Tech-enabled Architecture Services for Informal Housing

Latin America has experienced rapid levels of urban growth in the last decades and currently has the highest urbanization rate in the developing world with 80% of its population living in cities (UN, 2009). On average, urban land cover is expanding at twice the rate of urban population growth of which housing occupies over 50% (Asian Development Bank and Inter-American Development Bank, 2014). Urban growth has consequent implications for carbon emissions as roughly three-quarters of greenhouse gas emissions are emitted in urban areas (Aldana Cohen 2018). 

In developing countries, the housing sector will continue growing due to the need to provide shelter for more than 500 million people by 2050 (Jean-Baptiste, N., et al, 2018). This is mainly through informality as self construction (building without technical assistance) is the main way of housing production in Latin America - over 60% of the population builds their own homes, representing more than 270 million people across the region. Moreover, informal housing is the main driver of the horizontal low-density growth in emergent cities. This represents an increasing concern, given that compact urban forms tend to reduce both land consumption and emission production due to lower per capita floor areas, increased shading, reduced transportation, and more opportunities for district-scale heating and cooling systems. A London School of Economics study of large global cities finds that even a modest blend of pro-density housing and transit policies could slash those cities’ emissions by a third by 2030 (Floater et al. 2014).

In a context where local institutions do not reinforce building codes or construction parameters, families have the freedom to build however they see fit. Unfortunately, that usually means that families leave little to no unbuilt area which reduces the chances for natural light and ventilation. Or even worse, they build without the proper structures which increases their risk of damage or total collapse in the event of an earthquake. Additionally, these weak structures cannot support multiple floors above, limiting the potential for vertical growth and densification. Finally, the most common construction materials used in residential construction in Latin America are brick and mortar, which requires the use of high amounts of cement, a high pollutant. According to a Peruvian Cement company, 70% of the total amount of cement sold goes to self construction.

These homes often present severe structural flaws, layout designs fail to maximize the limited space available, and families overspend up to 50% during construction due to this improvised and informal process. Most low and middle-income families work with maestros -informal contractors- who have variable technical expertise. Families do not hire professionals (architects or engineers) because these services are out of reach, meaning that they are perceived as a luxury they cannot afford. On the other hand, architects prioritize higher-end projects with clear timelines and reliable remuneration, since it's not cost-effective for them to serve lower-income projects. This, however, is a small market that poses high competition amongst architects, leaving many architects fluctuating between unemployment and eventual projects.

In summary, there’s an urgent need to increase the quality of houses self-produced in both social and environmental terms. Considering the low-density growth of informal housing, the lack of bioclimatic designs, and the use of non-sustainable materials during construction, all of which happen at a massive scale underpins the concern around carbon emissions related to this sector. On the other hand, it is urgent to attend to the struggles and consequences low and middle-income families face when building their own homes currently without any type of support.

La Firme’s digital platform provides accessible and affordable architecture services for families to design their home and plan their construction. By integrating existing technologies and creating a digital-first architecture service we are able to reduce the time invested by professionals and, therefore, reduce its costs for the millions of families self-constructing their homes across the Global South.

The service is composed of three main phases: Site Analysis, Architectural Design, and Final Plans. The site analysis is usually a time-intensive activity that requires professionals traveling to the site, taking measurements, and gathering data onsite. Instead, based on the site location we leverage existing databases and aerial imagery to automatically assess the characteristics of the lot (as environmental risks, soil type, topography, etc.) and produce an automatic report and a customized quote. In the cases where an in-person visit is required, we leverage local technicians to gather the necessary data, who are not necessarily the same architects who will later design the homes. During the Design phase, families share their spatial needs and preferences through our engaging online experience. Once they are ready, families choose an architect from a couple of pre-filtered options (based on location, experience, style, etc.) to design their home in only 3 online meetings. Our architects receive all the previously collected information and templates that enable them to focus their time on design and work faster. Finally, families receive a complete drawing set, a booklet that translates its technicalities, and an incremental growth strategy designed to phase construction according to their financial possibilities. In summary, our service increases efficiency through automation, standardization and guidance throughout the architectural service, all of which makes it AFFORDABLE for families and PROFITABLE for architects.

By addressing the production of informal housing at scale, we can improve  results for them and cities overall. First, the architects on our platform are trained to maximize bioclimatic features such as ventilation, insulation and natural light to provide comfort and reduce the need to install energy-intensive cooling or heating systems and artificial lighting systems. Second, by introducing better planning we reduce construction waste due to mistakes and errors that often happen in the current improvised construction model. Third, through professional structural design, we enable families to safely densify their sites and avoid further horizontal expansion of the city.

Our service has a strong educational component to avoid misunderstandings and empower families as leaders of their future construction. Throughout the service we embed videos and resources about design and building to prepare them for each phase of designing and building their house. Our payment model adapts to families’ financial capabilities and variable cash flows, giving them the flexibility to pre-pay 50% of the service before connecting them with the architect. Even though we are currently focusing on professional assistance to design the home and produce the technical drawing set, we envision that in the near future we can deliver complementary services, such as legal advice, interior design, and even construction supervision.

As cities continue to grow, so will the housing sector and the impact of building-related emissions. Our solution represents an early action and cost-effective practice to avoid locking-in carbon-intensive options for several decades. The multidimensional nature of our solution  contributes to reaching the expected social and environmental impact by reducing carbon emissions related to housing production and by insuring a safe investment and homes for families as well as more job opportunities for professionals.

Our customers are low and middle-income families in Latin America who are about to start building their own houses. These families build on empty lots which they often inherit, or over existing constructions built by previous generations mostly without any professional assistance. Considering the top 5 countries with the highest self-construction rates in the region, our potential target population is 1.8 million households every year. In urban Peru, our beachhead market, there are 86,000 families who build without professional assistance per year (INEI, 2017). Most families within our target audience work fully or partially in the informal economy and therefore have variable income sources. The decision makers in these families are usually between 30 and 55 years of age and have teenage children.

By providing accessible and affordable technical assistance, we will enable the construction of safer buildings, maximize their space to meet their needs, and reduce unnecessary overspending during construction. In the long-term we are not only providing a structurally safe home, but a better investment overall. Considering housing as an asset, houses built with plans are usually worth 20% more on average. These homes will be able to serve generations to come and contribute to family wealth, instead of becoming a liability.

La Firme is composed of three founding members: Mora, Fiorella and Raul. All team members share the same goal and passion to develop innovative solutions to pressing urban issues, primarily for our Latin American region. We have proven to each other to be a solid team with a strong collaborative spirit and have worked with respect during challenging moments. Our team combines a diverse set of skills in the realms of urbanism, architecture, social research, and venture design. Fiorella Belli studied social sciences in Peru, has led social innovation ventures and developed digital services for low and middle income families in Latin America; Mora Orensanz studied architecture and urbanism in Argentina, worked in sustainable research and in urban design in New York and Latin America. Both Mora and Fiorella recently graduated from the Masters in City Planning at MIT, with a joint thesis on affordable housing in Peru. Raul Briceño studied Economics in Lima, Peru and is currently an MBA candidate at MIT Sloan. He has 7 years experience in social impact, sustainability, and entrepreneurship.

The country where we plan to launch and first grow our venture is Peru, specifically in Lima, where two of our founding members were born and raised. Raul and Fiorella have extensive experience working in social impact initiatives in Peru, working with diverse vulnerables populations. They have previously done field work, designed and provided services for this population, and collaborated with international development agencies as well as with governmental institutions. These experiences and networks will prove relevant as we move forward to pilot and launch La Firme in Peru.

As we are in the early stages of our startup, we are actively looking to expand our networks to inform and complement our strategies in different areas. We consider that we would greatly benefit from a rich entrepreneurial ecosystem such as Solve’s. We want to be challenged by advisors and other teams on our go-to-market strategy, financial plan, team hiring plan, and overall company growth, without compromising on our social purpose.

Our core innovation is to have tech-enabled architecture services designed to be accessible to an underserved market. We differ from all of our competitors in three ways. First, we directly target low and middle-income families and design our services to meet their needs and limitations. Second, we combine standardization and flexibility of technical support and design that no one else currently offers in the Latin American market. Lastly, our model engages independent architects, engineers, and maestros as partners in the process of low and middle-income housing production in an efficient way for the first time. We are creating a venture that not only enables families to plan and construct better homes while expanding the market for architectural professionals, but a model that can be easily replicated and scaled throughout the Global South. In this way, we are able to introduce green design solutions to the millions of new housing units being produced informally around the globe.

Impact goals: 

• Provide access to safe and functional homes to 3,750 people by 2023; and to 500,000 people by 2027. 

• Design approximately 675 housing units above existing structures (promoting densification) by the end of 2023 and 90,000 housing units by the end of 2027.

• Enable future savings among low and middle income families of approximately USD 17M by 2023 and USD 2.3 billions by 2027.

• Provide monthly work opportunities to 25 qualified architects by the end of 2023, and to 500 architects by the end of 2027.

We plan to achieve the first 3 impact goals by positioning La Firme in our target market in Lima, Peru and then replicating the same marketing strategy when expanding to Mexico. As part of our outreach plan, we will create digital campaigns in social media (facebook, instagram and tiktok), develop a referral incentive program to increase word-to-mouth and collaborate with community leaders to gain access to a broader community and neighborhood networks. The objective behind these activities is to communicate La Firme’s value proposition clearly, increase the willingness to pay of our target segment and to position ourselves as an innovative, practical and affordable option for the planning and construction journey of middle and low-income families. Moreover, we will constantly improve our platform as we grow the number of customers through machine learning. As we grow the number of customers and collect more data through our platform, we will be able to automatize and customize the design journey for families and, ultimately, improve efficiency throughout the whole experience. 

Regarding the final impact goal, we will develop partnerships with architecture departments of various universities and the official Professional Architecture Association in each country. Throughout these partnerships, we seek to position La Firme as a new work option for architects that are looking for alternative revenue sources, flexible working times, increasing their portfolio and are interested in working with a market segment they have not explored before. We will focus mainly on the cost-efficient components of our service and demonstrate how we are re-thinking the traditional design experience enabling them to take on more projects in less time.

La Firme has set 4 main impact indicators:

•  Number of people with access to safer and more functional homes designed by La Firme's architects - La Firme will make it more accessible and affordable for low-income families to construct robust houses that are safe and resilient. On the other hand, La Firme will allow families to better distribute their limited available spaces based on their needs, interest and preferences. Safer and more functional homes not only improve the family members' interactions and dynamics, but also introduce bioclimatic designs that maximize natural resources, such as light and ventilation, that create a better environment to thrive and reduce the use of energy.

•  Amount of money saved by low-income families throughout the construction journey - La Firme will avoid families incurring in future expenses to fix and repair houses constructed without technical assistance. Families that self-construct without any professional guidance end up spending almost twice the amount of the initial construction budget as their process extends over 5-10 years. Considering the average housing size and budget, a family will save approximately USD 23,000 through La Firme's solution by avoiding unnecessary repairs over time.

•  Monthly median revenue per architect on the platform - La Firme will increase work opportunities for trained architects that struggle to find clients as independent professionals. We will make a whole new market segment available for them in a cost-efficient way.

• New housing units designed above existing structures (densification) - La Firme will enable the construction of safer homes above existing structures and enable a vertical expansion of the city instead of a horizontal one. This will promote densification, compact urban surfaces and, consequently, reduce carbon emissions in urban areas.

The lack of housing alternatives for Latin American families is a multidimensional problem. Both markets and governments fail to provide affordable options so families are left to build their own homes. Self-construction involves issues such as land tenure, financing, access to basic services, materials and construction techniques, etc. We focus on improving access to technical assistance as it directly tackles housing quality, and it’s a critical entry point that has not been solved before despite it’s huge potential for unlocking other pieces of the puzzle. Once we are able to gain families' trust and advise the construction of their homes, other opportunities arise. We can expand our services to include legal assistance, propose designs that use new materials and technologies, partner with institutions to provide better financing options, among many more. A well designed and planned home that responds to its natural ecosystem, increases the resiliency of families in a context of increasing hazards such as earthquakes, mudslides, flooding, etc. But ultimately, we deeply believe that better quality housing provides a critical stepping stone for families to further improve their wellbeing, unlocking better educational, health and economic opportunities for its members and neighborhoods.

Our digital platform integrates existing technologies developed by other vendors such as image processing, AI, and virtual reality into our architectural service journey to make it more efficient and enable us to scale. These technologies include processing aerial imagery into ready-to-use CAD files for architects, identifying measurements, building materials and topography from pictures, producing 3D images through virtual reality, etc.

Our own technology also includes machine learning to match families with architects, provide automatic quotes, convert technical drawings into explained reports, among other features. As we continuously analyze the gathered data from families, we will identify patterns that can inform ways of continuously improving our service. Our software maximizes user friendly and inclusive interfaces designed specifically for our target population.

Towards the future, we will also identify and promote traditional building technologies for specific natural ecosystems. Diverse populations across the globe have developed technologies to adapt to their ecosystems that we can leverage to increase bioclimatic responses as well as incorporating local and sustainable materials to reduce dependencies from cement and similar materials.

As a fully Latin American team and a women-led venture, we care deeply about diversity, equity and inclusion. In order to achieve that in our internal organization, we will develop transparent procedures for hiring and retention of employees, a respectful organizational culture, and equal payment policies, among other strategies.

Our three founding team members share the same values about diversity and inclusion and are committed to guarantee these values are reflected when recruiting new members, growing the venture, developing partnerships, acquiring customers and creating a board of directors.

As our goal is to serve a diverse set of families across the Global South, having a diverse international team is critical to inform our strategies to work in each country. This will allow us to bridge cultural differences, identify early-on potential blind spots, and learn from each social and environmental context. 

Additionally, we are considering the option to incorporate as a Public Benefit Corporation which would allow us to protect our mission of social impact externally and internally.

As a B2C, La Firme earns a percentage from each architectural service acquired by families. Our automated system will calculate a quote according to the site’s size, location and number of floors requested. This price (to be defined for each country) covers the Site Analysis, Architectural Design, and Final Plans phases, including the meetings with the architect, and the complete set of plans and reports produced both by La Firme and architects. To provide flexibility and adapt to families’ variable cash flows, families have plenty of time to pre-pay 50% of the total service before getting started, and later the other 50% before receiving the final deliverables. How exactly we divide the payment between architects and La Firme remains undefined. The pilot under development will allow us to further test our pricing hypotheses. In the near future, we will leverage machine learning and data collection to reduce costs/price as more families use the platform, and we will also explore other revenue sources.

During the next 4 months, la Firme will focus on raising funds from social impact and social entrepreneurship competitions as well as from the MIT Entrepreneurial ecosystem. These grants and prizes will allow us to implement a pilot in Lima, Peru with families and architects to validate assumptions and adjust the features of our platform and service. During the second half of 2022, we will develop the first version of our platform and execute an initial digital marketing strategy to position our brand in Lima and engage with customers. We expect to earn revenue by the end of the year as we estimate that approximately 30-50 families will use and pay for our service.

By the end of 2022 and beginning of 2023, we will focus on raising funds from impact investors to further position La Firme in Lima, grow the team, invest in marketing and publicity and reach approximately 700 new customers. Throughout this growth, we plan to continuously adjust and improve the platform through machine learning and customer feedback. By the end of year 3, we expect to reach 4,000 new customers and start exploring the Mexican market.

During the third year, La Firme will explore additional market segments to increase and expand our revenue sources. We have identified that there is a need and opportunity for making the architecture service more efficient for all architects in Latin America that seek a more practical working journey with their diverse clients. Through our platform, we could tackle this need and even charge higher fees for designs with higher complexity by allowing professionals to leverage the automation, data collection, management and matching features that will already be in place.  

As a public benefit corporation, La Firme aims to attract impact investors early on in order to finance growth while generating socioeconomic benefits for middle income and low-income families in Latin America. We do not plan to subsidize our service but to make it affordable and attractive to our target customers and increase their willingness to pay. We will not seek donations and will prioritize covering most of our operative costs with our own revenues.

Up to this point, La Firme has been awarded funds as part of various entrepreneurial programs in the MIT Entrepreneurship Ecosystem like DeltaV, Sandbox, and DesignX. A small portion of these funds has been used to cover travel and living expenses, to conduct market research with potential families, maestros and architects, and to acquire technological devices for our upcoming pilot. We are planning to use the greater part of the funds to implement a 2-3 month pilot in Peru with 10 families and 2 architects. The pilot will help us test key assumptions and our intended service to inform the design of our platform. 

During the last couple of months, we have interviewed 40 families that have showed interest in our solution. Families were interested in the features of the platform, the working dynamics with architects and the price of the service. Based on these interviews we have created a waiting list with +20 families that want to be approached as soon as we launch the platform.