Market Systems to Enable Sustainability of Informal Housing in Lima, Peru
Updated: Sep 2, 2022
Editor's note (Michael Field from the Vikāra Institute):
The blog provides an interesting example of a project focusing on an important but often ignored population, the urban poor. While most MSD programs continue to focus on rural communities, in many countries, the fastest growing and often the largest component of the bottom of the pyramid segment are the urban poor. Additionally, housing, especially incremental construction of housing, is an important area as it is central to the well-being of this growing population. The blog also highlights the challenge around the idea of sustainability. Increasingly, MSD practitioners are interpreting sustainability differently in that there is no easily defined state where we can say something is sustainable as complex systems are unpredictable. The key is to define emerging changes in how market actors perceive and value a specific behavior, product, etc., to determine if that change is on a more firm footing in terms of durability. An additional and critically important aspect is how any initial change will lead to the next change. In systems thinking, it is essential to think more about the direction in which the system is changing instead of just thinking about a single static change, as complex systems are constantly evolving, and real systemic change happens over time.
Over the last few decades, the world has experienced an unprecedented urban growth due to population growth and domestic migration, which has led to the emergence of peripheral settlements characterized by informal building constructions that, when located in seismic areas, endanger human lives. This is particularly the case of the Peruvian capital city of Lima. In view of this situation, Swisscontact has implemented the Construya project, financed by the Hilti Foundation, which mitigates the vulnerability of the homes and promotes safe and sustainable construction through construction laborer training and awareness raising within the families in order to have them become agents of change. The goal is to have both the cities and the informal settlements be safe, resilient, and sustainable .
The Construya Perú project elevates the housing construction market’s performance level in Peru, from which up to 80 % operates under the self-construction format, according to reports issued by the Peruvian Chamber of Construction (CAPECO), and is mostly informal as well.
In order to attain sustainability, Construya applies the “Inclusive Markets” approach; thus aiming for systemic changes that promote, along with certain partners, the institutionalization of a training offer within the relevant training institutions and enable access to the professional services market (blueprints and supervision) for housing construction. This way, the revitalization of the supply and demand for services within the good construction practices market is promoted.
Working alongside CAPECO, the Construya Perú project got in touch with MUTUO, a platform that mediates housing construction projects in disadvantaged areas, bringing together architects and families from the bottom of the pyramid that are interested in building a home of their own. Based on this experience, the different factors that influence the families decision-making process in terms of the use of blueprints were analyzed, thereby exploring the feasibility of such service from a market system approach.
This study analyzed information about the goods and services market for the construction of homes within the base of the pyramid by mapping the current blueprinting service supply in Northern Lima. It was identified that the families value the tangible good, meaning the built object that helps resolve their housing conditions, and that the components of a value proposition for a blueprinting service they prioritize are:
Brand: meaning the evaluation and reputation of the blueprint supplier.
Quality: that they serve their purpose in terms of the construction process.
Benefits: if the blueprints allow them to build what they want (need) .
Price: the monetary value they need to pay in order to get the blueprints.
Time: the amount of time they need to wait for the process to begin.
Based on this analysis, we can infer that a blueprinting service business model needs to be able to articulate the required actions to get the families to reach their ultimate goal: a home (construction); not just the project design services (blueprint) or supervision, since they only constitute a mean to the final construction of the home.
The blueprint design service for housing construction is not sustainable on its own. Blueprint designers consider this activity and its contribution margin to be scarce. On the other hand, the execution of works involves a higher value for operators than the elaboration of blueprints by itself.
In this regard; the urban land providers, financial entities, municipalities, and construction industry professionals should be articulated in order for them to become synergic in a way that allows the viability the potential market’s resources .