Home.Earth is using the planetary boundaries as the guiding framework for their ecological impacts while they optimise for, e.g., affordability, liveability, inclusivity, and a responsible supply chain within their social impact.
Highlight of their unique design
Home.Earth is set up as an evergreen company that develops properties with an ambition to operate them in perpurity. The company has developed a business model that ‘grows the pie’ by aligning key stakeholders, sharing profits with its tenants, its foundation, its team and its investors. The intention is to ensure a more equal distribution of property profits and that more people can afford housing, while also supporting impact and innovation in the built environment through the foundation.
Home.Earth is an example of an urban development company that has embodied an innovative model of ownership and governance. Through profit sharing with its tenants , it helps tenants to afford housing and creates long-term relationships. A foundation has to approve the annual business plan, new members to its board and retains 35 per cent of voting shares of the company. These are some of the features of the business design that help it to pursue its regenerative and distributive goals. In an industry that particularly requires significant investment to get projects off the ground, Home.Earth’s deep design has driven some important innovations that can serve to transform business design across real estate and urban development.
02 | Founding Story
Home.Earth is an urban development company founded in the beginning of 2021 by a diverse team of experienced leaders from real estate, investments, architecture, sustainability, and social entrepreneurship. As an integrated investor, developer and housing operator, Home.Earth will be designing, building, and operating homes and spaces – initially in Copenhagen, but with European ambitions.
03 | Industry Context
Real estate and the urban environment have a profound impact on all of us. We spend 90 per cent of our lives inside buildings. And by 2050 almost 70 per cent of us will live in cities. The built environment enables life, community and culture. But at the same time, it fosters loneliness and health issues. It counts for almost 40 per cent of global CO2 emissions. It is the biggest living expense for most people. And nowhere is growing inequality more visible than in how we live.
Two core challenges are hampering the real estate sector from contributing to solving the challenges our cities are facing. First, the real estate sector is held back by a fragmented value chain, causing the sector to optimise for the short-term instead of the long-term. In a classic development project, most actors – such as the architect, the engineer, or the developer – are only involved in 2-5 years and thus take decisions that optimise value creation within those 2-5 years. But given buildings and the communities in them live for 50 to 100 years – if not longer – it is critical that decisions are made to optimise long-term value creation and life-cycle cost. We need to better incentivise all actors to optimise for the long term, even if it cost in the short term.
The other core challenge in real estate today is that the development and operation of real estate is driven by the interests of the developer/investor/owner/landlord rather than other key stakeholders such as tenants, communities, and our planet. While investors should receive a fair return and reasonable levels of governance rights, it is necessary to distribute influence to other stakeholders as well to align interests and enable maximal value creation across multiple bottom lines.
Home.Earth sketch by Asbjørn Lund of Vandkunsten Architects
04 | Regenerative & Redistributive Strategies and Ambitions
The purpose of Home.Earth is to develop people and planet positive homes. Inspired by Doughnut Economics, they approach their purpose with a holistic definition of “people and planet positive” and an ultimate aim of being a regenerative company. As such, Home.Earth is using the planetary boundaries as the guiding framework for their ecological impacts while they optimise for, e.g., affordability, liveability, inclusivity, and a responsible supply chain within their social impact, drawing on the 12 social dimensions from the Doughnut.
The ambitions are about to come to life in Home.Earth’s first development project just outside Copenhagen, where they will create ~158 homes and ~1,300 sqm of active commercial space, starting construction at the end of 2023. Read more about the project at www.home.earth.
05 | How the Deep Design Enables Strategy and Action
To tackle urban economic inequality, Home.Earth is allocating a share of the value creation to its tenants each year - which translates to roughly 1 month of rent in a normal economic environment and hence should enable a stable, affordable, and attractive housing option for tenants. This will, over time, hopefully translate to access to home ownership for tenants that cannot otherwise build enough savings to buy their own home. Alongside recognising tenants for the value they bring, Home.Earth hopes that this hybrid model of ownership will lead to tenants feeling and acting as owners rather than tenants, enabling better alignment between tenants, landlords and our planet.
To operate within the planetary boundaries, Home.Earth is embedding impact criteria in all its core processes and decisions. This entails for example that social and planetary impact targets are conditions for investments and operations. Similarly, the company’s reporting will include the key bottom lines of people, planet and profit, to create transparency about the impact achieved across stakeholders and to demonstrate that a holistic approach enables more value creation relative to traditional models.
Recognising the importance of a strong foundation – the right business design – Home.Earth has integrated business design and good governance principles into the core of their impact management framework. As such, alongside social impact and planetary impact, the 3rd area in their impact management framework is titled “Getting Governance Right”. In other words, Home.Earth will measure its success and failures within regenerative business design. This includes, for example, measuring the degree of supply chain transparency, the amount of value created for tenants, and the diversity of its board.
To enable the full realisation of its purpose and create mission-lock, Home.Earth is set up with a foundation controlling the purpose of the company. The structure draws on the success of many Danish companies, such as Lego, Maersk, Novo Nordisk and Carlsberg, that have established foundations to control the relevant companies in order to safeguard the purpose and ensure that the company operates for the long-term.
In the case of Home.Earth, the Home.Earth Foundation will hold 35 per cent of the voting rights in the company and be entitled to approx. 5 per cent of the financial return. The governance structure has been set up such that the Foundation has veto-right on any decision that relates to the Purpose of the company. The Foundation also holds a key role in regards to the Board of Home.Earth as the Foundation approves all board nominations and ensures that the board of Home.Earth is made up of members that represent the interests of all key stakeholders.
06 | Reflections and Lessons for other Businesses
Home.Earth’s ambitions for sustainable and inclusive urban development are high and realising its purpose will not be easy. The Home.Earth team is convinced that a regenerative business design will be a critical enabler for them to achieve their purpose.
To overcome the challenges in urban development, the business design of the companies operating in the urban space must be revisited, moving from short-term profit maximisation to long-lasting holistic value creation. Home.Earth has set out to be a pathfinder on this journey and has developed a business design and stakeholder-anchored governance model, which they hope can serve as inspiration for other companies on a similar journey.
This case study was researched and written by Erinch Sahan, DEAL's Business & Enterprise Lead. It was written in close collaboration with Home.Earth.
