Guatemala: Sustainable living: something everyone has a right to

One of the many topics of national interest in 2018, about which those of us who live in Guatemala City have had the opportunity to converse, is the current housing problem and it is necessary to address it immediately. Guatemala City is projected to experience a significant increase in the population in the coming years: it is estimated that the population of the urban area will rise to 27 million by 2080. In the recent National Business Conference (Encuentro Nacional de Empresarios ENADE), the challenges and concerns for the housing market in the coming years, as well as business opportunities and the commitment desired for this sector, were presented to different representatives of the public and private sector.

Of course, the challenge is not only formulated from the business opportunity view point; it is vital to develop an inclusive model that is promoted amongst the housing market sector and the construction of long-term sustainable buildings that follow a controlled and planned territorial development and that demands public policies focused on increasing the use of renewable energy sources and improving the environment, availability of services, transport systems, urbanization and security, amongst other things, in cities.

The financial and banking industry will need to address how to reach a sector which, even today, does not have a sufficiently developed mechanism that provides a way for potential first-time buyers to acquire a mortgage for a property within the urban area, according to their family income and financial situation. Currently, the majority of the population residing in Guatemala City is in the age range of 21 to 40 years old, which has had the effect of legal initiatives and projects being developed that will be to the benefit of this unattended sector. To this end, proposed legislation is being discussed in the Congress of the Republic of Guatemala, such as a bill to improve social services and access to them and another regarding common leasing for real estate. Although many different approaches exist, all the efforts are being directed at achieving more housing but, crucially, more affordable housing for a group that struggles to get onto the property ladder, which currently is a cause for concern for the country.

With regards to a sustainable resource and architectural design view point, the biggest challenge will be to provide the housing market with "decent housing", meaning a place in which a family or individual can live with security, peace and dignity. In 2019, the executive branch of the government announced the creation of committees to research models and policies for "decent housing". This begins with collaborating with other countries, such as Mexico and Germany, to suggest housing models that are functional, have a cultural identity and are considered green, by using materials and being energy-saving, as is being demanded in this century. Savings Institutes for Housing are schemes for loans and mortgages that come from programs already in development and currently operating. The scheme is based on mandatory contributions of between 5% to 8% of private sector employees which are withheld via payroll and paid by the employer. The contributions are managed in a capitalization account and can be used by the employees to purchase housing, be it new-build or not, home improvements and extensions and construction on land they own. The approach of covering a large segment of the population boosts the economy and, in the long-term, these models are successful if, simultaneously, efforts are made to improve private sector employees’ salary, something which is achieved in a growing economy. The scheme works by providing loans and mortgages to employees who have at least three years of continued work for the same employer, and by encouraging saving by offering long-term high returns. The challenge is to replicate a similar scheme in the public sector, since it is estimated that about 30% of Guatemala’s public budget goes to paying salaries and wages of public employees.

In conjunction with the actions described, it is relevant to consider a reduction or simplification of administrative legal regulations, so to remove red-tape and stimulate the construction sector. Since housing is needed, then regulations that are easy to follow, practical, logical, congruent and systematic must be implemented, that simplify and speed up the administrative procedures of acquiring construction licenses. Rather than needing separate and independent efforts, the plan will require complete cooperation from a variety of areas such as professionals, municipalities, banking sector and private and public sectors. The municipality plays an important role as the authoritative of urban planning within their territory; the municipality of Guatemala City already has been certified in process and staff quality and the trend must continue to simplify them and open a communication channel for all stakeholders.

Municipalities have the right and are obliged to collect a property tax (Impuesto Único Sobre Inmuebles – IUSI). To calculate the tax due on a given property, the municipalities use the tax value of the property and its characteristics, such as dimensions, location, construction and structure, among others. Comparing property tax rates with others in the region, Guatemala’s is lower than those in Panama, Costa Rica and Dominican Republic, for example. The exponential growth of the housing market requires consideration of a city’s infrastructure, as well as the provision of public services, such as education, health, water and electricity, the safety and security of the citizens and the creation and maintenance of recreational and green areas. The biggest challenge facing the Government is focusing its efforts on growth mechanisms which, at the same time, this growth will demand. All of this must be aligned to the projected growth figures and it is worth analyzing the way in which the taxes are collected which, in turn, must be an incentive for this sector which needs to be supported urgently.

The solidity, durability, security and habitability must be given more importance in countries like Guatemala, since home-owners should not be put at risk because of a lack of planning, knowledge, capacity and housing developments as housing must be of a sufficient quality. It must be understood that urbanization does not mean endless and disordered growth and development, because its fundamental objective is development within and respecting the legal framework that governs it, despite the need for construction and new housing developments. In Guatemala City, not all land is available or apt for construction and it must be left to the professionals of different subject matter to determine the type of land and its possible uses, to respect the law and to construct correctly sustainable urban developments, while ensuring to protect the cultural and historic patrimony.

Urbanization is underpinned by three important factors: the environment, the economy and the social necessity. As such, urban laws must promote innovations in technical construction, the development of new materials, the concern of security in the face of risks, the analysis of environmental impacts of construction and the need to provide a certain standard of living, comfort, savings and efficiency in housing developments. Within the legal framework of housing development, legal certainty, quick and simple administrative processes and security are all key parts of success.

Sandra de Zedán
Consortium Legal – Guatemala