartments that sell for $80,000 US dollars and others for $2 million US dollars. All within a few blocks of each other. We tend to hold on to commercial property for the long-term but we like to sell apartments because it allows us to recycle capital and we think that neighborhoods work better when people have a chance to own their own homes.
KC Hardin: On a personal level, I grew up in Miami until the 1990s and then in New York until 2003. For whatever reason I was always in neighborhoods that were either revitalizing or deteriorating. So, I had a sense for the good and the bad of an urban revitalization cycle. I saw how much better cities worked when their cores became vibrant and safe, but I also came to understand that there was a question of “better for whom?” So Conservatorio SA was founded on the question of whether it is possible to have the good of urban revitalization while minimizing its two big negative externalities: displacement and cultural homogenization.
That question has taken us down a long road of learning how to balance our responsibility to capital with our responsibility to community. Along the way we’ve picked up what I think is a pretty deep understanding of the mechanisms of social and economic exclusion, the long-term value of authenticity and how to co-create with communities.
KC Hardin: The Spanish laid out Casco Viejo’s fantastic street grid in the 1500s, and it has been transforming ever since, through numerous booms and busts. As Panama most recently boomed in the 2000s, Casco Viejo lagged the rest of the city. I think this is because very few investors understood how revitalization works back then. When we started Conservatorio SA in 2004 more than 80 percent of the building inventory was unrestored, there were four gangs that controlled the district, and raw sewage leaked onto the streets, just to name a few issues. But there were preservationists who fought hard to protect the area, and pioneers who started reigniting it culturally. It is now able to support a very high quality of life, and is a point of pride for the country.
KC Hardin: Housing prices have risen from being about 30 percent lower than the best parts of the city in 2007 to being about 30 percent higher now. I think that premium is due to limited supply, higher construction costs, and a unique lifestyle that doesn’t exist in other parts of the city. On the rental side, the change has been even more dramatic because it has gone from a neighborhood where most people lived in condemned buildings paying little or no rent to one of the city’s most expensive. So, in terms of relevance to the city and pricing, the neighborhood has gone full cycle from its last peak in the 1950s.
But that revitalization has come at a human cost because much of the population that moved in during the decline was not given a real opportunity to stay. There was a direct tension between public policies designed to restore heritage and create economic growth on one side, and the social need of preventing widespread displacement on the other. There were well-intentioned but isolated efforts to balance these tensions but going forward we need better public policy and a deeper understanding of the long-term value of authenticity in the private sector.
KC Hardin: Conservatorio SA has an internal policy of building one affordable housing unit for every high-end unit. We keep them affordable by keeping them compact, making parking optional, and sharing social areas and other amenities among several adjacent buildings. In many buildings, we mix market rate with affordable, so there are often a few units where the price is subsidized by those market rate units. There is also a government subsidy on interest rates for apartments that are under $120,000 US dollars, which helps keep the monthly payment affordable. For example, the monthly payment on a two bedroom can be as low as $380 US dollars, meaning that it is affordable for a minimum wage couple. That still leaves out a lot of people in our community so we need the government to address this gap.
KC Hardin: Besides building affordable housing, our primary social mission is to nurture an eco-system of social and economic inclusion programs. We believe that homeownership is a critical determinate of social outcomes, but we have learned that in historically marginalized communities the opportunity to buy, or even to move into a formal rental, no matter how affordable, is a very high rung on the ladder for many people. So investment in human development is the other key to minimizing displacement.
We invest in programs that address a multitude of interrelated problems like violence, teenage pregnancy, education, and poverty. We have also learned that all of those problems are just symptoms of a dysfunctional system. To create any sustainable change, those programs have to be tied together with a larger process of community organization, and empowerment that will hopefully push the community back into balance over the long-term. To help that process, we worked with the Community Innovators Lab at MIT to create a leadership development program called LiderazCo, which is short for “Leaders who Co-Create Community”.
KC Hardin: Resolving gang tensions was critical. We invested heavily in a program to integrate gang members into the broader community. The outcomes at the individual level varied widely, but I think it had the effect of not only reducing violence, but also changing perceptions in the public and private sector about what was possible. In Latin America there is a strong bias towards repressive policies towards gangs that is probably counter-productive in the long run, so one of the program’s goals was to build bridges between sectors that don’t normally connect.
KC Hardin: I see three big challenges for inclusive housing. First is antiquated zoning that requires expensive parking and generally encourages lower priced detached housing out on the periphery of the city. The rules are conceived around an ideal of city center apartments for middle-to-upper income nuclear families who have two cars and two incomes. That leaves out a lot of people and makes it hard to innovate with new housing models, though lately the city has been receptive to proposals.
The second problem is a strict bank financing criteria that generally filters out people who are self-employed and those who are in the informal economy.
The final challenge is the high degree of marginalization in our society. The lack of investment in human development has made it extremely difficult for a lot of people to break into the formal economy, especially here where the big job growth is in the service sector.
KC Hardin: In terms of lines of business, we are rapidly pushing further into bottom-of-the-pyramid, urban core housing solutions. We feel that affordable, multi-family housing with imbedded social services can be a profitable, and a key step in the ladder to equity. We are also working with our academic partners on some interesting commercial models around formalizing informal commerce. Geographically, we are now in Honduras and want to create urban core-focused joint ventures with like-minded developers throughout Latin America.
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Labels: Global Housing Watch
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