Financial market actors as urban policy-makers: the case of real estate investment trusts in Brazil (original) (raw)
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A B S T R A C T This paper provides two contributions to the research on urban planning and the financialization of land use. Instead of stressing the consequences of finance on others, it prioritizes the analysis of the social-technical constitution of finance itself within urban planning, and does so in an emerging country setting, which is still relatively understudied in the existing literature. We analyse a specific Brazilian planning instrument, i.e., the sale of securitized building certificates (CEPACs) in large urban (re)development projects (UDPs), as a potential constituent space of urban financialization. The paper explores how planners, financial consultants, contractors and builders/developers effectively shape the contradictory financial and physical design and implementation of UDPs with CEPACs. Although the initial evidence shows that there are still clear limits to the penetration of financial logics into land use planning, continuing regulatory rollout and the increasing activism of foreign investors suggest the instrument's open-ended trajectory, with a potentially more significant role for financial actors in constituting urban financialization through CEPACs.
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Financialisation and housing are predominantly associated to mortgages for homeownership and securitisation techniques. This paper looks at how financial markets influence the development industry, its business strategies, and the nature and location of its products. Adopting a supply-side account, the paper inquires into the rising role of financial markets as a source of funding for a consolidating development industry and its influence on the geography of housing in Brazilian cities. It develops the concept of resonance by combining two yet unrelated strands of literature on the study of financial markets (cultural economy and conventionalist economics). Narratives co-authored by the stock market community and development firms management over each individual firm, and the discursively linked strategic moves of developers, are shown to resonate, at the meso-level of the industry, into shared social representations (or conventions) on how to best assess and interpret the value of development firms. Analysing the wave of Initial Public Offerings occurring in the mid 2000s, the paper highlights that narratives of quick capital gains associated with the removal of the land banking bottleneck faced by developers supported a convention giving priority to the growth in total output, and contributed to the observed changes in the forms, scales and locations of housing projects in Brazilian cities. As discrepancies between the promises of returns for shareholders and actual financial results emerged, the growth convention unravelled, making way for other narratives and strategic moves to resonate anew and possibly change again the geographies of housing.
SECURITIZATION OF HOUSING AND FINANCIALIZATION OF THE CITY IN BRAZIL
SECURITIZATION OF HOUSING AND FINANCIALIZATION OF THE CITY IN BRAZIL , 2021
With the promulgation of the Real Estate Finance System (REFS) in 1997, the sociotechnical mechanisms needed to develop real estate securitization in Brazil started to be created, particularly the Certificates of Real Estate Receivables (RERCs). Their use, dissemination, and main agents are analyzed in this text, searching for a deeper understanding of the connections between real estate and finance in Brazil. Thus, the objectives of this work are on the one hand to analyze the trajectory and specificities of the financialization process of housing in particular and cities in Brazil and to understand the RERCs' contribution to the expansion and intensification of housing financialization processes on the other. The analysis focuses, in a critical perspective, on two specific agents presenting their shares on the securitization market: the Caixa Econômica Federal (CEF), the largest supplier of credit for housing in Brazil, and MRV Engenharia S/A, one of the largest Brazilian construction companies and real estate developers. The transformations emerging from their actions have resulted in the creation of a unique financialization and securitization model, which involves the expansion of the process to cities of different sizes and residential properties of different values and the strong presence of the State, sharply underscoring residential real estate financialization trends and the production of urban space in Brazil.
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Laisa Stroher examines the history of large-scale urban regeneration projects in Brazil and shows how a policy instrument initially designed to respond to a lack of public funding has morphed into a tool that has helped transform urban land into a financial asset, , leading ultimately to the displacement of populations without delivering on the initial social promises.
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Since its re-democratization in the 1980s, Brazil’s progres- sive agenda on urban reform and participatory ci mana- gement has been widely recognized for its initiative in many areas. These initiatives are part of a legacy of achievements in social and institutional movements seeking to produce greater equality in cities in a country that, despite periods of rapid growth, is one of the most unequal in the world. This progressive agenda has come under increasing pressure from groups that seek to expand and re-shape cities according to their own interests. This essay poses four questions with emphasis on aspects relating to housing provision: Who builds housing in Brazil? How does housing policy feed the real estate circuit? Who controls housing development today? and Where and how are the large estates of low-income housing developments built? Finally, some of the differences and similarities between the transformations in Brazil and those that occurred in the United States are explored, taking the la er country as a counterpoint because the connections between real estate and finance have evolved there the most. The paper was published in a volume that appears in the series Wohnungsfrage. The publication series is part of the exhibition project Wohnungsfrage (October 23 to December 14, 2015), conceived by Jesko Fezer, Nikolaus Hirsch, Wilfried Kuehn, and Hila Peleg for Haus der Kulturen der Welt, Berlin. www.hkw.de/wohnungsfrage
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The complete process of housing production is an important element in defining patterns of inequality. This paper aims to identify and characterise changes and continuities in the real estate wealth, with a focus on the residential segment. In doing so, we observed several two-way interactions, situating them in the long duration of the constitution of highly unequal structures in Brazil. In particular, we describe the reconstitution of the credit system by the Workers' Party government, in the 2000s, as a moment when interactions with the theme of inequality became more complex. The reorganisation of the regulatory framework and the expansion of housing credit in the 2000s generated a substantial increase in real estate activity and created a housing boom. In the text, we present three rounds of IPOs from real estate developers and discuss the most significant (2006-2008). While this round originated in the increase in real estate credit, its sustainability only occurred thanks to a housing policy that mobilised billions of reais (BRL) in subsidies for the construction of millions of houses. The amount was unprecedented and allowed the policy to reach social strata that had not had access to formal housing before – in this sense, it responded to a social and political demand. On the other hand, this volume of public funds was also significant for the financial real estate circuit. This increase in scale gave more power to homebuilders that decisively influenced the design of the housing programme. Some effects of this conflictive and multidimensional process on the struggle for the right to the city are discussed throughout the text.
Housing Policy and the Restructuring of The Real Estate Sector in Brazil
This paper examines the restructuring of the real estate sector in Brazil and its correlation with housing policies implemented since the late 1960s, with a special focus on analysis over the territorial impact of these processes in the Metropolitan Area of Rio de Janeiro (RMRJ). During the 1980s the homebuilders adapted their organizational structure based on self-financing practices and cooperatives. In the following decades, the real estate sector began a second restructuring process focused on two dynamics: the financialization of real estate companies and the spreading of activities of few construction companies all over the country through merging strategies. Between 2003 and 2004, other processes reinforced these trends: (a) Real Estate companies have held IPOs, capitalizing and diversifying their operations; (b) changes in regulatory funding policies expanded exponentially the credit conditions to the general public; and (c) the economic growth has been fostered by government policies, with a progressive fall in general interest rates and with raises in the lower and middle classes' average incomes.
The Financialisation of Housing by Numbers: Brazilian Real Estate Developers since the Lulist Era
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This article examines the emergence of large-scale real estate developers in the Minha Casa, Minha Vida [My House, My Life] housing programme launched in 2009 by the Lula government and their repositioning caused by the economic crisis that hit the country five years later. Their development, based on a systematic use of financial valuations in their governance, strongly connected with international investor requirements, enables us to defend an extended notion of financialisation of housing policies, characterised by the colonisation of managers’ activities by financial metrics. The question of trust in financial numbers is essential when splitting the sector into two groups that occurred with the crisis: some developers worked even closer to investors, while others substantiated public economic power, balancing investors’ demands. The argument is that the entanglements between the circulation of financialised valuations in professional activities of private agents gradually transformed the structure of housing provision itself.
THE LIMITS OF LOCAL MANAGEMENT IN THE STRUCTURING OF THE CITY’S TERRITORY: REFLECTIONS ON REAL ESTATE VALUATION (Atena Editora), 2023
The structuring of urban space is a product of the clash between urban planning and the “invisible hand” of the market, which creates a pattern of urbanization influenced by multiple variables, some manageable at the local scale and others that can be understood and modified only at larger scales. comprehensive, generally inaccessible to local managers. These non-local factors, such as population dynamics, the wage bill and the availability of credit, remain hidden and neglected in local territorial development actions, which undermines their effectiveness. Ignoring what cannot be changed contributes to the construction of territorial diagnoses full of “blind spots” that can guide local instruments and programs that are insufficient to change reality. This article addresses this issue from an exploratory approach to the popular housing market in the Macrometropolis of São Paulo - Brazil with the objective of identifying the non-local variables that contribute to explaining the structure of the real estate market. Understanding the local - non-local relationship can favor the conception of a new generation of territorial instruments to promote local development, which act in a less reactive way, enhance the integration of urban policies and recognize territorial complexity on multiple scales, thus, truly transform cities.
The financialization of real estate and urban re/development is an increasing trend, not only in the Global North but also in the Global South. This paper presents how urban redevelopment has entered a financialized phase in Rio de Janeiro, Brazil. The local government aspires to redevelop the area surrounding the city’s port through a project named Porto Maravilha (“Wonderful Port”). Not only is a federal policy scheme, named “Urban Operation”, utilized to foster this redevelopment project; federal land, and federal investments are also mobilized to enable this massive intervention. Furthermore, additional development rights are traded as a pure financial asset, contributing to the financialization of urban redevelopment. The leading actor in the project, FGTS, is a federal agency that owns the additional development rights, and whose involvement in the project is regulated by a privately-run city agency, CDURP, that operates in a space of exception (outside of normal democratic control mechanisms). In the end, land ownership and development, urban redevelopment and planning, finance, and various arms of the local and federal state have become entangled in a speculative logic. This logic preys on but also furthers uneven development in the Rio metropolitan area, resulting in displacement and selectively channeling investments into areas designated for commercial/office activities as well as into residential areas for the rich. The case of Porto Maravilha shows how land and development is no longer treated only metaphorically as a financial asset (à la Harvey), but also that land development rights are literally treated as just another financial asset. KEY WORDS: Urban Operation, Urban redevelopment, Financialization, Public-Private Partnerships, Rio de Janeiro, Brazil