Priu (social cooperative) – The Great Retrofit world

This is a description of Priu, a company which is a central actor in the Great Retrofit world created as an output of the Science Fiction Economics Residency 2024.

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Priu is a construction and real estate corporation based in Messina.

Legal structure

Priu is a Type B social cooperative. According to Italian law, social cooperatives are cooperative firms that pursue the general community interest in promoting human concerns and in the social integration of citizens by means of the carrying-out activities, including agricultural, industrial, business or services, and having as their purpose the gainful employment of the disadvantaged (who must account for at least 30% of staff).

Name

Priu (also spelled prju) is a word used in many SIcilian dialects. It means “joy, harmony, satisfaction”. It comes from the reflexive verb priarse, “to rejoice”.

History

Foundation and early days

Priu was founded in February 2027. Priu’s initial business was connected with the ongoing effort to rejuvenate the shantytown built as a temporary housing solution after the earthquake of 1908 and in which, as late as the 2010s, 2,000 families still lived. This effort, led by the Messina Community Foundation, was committed to give the inhabitants of the shantytown a range of possibilities to choose from rather than a single-point solution. Some of these solutions required the renovation of homes purchased on the market; Priu was founded to carry out this renovation work while providing good-quality employment and an opportunity for reskilling to shantytown dwellers. Of the initial founding members, all but three were informal construction workers from the shantytown; two were construction workers who lived in other parts of Messina; one was a construction engineer.

Priu’s idealistic vision and its embeddedness in Messina’s social economy cluster made it a natural candidate for working on building and remodelling projects connected to this plan. Its first projects were relatively small, but they were already led accordingly to the Quintuple Bottom Line principles upheld by the Foundation. That allowed Priu to acquire experience in green building, participatory processes, including sometimes difficult dialogue with the marginalized communities involved in the shantytown reclamation plan, knowledge sharing and aesthetics.

U Scogghiu project

One of the housing solutions offered to shantytown dwellers consisted in joining a community, organized as a housing cooperative, that would jointly own and run a large – but, at the time, dilapidated – building in town. The Foundation wanted to experiment with cohousing, since it believed that tighter cooperation between people living in the same space would lead to high resource efficiency and a fulfilling life. There are economies of scale to living together: neighbors could work together to manage efficiently their energy generation and consumption (by forming renewable energy communities) their water management (by collecting rainwater and re-using gray waters), their mobility (by joint ownership of one or two electric vehicles) and even grow part of their own food in the building’s large garden. Though not everyone was interested in such a project, a group of 24 families agreed to join. This move entailed a large, ambitious, participatory building renovation project. Helped by the Foundation, Priu contracted or hired highly skilled professionals to provide solution to heat- and sound insulation, design and install solar panel arrays, rain– and graywater captation, filtration and reuse systems. The technical and social complexity of the project, combined with the emphasis on beauty and harmony inherited from the Foundation, led Priu to deliver a building with a peculiar aesthetic character, the first well-known example of the style that came to be known as Mediterranean solarpunk. Its dwellers called it U Scogghiu. Scogghiu, related to the Italian scoglio, is a Sicilian word that denotes both a marine rock and, metaphorically, an obstacle to navigation. Didier Mbaye, an U Scogghiu resident who would later become Priu’s Chairman of the Board, quipped that the building wanted to be a shallow rock to the ships of greedy landlords, by giving people hope in a more humane way of living. U Scogghiu attracted interest in the architecture world, and featured on the cover of Domus magazine in 2031.

U Scogghiu is incorporated as a limited liability housing cooperative (Società Cooperativa a Responsabilità Limitata), with all adult residents as shareholders. The cooperative acts as the economic and financial interface for the building and its inhabitants: it collects rent from the residents, manages and maintains the building, is a member of the district’s renewable energy community, and sells some services, like cultural events held in the buildings common spaces, food produce from its urban farm, and support and training services to groups who also want to start their own cohousing. Fondazione Comunità Messina’s former secretary general Giacomo Pinaffo, who already lived in a cohousing of his own in Padova, was appointed as a lifetime honorary member of the board without executive responsibilities.

Implementation of the Great Retrofit moonshot

In 2034 the Messina City Hall, advised and supported by the Foundation, launched a “local moonshot”: retrofitting 60,000 housing units (60% of the city’s housing stocks) in ten years. The new policy was inspired by the ideas of Italian-American-British economist Mariana Mazzucato’s observation that setting ambitious, time-limited and verifiable goals, which she calls “missions”, stimulates innovation in directions consistent with the policy maker’s goals. Mission objectives are often called “moonshots” in tribute to the objective of the United States of America’s Apollo Program in the 1960s. With the housing stock retrofit moonshot, Messina’s became a mission economy focused on a green and social transformation.

The substantial new investments mobilized for the moonshot created a large market opportunity. At the same time, the new policy disposed that retrofitting operations must incorporate participatory elements, something most construction companies had little experience in. Priu, with its strong social element, experience in participatory processes, and the competences and prestige acquired through the U Scogghiu project, was asked to scale up to help deliver the moonshot in time.

Supported by the Foundation, Priu’s board accepted the challenge. It grew rapidly, hiring preferentially shantytown dwellers and themselves construction workers, most in informal or semiformal employment. Priu’s founders, who shared that same background, were able to reach out to many shantytown dwellers and convince them to join the Priu cooperative and embrace its way of working. It introduced power-sharing arrangements such as a decentralized management architecture based on sociocracy. The board itself expanded in numbers and grew in role, with several former shantytown members now finding itself not only in board seats, but wielding executive responsibilities. Mbaye, a Senegalese who had come to Sicily as a refugee when still a child, was appointed as chairman. He turned out to be exceptionally effective at representing the ethos and style of the company, and, in a broader sense, became a sort of figurehead of the Great Retrofit mooonshot.

Priu decided to prioritize retrofitting the largest condominiums in Messina first. This move made technical sense, because the largest building had the largest carbon footprint and the lowest retrofitting costs per unit. They also tended to be where the less affluent Messinese lived. This had the curious effect that, as the deadline for achieving the retrofit moonshot in 2044 approached, Messina became a place where the relatively poor lived in more efficient, modern, and often aesthetically attractive buildings than middle-class segments of the population. Additionally, the Foundation, Priu itself and other actors in Messina’s social economy cluster ended up acquiring several buildings that were also retrofitted by Priu. Their inhabitants were not evicted, as that would have clashed with Priu’s mission and statutes, but allowed to stay at an affordable rent, in what amounted to a de facto social housing program. Many of them chose to turn themselves into housing cooperatives, following the example of U Scogghiu and actively supported by the U Scogghiu cooperative. The combination of these two effects led to a noticeable improvement in the quality of life in the city, especially for low-income residents. Some commentators talked of “Messina model”, but most people used the more informal and catchy language of “Great Retrofit”.

Business model and source of competitiveness

Priu’s first business plan was completed in 2026. The business model described is straightforward: offer home remodelling services, with a focus on resource efficiency and preparedness for a world threatened by climate change. The business plan stated that the company had an opportunity to carve for itself a share of the Messina construction market leveraging the skills and ingenuity many construction workers in informal or semi-formal employment.

“Based on our experience, Messina’s underemployed construction workers may lack formal education, but have substantial technical and practical skills, and are hungry for opportunities for better employment and a better life. They could become much more productive and therefore prosperous by forming a modern, well-capitalized organization, consistently to the “stocks over flows” principle upheld by physicist and economist Gaetano Giunta.” – Priu scrl, Business plan 2027-2032

The business plan asserted that the Italian construction and building remodeling industry was, with exceptions, not fit to serve a green and social economy as Messina wanted to be; Priu’s founders believed they could outperform most competitors. The company’s statute committed to adopting a quintuple bottom line approach and power-sharing organizational arrangements, and to using short-term debt very sparingly. The Foundation leveraged patient finance from the ethical finance and cooperative sectors to allow the new company to make the first investments in staff training and equipment.

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@giacomo.pinaffo can you make a back-of-the-envelope estimate of the volume of investments need of retrofitting 60,000 housing units? Such a policy would focus on the larger buildings. Maybe we can cut the chase and imagine 4,000 renovations of condos with an average of 15 units each. Is this realistic for Messina? also ping @zazizoma

This is a work of fiction. Any resemblance to actual individuals, especially @giacomo.pinaffo , is purely accidental. :smiley:

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Point of clarification . . . are retrofits being performed by a series of independent construction co-ops, each with a small capacity, or by the single Priu cooperative with expansive capacity?

It’s a market. Priu is no monopolist, which would be illegal. Any company, cooperative or not, can supply it. But we know from the superecobonus experience that supply is a problem, so setting up Priu ensured capacity to serve the suddenly expanded market.

Some retrofit model results. @alberto, I’ll email you the .ipynb file with the code.

10,000 buildings to retrofit, 10 retrofit construction co-ops with endowments of 100000 and a capacity of 3 concurrent projects each, mean weekly cost is 1000, mean time to retrofit a building is 12 weeks. I made all this up.

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Above is the number of completed buildings per initial endowment value per co-op, E. The dashed vertical line indicates the value of capacity * mean cost * mean time, or 36000, which is on average what a company would need to start with to manage cashflow. Model was run for 100 runs at each E value, thus you see variation in results due to internal model stochastity such as costs and time varying from the means.

Here’s number of the 10 co-ops that become insolvent due to cash flow constraints according to initial endowment.

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For differing numbers of buildings, n, here’s numbers of building completed according to starting number, for E = 100000 and 10 co-ops with capacity of 3.

image

Note first five points are linear and all buildings are completed. Capacity and numbers of retrofit companies are the driving parameters here.

Here’s time to completion in weeks for various numbers of buildings with same parameter values. The model stops after 100 years, or 5200 weeks.

image


Lastly, here’s number of co-ops with time to completion

image

Note there is not a lot of variation between number of coops after 40, because number of buildings are the same and the rate of new retrofit requests is on average 5 per week. So most are operating well under capacity most of the time.


It might be interesting, and not difficult, to add

  1. occasional additions of new construction co-ops, and
  2. added time for collection of funds from the state, separate from construction time, which will affect cash flows but not the ability of co-op to take on new retrofit work.

Happy to discuss.

Looks like great work, thank you so much! But yes, I will need you to walk me through it.

I am still in Guatemala on mission, let’s reconnect next week.

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So that means aggregate capacity is the single parameter here, right?

Ok, this was useful, I am starting to see where this could be going. How about this, though: realistically, capacity is developed over time. This is a central problem of any transition, and the Great Retrofit is no exception.

So here is a story:

  • The powers that be in Messina (with the Foundation in the lead) want to transition.
  • But, as previous experience in Italy has proven, the capacity is not there. However, there is some, thanks to the shantytown reclamation experience.
  • So, the Foundation rolls out a (fairly easy in principle) demand side policy, just like the real-world government of Italy did. But also a supply-side one, aimed at building the capacity to meet that demand. In this construction, capacity is the constraint, itself limited by the endowment.

Companies build capacity by doing projects. They do projects by being capitalized, like you already imagined. Endowment, however, is constrained. In a computational model, it does not matter so much how many companies you have, for the moment assume the same production function.

Capacity grows by companies making a profit on each retrofit. This is captured in your accounts variable. We can use profit as a proxy of capacity. So far so good. What I don’t understand is this:

How is it linear? This should be exponential growth. Before we continue, can you help me understand this point?

Hi! Because capacity isn’t growing in this version, so time to completion scales with n. We can add new coops entering and existing coops growing in capacity in next version, setting capacity as a function of endowment, but that assumes unlimited labour. Still it would be more dynamic and thus more interesting. In this version, it is that 3-project limit per co-op that is the gating factor. Were you able to open the notebook file with the code? I could also post it as html for easy viewing. All this will be easier via a call. I’m free most of Tues and Wed.

The real-life version is: there is plenty of labour in the construction sector. My hunch is that the skillset needed to power the Great Retrofit is not so very different from that needed for vanilla construction. Firms, however, still need expertise: a supply chain of relevant materials, the ability to budget etc., with retrofit gigs being a bit different from the bread-and-butter contracts of an average construction company. To give you an example, the architects of The Reef employ, on a consulting basis, a physicist, whose main job is to “raise the bar of sustainability”; the solutions he suggests are then implemented by regular construction companies, under the supervision of the architects’ studio. Finding such professionals and establishing a good working relationship with them is part of the mission of a Great Retrofit construction company. For the purposes of modelling, we could collapse in the endowment variable the growing capacity. We should probably rename it, though, because endowment suggests (static) initial conditions rather than a dynamic measure of capacity.

Yes, I have Anaconda installed. In the second part of the model, though, I feel the need for more explanations if I am to play with the code.

To link capacity to amount in co-op accounts, replace

with_capacity = [c for c in range(n_coops) if len(projects[c]) < capacity]

with

estimate = costs[b]

with_capacity = [c for c in range(n_coops) if sum([costs[x] for x in projects[c]]) + estimate <= accounts[c]].

I don’t think any co-ops will become insolvent under this v2 algorithm, and we no longer use the capacity parameter.

I’m currently running an E parameter value sweep with this v2; I’ll post results once it finishes.

By second part of the model, do you mean the parameter sweeps?

I think this is coming along nicely. Here’s a ‘mini’ version with 1000 buildings, 10 retrofit co-ops, E = 30k and a tau of 5. This shows the driving dynamics which get lost in plots of larger n.

These plots are for 10 runs, shown in step-wise detail.

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@alberto, you were correct in that something happens once co-ops start to realize profits, but that something under these parameter conditions is that buildings no longer need to queue before work starts on their project, since all new projects can be immediately accommodated.

Note interesting behaviour about step 130, where in progress work drops off and finished accelerates, up til about step 150 when finished projects turn linear.

Here’s what’s happening to total accounts.

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Increase in balances correspond to decreases in in progress projects, meaning less expenditures. Notice the distinct waves in the first 50 weeks.

Ok, this means I was mistaken here:

The endowment variable is not a good measure of capacity. At best, it can be seen as a correlate of unallocated capacity. It’s just the nature of the beast. And still, it is fascinating that a highly simplified model (everything depends from money in the bank) still produces an accelerating rate of completion until extra demand runs out.

The next step could be: now imagine that building are not identical, but they are on a distribution across two variables, thermal efficiency before retrofitting and financial capacity of the owners. The two are negatively correlated: rich people live in better insulated buildings, and vice versa low-income households. You could imagine that smaller retrofitting jobs for rich people would be more profitable (or less risky, which is roughly the same). Now you could model what happens if the companies are motivated by profit vs. motivated by “mission” (emission reduction) but constrained by profit > 0.

What this model would show is that, even if demand-side policies are in place, supply-side ones matter a lot.

And again, I am not convinced that having multiple retrofitting coops is doing anything. What matter here is aggregate capacity.

Indeed, in this incarnation all co-ops have identical endowments and capacity expansion dynamics, and are instantiated at the same time, so results from a single firm with total endowment of 300k are materially indistinguishable from 10 co-ops with 30k endowments.