Rentabilidad sobre Activos

Condominium (n) / kɑndə’mɪniəm/1

From Latin com (cun)- “together” + dominum “right of ownership”

The aim of this thesis is to help policymakers better understand why low- and middle- income homeowners have difficulties with the maintenance of common property parts of the buildings they occupy. Homeowners are expected to be in control of their units, but why are some of them not taking care of their properties? What is the problem in the context of Latin American housing policy? Which factors play a distinctive role, and what does this means for Colombian and Ecuadorian policies on affordable housing? Low- and middle-income households in Latin America can achieve the dream of homeownership by buying an affordable unit with the assistance of subsidy to make the down-payment. Both subsidization programs and affordable housing provision are regulated by government. The urban property system to which these housing solutions are directed is the condominium regime. By comparing cases from two capital cities of Latin America, namely Bogota, Colombia and Quito, Ecuador, this thesis seeks to unravel the institutional complexity of the policy system and homeownership in condominium.

As cities grow and communities are built in greater density, the meaning of

homeownership changes. In an urbanized world, homeownership occurs in multifamily and collective arrangements of land and architecture (Robertson, 2012). That

description points to the kind of homeownership that is the focus of this study: low- income families in dwellings in horizontal property. Horizontal property is the term used in property law to refer to the ownership of air space within a collective structure, which is also called condominium (Lujanen, 2010). To gain a better understanding of the maintenance of horizontal property, it is necessary to understand the bundle of rights and the collective action dilemmas existing in a common property such as the condominium. In the context of condominium housing, owning a home of one’s own implies a more complex configuration of rights than just the possession of a single unit.

§ 1.1

The research problem: Housing policy and deteriorated units

FIGURE 1.1 Mid-rise buildings built in 2010-2012 in Bogota, Colombia. (Photo credit: Rosa E. Donoso) The picture above illustrates two of the main social housing sectors in Latin America. Ascending towards the top of the hills is a typical informal settlement, where each dwelling was incrementally self-built by their occupants. Whether attached or

detached, each household is responsible for their own self-built house. The importance of squatter settlements, their formative processes, and the habitat conditions in this sector have dominated housing policy research in developing countries. However, as cities shift towards more formal and dense housing solutions, other housing conditions and problems come to the fore that warrant observation and study.

Since the mid-twentieth century, Latin America’s national governments have built mid-rise apartments for owner-occupation in an effort to address the housing needs of low-income families in cities. Nowadays, under a new policy network, these dwellings continue to be produced but now in conjunction with the private sector. The formal market for affordable housing comprises dwellings that are generally mass-produced

and that have building permits and property titles. The informal market operates outside the bounds of prescribed legal systems and modern urban development patterns. Informal housing includes dwellings that are self-built over time without participation of the construction companies and investors that are typically involved in the formal housing market.

However, apart from the process of housing provision, the key difference between the squatter houses on the hills and the mid-rise buildings pictured above lies in the form of tenure. First of all, self-built houses are owner-occupied dwellings on individual plots of land. In contrast, apartments are individually owned but at the same time are partly common property with respect to both the building and the land. In short, these apartments fall under the condominium regime. Owing a single-family house is very different than owning an apartment or a unit in condominium. In a single-family house the burden of maintenance weighs on the household; in condominium, both the decision-making about and the costs of maintenance are shared with co-owners and other occupants.

‘A home of one’s own’ is perceived by families and policymakers as a fact of life. Homeownership is the preferred form of tenure in housing policies. Over the last few decades the growth of homeownership has been remarkable around the world (Piketty, 2014). From a social policy perspective, homeownership is considered an important economic asset for low-income families (Elsinga, 2005; Moser, 2009), as well as a source of self-esteem and satisfaction (Elsinga & Hoekstra, 2005; Marcuse, 1972). “Owning rather than renting is thought to foster higher levels of perceived control over life events” (Rohe & Basolo, 1997:797). However, other investigators have demonstrated that homeownership is highly affected by location and neighborhoods effects, implying that there are other factors besides the individual control over the dwelling to consider in housing research (Galster, 1987). It is assumed that owner-occupiers will maintain their properties better than tenants or landlords (owner-investors). And likewise, several claims have been made about the benefits of homeownership for low-income families.

Besides the benefits that homeownership presumably bring to low-income families, the literature describes some risks and reveals how certain assumptions about the benefits of homeownership fall short when low-income families become owner- occupiers (Galster, 1983; Littlewood & Munro, 1996). Failure to maintain the dwellings is one effect that may actually create more problems for a low-income family. The literature warns about the potential for a low return on investment and negative equity when the unit deteriorates, which can make homeownership more of a problem than a solution (Scanlon, 1998). Low-income homeowners often neglect the maintenance of their properties for social and economic reasons, but possibly also

because of the poor quality of the structure, which makes maintenance of a dwelling more costly (Galster, 1983; Scanlon, 1998).

Recent studies in Latin American consolidated self-help neighborhoods2 _have

documented a need for better upkeep and housing rehabilitation policies (Ward, Jiménez & Virgilio, 2014).3 _{Within the formal sector in Chile, Mexico, and Brazil there}

is evidence that subsidized dwellings in ownership start to deteriorate prematurely, just a few years after the new homeowners move into the dwelling (Paquette-Vasalli & Sanchez, 2009; Rodriguez & Sugranyes, 2005; Rojas, 2010). Similar problems are observed in Colombia and Ecuador, as will be elaborated in this thesis.

Under the right to housing, different housing policies have been applied in Latin American countries. As set forth above, two housing sectors have been targeted by housing policy programs seeking to guarantee that the population lives in adequate homes (UN-HABITAT, 2011). Policies focusing on informal settlements pursue regularization and improvement of facilities in the public domain such as streets and public services. Within the formal sector, government incentives promote the production of new dwellings for affordable ownership (Donoso & Elsinga, 2016; Ferguson & Navarrete, 2003; Zanetta, 2001). The right to an adequate home is not necessarily a right to own a home (Florian, 2012; Rolnik, 2013). However, owning a home is an important social aspiration and a dream providing direction in people’s lives (Elsinga & Hoekstra, 2005; Ronald, 2008).

A market-oriented, subsidized mechanism for low-income homeownership was first adopted in Chile in 1977; today the policy is commonplace in Latin America (Ferguson, Rubinstein & Vial, 1996; Gilbert, 2004). It has been adopted as a successful strategy to increase the provision of affordable dwellings and homeownership (Rojas, 2001). However, after more than three decades of implementation some problems have come to light, including the lack of maintenance (Rojas, 2010).

2 I prefer to call them self-help neighborhoods instead of slum areas or informal settlements because most of them today have had urban improvements programs.

3 Rehabilitation is needed in particular in those settlements that are thirty to forty years old, located in the in- ner-suburban areas of Latin American cities, and currently owned by low- and middle-income families. To read more about this research, see Ward et al., 2014.

Research focusing on housing quality or lack of maintenance, in either formal or informal4 _{situations, is generally focused on individual households owning a single-}

family house or an individual flat.5 _{In Latin America, particularly in big cities, low-}

income homeownership exists under multifamily and shared ownership regimes, which implies different institutional arrangements than would pertain to a single- family house. How might our understanding of the deterioration of dwellings change when these are under a condominium regime?

The body of literature about condominiums rarely distinguishes those that are produced and inhabited by lower-income groups, but there are some exceptions (Esquivel, 2008; Rodriguez & Sugranyes, 2005; Werczberger & Ginsberg, 1987). However, since management problems have become more common, housing scholars have started to investigate the challenges of condominium maintenance in different parts of the world. For example, privatization of the state housing stock in Eastern Europe raised awareness of the need to address the repair and management problems that came to light when social housing was converted to condominiums (Grover, Munro-Faure & Solviev, 2002; Orban, 2006; Rabenhorst & Ignatova, 2009; Soaita, 2012).

In the last decade, research coming from Latin America – notably Chile (Rodriguez & Sugranyes, 2005), Mexico (Esquivel, 2008; Paquette-Vasalli & Sanchez, 2009), Colombia (Mejia, 2006), and Brazil (Paz, 2014; Rolnik & Royer, 2014) -- has demonstrated that the lack of maintenance of dwellings built with the help of subsidy policies for low-income homeownership is a common problem in affordable condominium housing. In this context comparisons would yield particularly useful insights, allowing the policymakers to better understand the problems and to find policy solutions. Considering that the subsidy policy approach to low-income homeownership has been transferred to many countries in the Latin American region (Ferguson et al., 1996; Gilbert, 2004), it is surprising that cross-national comparisons have not yet been made to study deterioration in the condominium housing stock of low-income homeowners.

4 Informal housing is a term used within the Latin American research community to refer to the self-help process- es of housing provision without building permits and formal registration at the city level. In these settlements land ownership is sometimes legal or in the processes of land titling.

5 The literature of maintenance practices of European social housing is not necessarily similar to the Latin Ameri- can cases since the institutions and people in charge of maintenance are different.

§ 1.2

Research approach

Buildings under a condominium regime can be considered as communities, albeit ‘loose’ or hybrid ones, since the institutional structure is prescribed or already defined during the housing provision process (Ball & Harloe, 1992) and established in the property model implied in horizontal property law (Lujanen, 2010; Merwe, van de, 2015; Orban, 2006). Houses in condominiums are private goods, although their main characteristic is the common property of the land, structure, and infrastructure of the buildings. Common property elements need to be maintained collectively. Therefore, this thesis assumes that condominiums can be studied as common property resources (Ostrom, 1990).

The research approach uses Ostrom’s Institutional Analysis and Development (IAD) framework. Its starting point is the observation of how rules, governance practices, and physical characteristics of a common property resource influence collective action. Since the ‘resource’ is the outcome of a housing policy, concretely people’s homes, the research approach is aligned with comparative housing research theories as used in housing systems studies (Haffner, Hoekstra, Oxley & van der Heijden, 2010; Oxley, 2001; Toussaint, 2011). By comparing two systems, drawing cases from two countries, it is possible to test whether the law and context, including each network of actors, are significant variables and have an influence on the policy outcome.

The main pillar of affordable condominium housing is a formal institution: the law of horizontal property or condominium law (Blandy & Hunter, 2012; Lujanen, 2010; Orban, 2006). Nonetheless, “as expressed in forms of life, institutions are analysed only in so far as they form a consensual backdrop against which action is negotiated and its meanings formed” (Giddens, 1979:50). Therefore, even though the law is a key variable in this research, the goal of this thesis is to observe how it is interpreted and ascertain whether maintenance practices are actually influenced by laws.

The institutional approach applied in this thesis is explained in more detail in chapter 2. At this point, however, a brief introduction is necessary to frame the scope of the research and its main questions.

Institutions are the underlying rules of the game, as North (1994) explained. Institutions “are made up of formal constraints (e.g. rules, laws, constitutions), informal constraints (e.g. norms of behavior, conventions, self-imposed codes of conduct), and their enforcement characteristics” (North, 1994:360). In affordable condominium housing both formal and informal institutions can be observed,

merge (Ostrom, 1990; Ronald, 2005; Toussaint, 2011). This thesis is about people’s homes and their collective maintenance practices, so the meanings of housing institutions are of particular importance (Bengtsson & Ruonavaara, 2011; Elsinga, 1998; Ronald, 2008; Ronald & Hirayama, 2006).

The notion of governance often “emphasizes that policies are formulated and

implemented in multi-actor, networked environments, in which actors pursue different goals” (Rhodes, 1997 in Bueren & Heuvelhof, 2005:47). Governance is about the cooperative process, “about organizing, about running organizations, about steering” (Bortel, van, 2012:93). Governance occurs in horizontal arenas of policymaking, where public, private, and self-governed actors contribute to the formation of the different governance arrangements that are generally involved in the production and implementation of public policy (SØrensen & Torfing, 2007).

Governance of the condominium occurs in different but coexisting arenas, such as during the production of condominium housing, and afterwards when homeowners move into the new dwellings and live there as co-owners. The main assumption of this thesis is that condominium property law brings structure to the governance arrangements that are necessary to produce, own, and live in condominium property. Actors involved in housing provision, including the professionals, are regulated by this law; it also stipulates the homeowners’ rights and obligations. As explained by the theory of governance and institutions, formal institutions bring some order into chaos, but “they do not determine the course and outcomes of the game” (Bueren & Heuvelhof, 2005:48). Moreover, in comparative housing research, not only formal but also informal institutions matter when observing housing systems’ structures and outcomes (Toussaint, 2011; Heijden, van der, 2013).

The main outcome under scrutiny here is the maintenance level of condominium housing. There are several factors that may influence the perception of maintenance levels, and this thesis makes a diagnosis of these factors, as set forth in Ostrom’s IAD framework. Two types of factors are subjected to analysis. First, this thesis evaluates the opinions and positions of the policymakers and professionals involved in the production of affordable housing in condominium. And second, this thesis considers the factors or variables that take into account the characteristics of the community of homeowners, their perceptions regarding the rule of law, and their opinions about the physical characteristics of the resource. Chapter 6 deals with the governance of both policy actors and housing development processes as they are perceived by the professionals involved in the provision process. Then, chapter 7 deals with the characteristics of low- and middle-income owners in condominium.

To what extent do both formal and informal institutions affect the maintenance outcome? This thesis advances the comparative housing approach by bringing Ostrom’s (1990) scholarly position to bear on the role of the institutions in the condominium tenure. Condominium tenure is a form of co-ownership with ancient institutional roots but taking specific forms in different parts of the world. In Latin America, modern condominium laws regulate individual and collective rights and obligations and also regulate the homeowners associations (Merwe, van de, 2008). This is a study about how human beings interact when involved in a common property resource such as housing in condominium (Orban, 2006; Ostrom, 1990, 2009a). As Ostrom mentioned in her lecture when receiving the Nobel Prize in Economics in 2009, citing Douglas North (1990):

"The humans we study have complex motivational structures and establish diverse private-for-profit, governmental, and community institutional arrangements that operate at multiple scales to generate productive and innovative as well as destructive and perverse outcomes (North 1990, 2005)." (Ostrom, 2009a:408)

Ostrom’s framework envisions human beings not only as rational and egoistic, or as helpless and trapped in the prisoner’s dilemma, incapable of cooperating to manage and maintain their common property. In fact, and in real life, humans communicate and interact:

"When boundedly rational individuals do interact over time, it is reasonable to assume that they learn more accurate information about the actions they can take and the likely actions of other individuals…" (Ostrom, 2009a:430)

Therefore, in this research the starting point regarding the behavior of actors in the system is aligned with Ostrom’s position. Rather than looking at communities of low- income homeowners as inevitably problematic or helpless, taking Ostrom’s approach we observe their potential, their internal resourcefulness, and the mechanisms

through which satisfactory outcomes are to some extent achieved as perceived by the households themselves.

This research is not just about co-owners; it is also about their relationship with actors in the housing system. Professionals and developers are part of a network in which they often interact, developing common ideas and strategies to build affordable housing. The provision process leading to low-income homeownership in condominium creates a complex system among users (owners and tenants) and developers, together with the lending sector and the state.

If the goal is to understand, and then compare, which factors are associated with perceived maintenance levels of common property elements, it is necessary to unravel the meanings of homeownership in the condominium tenure and the housing system for low-income homeownership. As Stephens explains, housing tenure is an important institution in the system and goes to the heart of the ‘distinctive’ nature of housing in both comparative research and welfare policy (2011:345). To perform an institutional analysis of low-income homeownership policy in Latin America, a conceptual approach was chosen that foregrounds the institutions of condominium tenure and therefore brings the latent collective action dilemmas to light (Orban, 2006; Ostrom, 1990).

§ 1.2.1

Comparing Bogota, Colombia and Quito, Ecuador: Hypothesis

The literature generally discusses problems with condominium maintenance within a single institutional context. In contrast, this thesis discusses data from Bogota, Colombia and Quito, Ecuador. These two Latin American capitals have different property laws but similar subsidy policies for promoting low-income homeownership in condominiums. The underlying hypothesis is that this difference in property law impacts on the functioning of condominium development and management and in turn on maintenance outcomes as perceived by the residents themselves. Chapter 2 explains the comparative approach taken here and chapter 3 presents the research design, which was systematically applied in both contexts to permit comparison of the condominium situations.

Colombia and Ecuador have very similar policies for promoting low-income and