Housing under finance influence:

the case of So Paulo, Brazil.

Higor Rafael de Souza CARVALHO,
Urban planner, PhD candidate. higorrafael@gmail.com

Daniel vila CALDEIRA,

Economist, PhD candidate. dac@usp.br
Authors current affiliation:
Graduate School of Architecture and Urbanism University of So Paulo.

Abstract
Following an international trend, structural changes have happened in Brazilian
real estate markets. In the context of globalization of capital, Brazilian major
homebuilders have gone through financial markets for less than a decade and,
not by chance, they are those who concentrate a significant part of the private
housing production in the country.
In these terms, there is an approximation of the financial stock market to
housing production, with demands for management and production
adaptations of a sphere over the other. Thus, an important part of new homes is
being built in accordance with the economic strategies of this group of actors,
increasingly subject to the interests of its shareholders, not rarely foreign
speculators, who seek to multiply their capital in the abstract and speculative
sphere of the financial world.
The State plays a vital role in this context, acting to ensure the valorization of
the developers` and investors` private capital, both national and international.
Comparing the financial performance and housing production of three of the
main residential real estate groups in Brazil, regarding the experience of So
Paulo with more attention, the paper aims to map how the new economic
strategies of the major real estate developers in Brazil emerge and materialize,
questioning the effects on market output of that which is, at least legally, a
citizens right and a State duty.
Keywords: housing, finance, So Paulo.
1

1.

Understanding a territory

The Greater So Paulo, composed by its 39 cities.

With a population of about 20.7 million inhabitants spread over 7,900 km1 of
urban area, in 39 municipalities, So Paulo Metropolitan Area (SPMA) is one of
the biggest metropolises in the planet. Product of a historically unequal urban
growth based on the concentration of private capital and on the extremely
uneven distribution of public infrastructure, So Paulo can be understood as the
exacerbation between accumulation and poverty2. Not coincidentally, despite
its GDP being about R$613 billion3, this metropolis faces a big challenge
concerning housing for its citizens.
In the SPMA, an estimated 2 million 99 thousand households (about 6 million
people) live in subpar conditions in 20104, of which at least 318 thousand
families need a new home5. These are the effects of an urban center which has
1

Source: IBGE, estimation for 2012.

P. F. C. Camargo et alli, So Paulo 1975, crescimento e Pobreza, So Paulo, Loyola, 1976.
3
About US$ 306.5 billion.Source: IBGE, 2009.
4
Such as favelas, irregular settlements, precarious tenements and cohabitation.
5
Source: So Paulo (Estado). Necessidades Habitacionais no Estado de So Paulo, 2010.
2

grown fast without distribution of wealth, opportunities and lacking housing

policy and an inclusive urban design. However, the formal housing market is
far from meeting such a demand. Since the 1940s, for millions of poor families,
housing has been associated with self-provision in subpar urban settlements
and affordability has always been made difficult given the market structure
highly driven to the production of homes for upper and medium social strata.
Even if this exclusionary pattern has not been structurally altered, the last
decade brought some shift in this picture, with both the building industry (even
if even though construction in Brazil still relies heavily on traditional
techniques) adapting itself to meet a larger part of the demand from the lower
classes an enormous repressed market adhering to a public federal housing
program, but also some important changes on their economic and financial
structure.

2.

Understanding a market

While the first experiences of private capital reproduction on urban sphere in

the city of So Paulo took place in the last decade of the nineteenth century with
the design of formal subdivisions for upper-class settlements6, until the 1930s,
in Brazil, prevailed a housing development model based on rental development
for the working class7, frequently in subpar conditions, and led by
entrepreneurs from local petty bourgeoisies. Besides, at least since the 1940s, for
millions of people, housing has been associated with self-provision8. It only
became a capitalist production model (in the terms set forth by Christian
Topalov9) in the middle of last century, stimulated by changes in the countrys
economic and political structures, by means of an economic policy of import
substitution industrialization10 - that was also the time of first experiences with
direct housing provision by the State.
But it was only in 1964 that a federal policy for housing finance was created in
the country, with the Housing Funding System (SFH) initially operated by the
National Bank for Housing (BNH), pioneering long-term finance for housing
development in Brazil. According to Fix11, the BNH was created also in order to
6

H. Carvalho, Campos Elseos: um bairro, um patrimnio, uma cidade. Um caso histrico de patrimnio
pblico e mutao urbana na cidade de So Paulo.
7
C. Lemos, Prefcio. In: M.R.A. Sampaio (org.), A promoo privada da habitao econmica e a
arquitetura moderna, p. 6; N. Bonduki, Origens da habitao social no Brazil, p. 43.
8
N. Bonduki, op. cit.
9
C. Topalov, Les promoteurs immobiliers: contribution lanalyse de la production capitaliste du
logement en France, p. 15.
10
E. Maricato, Indstria da construo e poltica habitacional (tese de doutorado), p. 92.
11
M. Fix, 2011: 144.

face unemployment during a recession time. From its inception until its demise
in 1986, the BNH was responsible for financing the construction of almost 5
million homes in Brazil12, most of them addressed for Brazilian middle class.
The SFH still exists, and it is responsible for managing credit operations funded
by the Assurance Fund for Period of Work (Fundo de Garantia por Tempo de
Servio, FGTS) and the Brazilian Savings and Loans System (Sistema Brasileiro de
Poupana e Emprstimo, SBPE). After the closing down of BNH in 1986,
management of the FGTS has been transferred to Caixa Econmica Federal (or
simply Caixa) a federal government-controlled bank. The fund collects an 8%
tax on the payroll of all formally employed workers and is intended primarily
to provide unemployment insurance but can also be used by the contributors
to buy a home13. FGTS-funded loans typically finance the purchase and
construction of low-income housing14. The other main source for SFH loans, the
SBPE, requires commercial banks to earmark 65% of their savings deposits for
housing loans for middle-income families.
The system was created during the Brazilian economic miracle of the late
1960s and early 1970s, when Brazils GDP grew at an average annual rate of
11,1%15. In spite of the sheer unmet demand for housing in Brazil, the SFH was
the first nation-wide massive housing finance initiative, and the number of
housing units financed by the SFH during the brief life of the BNH peaked in
1980 at 628,000. In the wake of the 1982 Latin American debt crisis, massive
withdrawals from both the FGTS and the SBPE combined with soaring
inflation. While the monthly installments were indexed to the borrowers wages
(systematically adjusted below inflation, following the official minimum wage
policy), liabilities were adjusted according to inflation. A fund the FCVS
(Fundo de Compensao de Variao Salarial, Portuguese for Fund for
Compensation of Wage Variation) was created to cover any shortfall between
the adjusted payments and the agreed payments when mortgages matured16.
Soon the solution proved itself unsustainable. That situation eventually forced
the federal government to shut down the BNH. Although the SFH itself
continued its operations under Caixa, housing credit remained practically
paralyzed17 for almost 20 years.
The economic conjuncture of the mid-1990s in Brazil could not be worse for
both the old and the new housing credit systems to take off and for the lives
12

N. Bonduki, Origens da habitao social no Brasil, p. 318.

Haddad & Meyer, 2009, p. 287
14
For caixa, low-income housing is divided into two bands: housing for families earning up to R$ 1600
(US$ 800)/month and for families earning between R$ 1600 and R$ 5000 (US$ 2500)/month.
15
IBGE.
16
Haddad & Meyer, p. 288
17
Ibid.
13

of the working poor. The Plano Real was a set of economic measures
implemented in 1994, devised to end with hyperinflation, an issue that had
become chronic since the 1980s. Inflation was attacked by pegging the newly
created currency, the real, to the U.S. dollar at a 1 to 1 rate. To sustain the
overvalued currency, the interest rates of risk-free Treasury bonds had to be
fixed at internationally competitive levels in order to attract foreign capital.
These measures meant imported consumer goods were cheaper than the
products offered by the less competitive national industry. High interest rates
and the overvalued currency had as a consequence initiating a process of deindustrialization that brought about rising unemployment and slow economic
growth. As a matter of fact, in the years 1995-2002, annual GDP growth
averaged only 2.3%.18
In 1998, in the wake of the Asian financial crisis, the outflow of capital from
Brazilian financial markets forced the Central Bank to devalue the real and raise
interest rates to levels unheard of. In the period from 1995 to 1999, the average
annual interest rate on risk-free Treasury bonds was 32.34%19.
Throughout the early 1990s, there was intense debate in Brazilian society to find
a solution for housing credit and finance. In 1997, the federal government
answer to social pressure by sanctioning the SFI (Sistema Financeiro Imobilirio,
Portuguese for Real Estate Financial System), a new system that would
complement the SFH20. The new system introduced some innovations such as
the instrument called alienao fiduciria, a form of liens whereby property
bought with SFI funds remain under the lienors direct liability until the debt is
paid off.
In spite of the new regulations, in tune with the neoliberal wave that hit
mainstream Brazilian economic and political thinkers (and regulators), housing
credit did not expand as expected after the implementation of the SFI. In fact,
up to this day, SFI advanced more in financing commercial buildings than in
the residential segment21, an indication that the new regulation was not
designed to address the sheer repressed demand for housing in Brazil, but
merely to secure low risk for creditors.
Having in mind the economic conjuncture of the late 1990s, it should not be
hard to understand why housing credit remained stagnated. Housing credit
being a high-risk, long-term modality of financial operation, both the SFH and
the SFI it could never have fulfilled their intentions when buying risk-free
18

http://www.ibge.gov.br/home/presidencia/noticias/imprensa/ppts/0000000776520311201252260661
9383.xls
19
http://www.ie.ufrj.br/moeda/pdfs/Modenesi_Modenesi_26-05-10_FIN.pdf
20
Maricato, 1998.
21
Fix, op. Cit., p. 132.

bonds was such a profitable investment decision. Moreover, sluggish economic

growth also meant that the building industry slowed down altogether.
Since 1988, 65% of all savings deposits in banks who participate in the SBPE
must be used for housing loans22. However, financial institutions were
authorized to compute FCVS credits as housing credits, hampering the
resumption of SFH loans. A National Monetary Committee (CMN) resolution in
2002 determined that the FCVS credits had to be gradually removed from the
calculation of the mandatory 65% for housing loans.
Together with the consistent decline in interest rates since mid-2003, those
measures were responsible for breaking with decades of stagnation of housing
credit in Brazil. Whereas in 2002 SFH credit represented a little over 1.2% of the
gross domestic product, by 2010 that proportion had risen to 3.6% of GDP 23.
Looking at only SBPE-funded loans (both for purchasing and building new
homes), whereas in 2002 a total R$ 1.76 billion (US$ 0.88 billion) were used in
housing, representing 28.9 thousand new households, by 2006 SBPE savings
were used to grant more than R$ 9.31 billion (US$ 4.65 billion) in housing loans
that represented 112 thousand new homes, and by 2010 those numbers had
grown to more than R$ 55.99 billion (US$ 27.99 billion) that financed the
construction and purchase of 416 thousand housing units24.
Aware of the upturn taken by the housing credit systems in Brazil and aware
of the faster economic growth Brazil had been experiencing since 2003 major
real estate developers and builders saw a unique opportunity to expand their
businesses to levels they could have never imagined. A long repressed demand
for home ownership by low- and middle-income families that finally had the
possibility to take housing loans represented a great potential for growth in the
real estate industry. The fastest way for the industry, i.e., the supply-side, to
cope with that growing market was to go public. From 2005 until 2007, 20 real
estate firms and developers launched their stocks in the So Paulo Stock
Exchange BM&FBOVESPA.
Some years later, in 2009, in the wake of the global financial crisis, a Federal
housing finance program was launched, called Minha Casa, Minha Vida (MCMV,
Portuguese for My Home My Life). Granting direct subsidies to promote
homeownership for people that used to be out of formal housing markets, the
primary goal of the program was to promote the supply of 1 million new homes
all over Brazil, focused on low-income housing. The program aimed to create
22

Royer, 2009, p. 60
Lundberg, Eduardo Luis. Bancos Oficiais e Crdito Direcionado: o que diferencia o mercado de crdito
brasileiro. Trabalho para discusso n 258 Banco Central do Brasil, 2011, pp. 19-20.
24
Ibid.
23

mechanisms to encourage the production and purchase of new housing units,

rehabilitation of urban properties and production or renovation of rural
housing25. According to Fix, the total subsidies reached the amount of R$ 34
billion (US$ 17 billion) from 2009 to 201126.
A side-effect that such a massive program of subsidized housing credit would
entail was the sharp elevation of land prices in Brazils major urban areas. As a
matter of fact, this issue had already been foreseen by prominent urban
planners who voiced in favor of stricter land use regulation and land value
controls27.
MCMV met the interest of main housing developers, who were trying to reach
lower income segments, once the upper and medium-income models were
already exhausted. Not coincidentally, President Lula was announced by
housing developers as the best president ever for the sector28.

3.

A brief history of the chosen housing developers

In the early 20th century, housing development revolved around family-owned

building contractors. Then, in the course of the 1960s and 1970s, they evolved
into housing/real estate developers, even though some remained family
businesses. This development model in the building sector persisted for at least
four decades, when they start merging with other regional enterprises and
forming limited companies, and further becoming public companies.
This is a really concentrated market: in 2010, 40% of all the housing units
developed in the SPMA were made by the ten biggest real estate developers in
Brazil, and the three companies here studied are the top three of this list: Cyrela
Brazil Realty, Gafisa S.A. and PDG Realty29.Strongly active in So Paulo, those
developers are products of this historical process.

25

First article of the National Law 11.977/2009.

Fix, op. cit., p. 150.
27
Rolnik & Nakano, 2009. As armadilhas do pacote habitacional, In: Le Monde Diplomatique, web
version (http://www.diplomatique.org.br/artigo.php?id=461)
28
A. Aranha, Lula: o melhor presidente para o setor imobilirio. In: Brasil de Fato, 30 de junho de 2011.
Apud: H. Carvalho, op. cit., p. 195.
29
Embraesp, 2010.
26

Gafisa S.A.
Gafisa S.A. remained a family business from its creation, in 1954, until 1997,
when it merged with GP Investments S.A., resulting in a limited company. In
2005, prior to going public in the So Paulo Stock and Futures Exchange
(BM&F-BOVESPA), 32% of its capital was bought Equity International
Management, a private equity firm based in Chicago. The injection of foreign
capital could have contributed to establish some important transformations in
the companys financial and management structure, because in the next year,
2006, Gafisa makes its IPO, raising R$ 927 billion with the sale of 47% of its
stock30. In 2007, Gafisa raised R$ 1.171 billion (US$ 585.5 million) 31 in a followon offering, and later, in 2010, in another offering, it managed to raise R$ 1.063
billion (US$ 531.5 billion)32 more.
In 2007, Gafisa created a brand for the popular housing segment, named Fit. In
that same year, Tenda, one of the strongest homebuilders for low-income
segment went public and Gafisa immediately bought it out, incorporating its
structure. Although Tenda also had business in the SPMA, it focused mainly on
housing developments for the so-called popular and economic segments
(low- and middle-income households) and thus was not a direct competitor, for
Gafisas products were aimed at the highest end of the middle-income families
and up.
Among the housing developers studied, Gafisa is the only one which has stock
been negotiated both in So Paulo and New York stock markets. In 2011, the
company was present in 22 Brazilian states.
Cyrela Brazil Realty S.A.
Cyrela Brazil Realty S.A. Empreendimentos e Participaes is also a strong
housing developer in the SPMA, in addition to acting in other 15 Brazilian
states and also in Argentina and Uruguay. The corporation was founded in
1962 and went public in the BM&FBOVESPA in 2005. In 2006, it does its first
30

Data from the companys financial report, www.gafisa.com.br/NoticiaDetalhes.aspx?noticiaId=27

http://www.bmfbovespa.com.br/pt-br/mercados/download/Gafisa-Anuncio-Encerramento28032007.pdf
32
http://www.bmfbovespa.com.br/pt-br/mercados/download/GAFISA-ENCERRAMENTO-DOESP-VALID2010.pdf
31

follow-on in the same stock market, creates a low-income housing segment

brand, named Living. In order to enable the brand Living operations, in the
following year Cyrela made a joint venture with the homebuilder Cury,
specialized in the low-budget segment, aiming to acquire its technology and
know-how to make profit developing and building for lower-income social
classes33.
The third time Cyrela made a public offering in the stock market was in October
2009, and it can be understood as a consequence of the launching of the MCMV
program. In this offering, the company raised more than R$ 1.182 billion (US$
591 million), funds expected to be used 70% for landbanking, and 30% for
working capital34. In 2010, the company closes the year having produced 35
thousand new homes for about 105 thousand clients, all over its market area35.
PDG Realty S.A.
PDG Realty is the most recent of the biggest real estate companies in Brazil. It
arises in 2003 from the manager funds of an investment bank (Pactual),
becoming an independent company in 2006. In 2007, it makes its IPO in BM&FBOVESPA, reaching the amount of R$440 million (about US$ 220 million). In
the following years, PDG acquires other big housing developer companies:
Goldfarb (a builder and housing developer, specialized in the low-income
housing segment), CHL (a builder and developer from Rio de Janeiro) and Agre
(a real estate developer that had been created a few years before, by the merge
of three other enterprises KlabinSegall, Agra and Abyarathrough private
investment made by a Spanish investor). Since then, PDG Realty has a
dispersed composition of capital, without majority-controlled assets from the
original founders.
Adopting a holding structure, PDG acquires builders, without assuming
development and building. Thus, companies keep their independence as to
production, while capital, profits and investment are controlled by PDG.

33

CyrelaBrazilRealty S.A., Press Release, 04 de julho de 2007. Disponvel em:

http://www.acionista.com.br/home/cyrela/050707_joint_venture.pdf
34
H. Carvalho, A cidade como um canteiro de negcios...
35
Dados e histrico da companhia obtidos atravs do stio do grupo (www.cyrela.com.br) e de pesquisa
quantitativa da EMBRAESP, disponvel no endereo eletrnico:
http://www.embraesp.com.br/pesquisas/Rankings%20Incorporadoras%20-%202010.htm

According to its president, our business model prioritizes what is best in both
[financial management and housing production]. We bring our culture of results
which we have inherited from investment banks, without harming each companies'
autonomy. () We have bought management capacity, not plots or buildings.36

4.

Finance and housing production

Going public was not a strategy restricted to Brazilian housing developers, this
phenomenon happened in a systemic way all over the world: in just 7 years,
from 2000 to 2006, the number of real estate companies that made their IPOs
doubled37. In Brazil, that happened mostly after 2005.
Whether critical theory sees this IPO wave as a strategy in a changing
international economy38, or as a strategy for a class to retrieve accumulation and
the elite power interrupted by decades of welfare state39, within a period of new
worldwide financial hegemony40, for Brazilian homebuilders it is justified as a
result of a maturation process of the business and as an alternative way to raise
unleveraged funds (desintermdiation41), expand their international projection
and improve their competitiveness.
As stated by Shimbo, before the IPOs, there was already a tendency, in Brazil,
of growth and concentration of capital in the big players of the residential real
estate market, mainly developers and building contractors. After the IPOs,
these companies output was potentiated and comprehended a great part of the
property sold in recent years, especially in the SPMA42.
It is also worth noting that the growth prospects of the Brazilian real estate
developers attracted many foreign investors to a market that was, until then,
controlled strictly by local interests. For example, as of October 2011, 7.8% of
Cyrelas shares were owned by Carmignac Gestion, a French investment bank,
5.3% of its capital was held by BlackRock, Inc., a leading American asset
management firm, while Janus Capital Management LLC, another American
investment firm, owned 5.18% of the shares. In that same month, 7.2% of PDGs
36

Cf. Uma empresa em construo, In: Isto Dinheiro, 09 de julho de 2008. N. 562. Apud: H. Carvalho, A
cidade como um canteiro de negcios.
37
P. Zivkovic et AL., Financiarisation de limmobilier: la rponse du groupe BNP Paribas.2006.
38
F. Chesnais, A finana mundializada.
39
D. Harvey, A brief history of neoliberalism.
40
D. Lvyand G. Dumsnil, O neoliberalismo sob a hegemonia norteamericana. In: F. Chesnais (org.) A
finana mundializada.
41
I. Nappi-Choulet, Les mutations de limmobilier: de la finance au development durable.
42
L.Shimbo, Habitao social, habitao de mercado: a confluncia entre Estado, empresas construtoras
e mercado financeiro (Tese de doutorado), p. 26.

10

shares were owned by BlackRock, and 5.06% by T. Rowe Price Associates, an

American firm. BlackRock also owned 5.1% of Gafisas shares.43
Effects of IPOs in housing production are clear. In the SPMA, before the IPOs, a
number of 96.6 thousand of housing units were developed from 2004 to 2006.
This number grew 79% in the following 3 years (2007-2009), so in the context of
IPOs, international crisis and the launch of the federal housing program
MCMV, to reach 178.6 thousand new units. This number kept rising in 2010 and
2011, reaching 138.2 thousand units during these two years.

Source: production of the authors from a chart made by SECOVI. See: SECOVI, Balano do Mercado
Imobilirio 2012, available in: http://www.secovi.com.br/files/Downloads/balaco-mercadoimobiliario-2012pdf.pdf.

This shift in housing production is also evident when we analyze each

corporation separately. As shown in the graph below, before its IPO in 2006,
Gafisa alone launched on average 500 residential units each semester in the
SPMA, except for the second halves of 2002 and 2006, when launches topped
one thousand units on each period. After the IPO, production figures boosted:
in 2007, for instance, Gafisa together with Tenda (bought out by Gafisa the next
year) launched 2254 housing units in the first semester of that year.

43

Carvalho, H., op. cit. P. 163.

11

Source: Carvalho, op. cit., p. 226.

The number of housing units offered in the market and the price of the publicly
traded shares seem to follow the same trend. However, the very nature of real
estate development in Brazil makes it an industry that cannot respond to
externalities as swiftly as the stock market can. In the wake of the 2008 global
financial crisis, there was a sharp plunge in Gafisas stock values, and the
production of new housing units also slowed down. From the beginning of 2008
until the first half of 2009 that downward movement persisted. That year the
pace of production declined to early 2000s levels, and Gafisas share prices
plunged to R$ 5 a share (down from about R$ 30 in 2007). After the federal
government started implementing the MCMV program (represented by the
vertical line in 2009), shares quickly appreciated and production recovered in
the second half of 2010, Gafisa launched nearly 3 thousand housing units, the
record high for the decade.

Source: Carvalho, op. cit., p. 230.

12

Cyrelas performance followed the same trends as Gafisas, as shown by the

figures above. After going public in 2005, its shares rapidly appreciate, and in
the second semester of 2007 its level of production surpasses the total number
of housing units launched in the market during the five previous years (5611
units). Although its performance is affected during the height of the
international financial crisis in 2008-09, soon its rate of production and its
market value raise sharply, influenced by the MCMV program. Whereas in the
2007 production peak around 2/3 of units produced were part of the Cyrela
brand, meaning high-end products, in 2009 about 2/3 of launches were Living
brands popular housing units.

Source: Carvalho, op. cit., p. 232.

PDG Realty, as explained in the previous section, was born out of a banking
group and grew based on the acquisition of existing developers. Its market
performance, seems to share similarities with the other developers analyzed.
Nevertheless, PDGs activities in the SPMA seem to have not been so strongly
affected by the late 2000s financial crises. One possible reason for that is the
groups business model based on decentralized control, meaning each company
of the group has more liberty to respond to externalities.44
One issue that is promptly noticeable in the market behavior of the three
developers analyzed is that share prices and total output follow the same trend,
although the very nature of the real estate development process, real
production tends to take longer to react to market pressures. Despite trying to
find a clear causal relation between share prices and production may be too
44

http://www.istoedinheiro.com.br/noticias/4182_UMA+EMPRESA+EM+CONSTRUCAO

13

hurried, those two factors are interrelated and feed each other back: the brighter
the prospects of corporate growth, the higher its market value; the higher the
perceived market value, the more each corporation is stimulated to grow. The
following figure attempts to resume that circular flow:

The real estate stock market interrelation scheme. Source: H. Carvalho, A cidade como um canteiro de
negcios. p. 242.

5.

Urban and social effects

As the real estate market must have a physical territory to reproduce its capital
now linked to international financial capital and since land is special
commodity because it is not reproducible, it is not hard to imagine that this shift
has important consequences in urban areas. However, this effects are not
exclusively connected to Economics and Finance, but they are liked to urban
legislation cities Master Plan and land use laws , and social shifts. Here, we
show up some of these topics: affordability; urban land availability and
standardization of housing and urbanity of housing complexes.
5.1 Affordability and house prices
The rapid and intense growth experienced by the housing development market,
influenced by the IPOs of major firms and by the facilitation of credit
stimulated, as argued above, an unprecedented land run; subsidized credit for
home acquisition also helped to drive land prices upward.
Between 2006 and 2007, the additional housing supply was made almost
entirely of units designed for middle-income families earning more than the
ceiling for SFHs FGTS-funded loans. Haddad & Meyer found that despite the
supply growth of 52% in the period, only 0.2% of housing starts in 2006 and
0.7% in 200745 were for families earning 5 minimum wages or less per month,
value at the time equivalent to R$ 1900 (US$ 950). Indeed, notwithstanding the
45

Haddad & Meyer, op. cit., p. 297.

14

fact that a significant part of the middle class only now could have access to
housing credit, the greater part of the repressed demand, composed of poor
families, remained unattended.
Bearing in mind that the informal labor market is still large in Brazil, and SFH
loans follow strict credit rating criteria, it is reasonable to say that affordability
of house ownership is not an issue related exclusively to household income, but
rather with broader institutional issues. The absolute lack of any kind of public
policy for rental housing also puts a restraint on affordable housing for the
poor.
5.2 The Land Run and the problem of urban land availability for social
housing
IPOs and successive follow-on in stock market gave to housing developers a
high potential to produce housing in a large scale, as they have never had
before. With capital coming without debt, and with credit allowing more people
to access formal housing markets, land seemed to be the only impediment for
their accumulation in the form of real estate. So, from its IPO (2006) to its third
public offer in the So Paulo stock market (2009), Cyrelas total land bank
almost doubled, from 6.5 million square meters to 12.6 million46. In 2011, PDG
Realty had a land bank valued at R$28.4 billion, able to produce 176.5 thousand
housing unities, and 52,3% of it had been acquired just after its IPO 47. In 2007,
one year after its IPO, Gafisa had a land bank valued at R$10.195 billion, with
19.2 million square meters, land resource needed to keep promoting new
developments for, at least, three years48. These land banks refer not only to
SPMA, however. Plots that are prospected and bought by these companies
cause a huge consumption of urban land for private production that is not
addressed to people that compose cities main housing deficit.
Municipalities have had difficulty to access land to promote its municipal
housing policy. After 2001, many cities all over Brazil have implemented an
urban planning tool reserving vacant areas for social housing production. Since
then, this tool, named Social Interest Special Zone (ZEIS), has been applied
almost everywhere in Brazilian big and medium cities, including So Paulo 49. In
So Paulo city, it was implemented in 2002 and improved in 2004, listing a total
of 181 vacant plots (totalizing 11.5 million square meters) for social housing
production, by both public sector and private developers. Ten years passed,
46

CyrelaBrazilRealty, AnnualReportyear 2009, p. 8. Apud H. Carvalho, op. cit., p. 253.

nd
PDG Realty, 2 trimestre 2011 Financial report, p. 13.
48
Gafisa S.A., Annual Report 2007, p. 34. Apud H. Carvalho, op. cit., p. 254.
49
A survey applied by the Ministery of Cities in 2009 shown that 72,7% of the 1.343 municipalities
surveyed had applied ZEIS in their zoning or Master Plan laws.
47

15

after all this shift and boom in housing markets, and because of this specific
zoning, 8.6% of this land stock was used for public and private housing
production, and 69% of this surface remains vacant for new social housing
projects. Whether this data shows that this tool was not very attractive for
housing developers, at least it allowed to the municipality to assure some land
for producing homes for the most vulnerable of its citizen.
However, we can regret that without prioritizing strategies to access land and to
control land prices, even the public sector can contribute for stimulating
speculation. The MCMV program is an example of that. Without applying tools
and mechanisms to avoid speculation of urban land, the trend is that a part of
capital flow implemented including the subsidies offered with funding from
the government budget is captured in the form of land rent 50.

Residencial launches by selected developers in 2010: Cyrela, Living, Gafisa, Tenda and PDG
Realty.

The map above shows the new housing developments made by the companies
studied in this paper in the year of 2010. Analyzing it, it is possible to realize
how important location and land prices are to establish new construction sites.
Those developments made by Tenda (Gafisa) and Living (Cyrela) are more
evenly spread over the limits of the SPMA, far from employment, infrastructure
50

Fix, op. cit., p.145.

16

and good quality public services, while residential development for highincome families is concentrated around the urbanistically consolidated, newly
developed business districts.
5.3 Standardization of housing and urbanity of housing complexes
The landscape of Brazilian cities has been strongly transformed by real estate
developments. In SPMA, old and horizontal working-class neighborhoods, rundown industrial areas and vacant land within city limits or at the edge of the
urban sprawl have had their original characteristics often replaced by projects
without unrelated to the local urban specificities. Furthermore, their typology is
frequently the same almost everywhere, whether in the same city or not. In
some cases, even rural areas have been rezoned to host massive housing
developments, when lower land prices justify the distance from the city what
happens mostly with low-income housing complexes.
When housing becomes a mere commodity, standardized production is
justified as a necessary condition for profitability. That does not mean that
design is disregarded by developer. Housing developers in Brazil usually have
a development project department, where the role of architects is reduced to the
creation of codified product families, reproduced thousands of times,
depending on the economic model of the development rather than on
specificities of climate or site conditions.
Cyrela Brazil Realty, for example, usually starts a development project with
only three options of products, and the final decision of which one implement
is based in market analysis51. In low-income housing this happens very often.
Tenda, for example, works with only 4 standardized types of housing unities
for any kind of development52.
The following images show how they looked, housing developments in SPMA
made by some of the companies here studied, in 2010.

51

Cyrela Brazil Realty, Annual Report 2009, p. 11. Apud H. Carvalho, op. cit., p. 253.
Shimbo, p.139.

52

17

Standardization: six different housing complexes in different areas of SPMA developed by Living. Source:
H. Carvalho, op. cit., p. 311.

In different cities in the SPMA, three projects with almost the same standard of project. Source: H.
Carvalho, op. cit., p. 311

It demands adaptation of developers to work with lower profit expectations,

thus design standardization has an even greater economical importance. The
profitability of the business for the builder is the production of large-scale units.
Therefore, construction companies wishing to enter this new market know that
they will not succeed if they do not invest in detailing the initial design of their
projects, which will be repeated hundreds of times across the country 53. The
idea is to make apartments in scale. Doesn't Fiat make the car Uno the same one
after another? The idea, roughly, is that we do the same. Two-bedroom
apartments in series 54.

53

R. faria, Torres econmicas, in: revista tchne, Ed.130, jan. 2007. Apud: H. Carvalho, p.308.
Speech of an engineer working in a developer specializing in low-income housing in cities average
Brazilian.Cf. Shimbo, 2009, p. 204.
54

18

Upper-income housing developments in SPMA, made by different developers. Source: H.

Carvalho, op. cit., p. 311

However, even the public sector has induced developers to build standardized
housing units. The MCMV program, for example, in its original version,
specified only two standardized models of dwellings that would be acceptable
for the program: a 35m house and a 42m apartment. In this subsidized
category, MCMV funds housing developments that depend on housing prices
to be implemented. As land is cheaper in the outskirts of the urban sprawl, and
the scale of production matters for private developers building for a subsidized
demand, the consequences are enormous complexes of standardized housing
located far from the city, without urban infrastructure, as we can see in the
following image, a top view a complex built in the limits of Campinas city
urban area.

Housing development in an ancient rural area, in Campinas. Source: Google Earth, 2011.

19

This model has been widely applied in medium cities. The way it has been
done, the Brazilian urban expansion still seems to produce the opposite of
sustainable cities, not only in poor neighborhoods, but also in the new districts
for the middle and upper classes. Does provide some promising future for the
inhabitants of the next generations. In short, one can say that they are
unsustainable cities that have been produced by economic sector 55 .
The combination of an economic model that requires reducing project and
building costs, in association with a land use regulation that almost exclusively
serves to define the constructive potential of the land, without guided types and
aspects of relationship with the public space, have resulted in urban spaces with
a lack of quality, whether in urban areas or in the limits of urban sprawl. Inside
the cities, they have been in identical buildings in different cities, successively
deployed "stranded", not bearing relation with the immediate surroundings.
The standardization of housing produced by housing developers refers rather
to the overall reduction of architecture to market logic, the reduction of the
dwelling to a product and the reduction of cities in mere spaces of reproduction
of the real estate capital, without public project without collective reflection of
what city plans to construct56. The supremacy of a massive housing production
and the building standardization reflects the priority of a home took as an
exchange value rather than as a value in use, i.e., housing produced as an
ordinary commodity.

6.

Final considerations

The right to housing has only been a formally consolidated right in Brazil since
200057. It is the role of the State to guarantee adequate housing for the
population. Evidently, however, in a society as unequal socially and
economically as Brazil is, supplying the sheer unmet demand for housing
requires strong intervention on the real estate market structure.
55

Ferreira, op. cit., p. 31.

56

H. Carvalho, p.316

57

Constitutional amendment no. 26.

20

Since the mid-1960s there have been several attempts at the national level to
tackle the housing issue. Those policies have been based almost exclusively on
subsidized credit for homeownership, a solution that has served only a small
portion of potential homebuyers not the most needed while reinforcing
the segregational structure of the housing finance system.
Recent developments in the global economy and in local real estate markets led
major housing developers to go public in the So Paulo stock exchange. That,
along with a new subsidized housing credit program for poor families, brought
about an extremely rapid and intense growth in housing markets.
Although part of the lower middle classes (and, of course, developers
themselves) benefited from this upgraded market structure, the poorest among
the poor remain, by and large, unattended. Land prices have increased sharply,
harshly impacting on affordability.
Moreover, this unprecedented growth in housing supply, in the absence of
tighter land use controls, has been generating ill-located residential
developments devoid of any urbanity, detached from what living in a city
should really mean.
As many housing social movements, urban planners, and scholars have
repeatedly stated, the real challenge for policymakers seems to be not how to
supply houses, but rather how to build cities that are socially inclusive and
livable.

21

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