The recipient of the prestigious 2017 Ideas Worth Teaching Award by The Aspen Institute’s Business and Society Program for his educational innovations to address affordable housing development, Jaime P. Luque joined ESCP (Madrid Campus) as Associate Professor in Economics in July 2018. He explains why real estate and housing economics will make 2019 a special year at ESCP.
Real estate plays an integral role in the economy. It creates places to live and spaces for business. It also contributes to the financial industry by providing a permanent source of revenue to investors.
Well-known examples of such investments are residential and commercial mortgage lending, land acquisition and development, and Real Estate Investment Trust (REIT) shares. In expansionary periods, real estate returns may outperform other asset classes – for example, residential house prices in Spain grew 150% in nominal value between 1997 and 2006. But every boom is followed by a bust. The subprime mortgage crisis of 2008 proved to be one of the most catastrophic economic events in postmodern history. The real estate burst brought countries such as Spain and the United States to their knees. Unemployment skyrocketed and financial markets collapsed following an unprecedented rise in defaults and foreclosures in residential mortgages.
Right after the subprime mortgage crisis, another crisis of epic dimensions emerged: the housing affordability crisis. Many cities, such as New York, San Francisco, London, Paris, and Madrid, have struggled to cope with the problem of homelessness and the lack of affordable housing. Today in the United States, homeownership is hovering at 20-year lows, while about half of renters struggle to pay their landlords. And more than 560,000 people nationwide are estimated to be homeless – meaning they slept outside, in an emergency shelter or in a transitional housing program. Almost a quarter were children (140,000 homeless children on a single night in the US!). Similar problems were documented in several European countries, including Denmark, France, Greece, Portugal, Spain, and the United Kingdom.
Given the relevance that real estate has for the economy, real estate has emerged as a successful and engaging field in the academia. In the research front, urban economics, housing economics, and mortgage finance, are popular topics in all prestigious academic conferences. In the education front, business schools have embraced real estate as a separate field. Only in the United States, there are more than 65 real estate programs, many of them anchored to a real estate department and/or a real estate center. With a few exceptions, Europe is still in its infancy in terms of developing strong real estate education programs and research. My goal for 2019 is to implement a series of initiatives that will make our school a leader in the field of real estate.
A prestigious conference, a new certificate, a new association and a new Professorship
On the research front, I am pleased to announce the celebration of an international research conference on the topic of housing affordability. It will take place at the ESCP Madrid campus on June 4-5, 2019. The conference will bring together top researchers that will share their findings on important economic and policy issues related to housing affordability. The organizers of this conference are Stuart Gabriel (Director of the Ziman Center for Real Estate at the University of California Los Angeles), Danny Ben-Shahar (Director of the Alrov Institute for Real Estate Research at Tel Aviv University) and myself. The three of us have put together an outstanding Scientific Committee composed by first-class researchers in top institutions, such as Harvard, Northwestern, UCLA, NYU, Stanford, LBS, LSE, USC, and the Federal Reserve. Scientific Committee members will evaluate all papers submitted and select the best ones according to a research excellence criterion. It is my hope that this initiative will significantly increase our visibility as a top research institution in the fields of real estate and housing economics.
On the education front, we must recognize that real estate companies often rely on well-trained workers capable of making investment decision in an environment of complexity. To fill this education need, we will launch a new Certificate in Real Estate Finance and Investments (CREFI) that will be taught at the ESCP Madrid campus in the spring of 2019. I have been teaching this course since 2012 in the real estate program of the School of Business of the University of Wisconsin-Madison and I can assure you that our high quality education standards will be no less than any top real estate program in the United States. The program consists of 40 hours of class instruction, with the first 30 hours devoted to a course on real estate finance and investments and the remaining 10 hours dedicated to preparing students for an exam that, if successfully passed, will award the student with a certificate.
In addition, we have also launched the ESCP Real Estate Association (REAS), which I serve as Faculty Director. The new REAS’s organizing committee, led by Presidents Claudia Russo (Master in Management student) and Sofia Restrepo (Bachelor in Management student), are creating a community of students who are passionate about real estate development, smart cities, and urban development and who aim to start their professional careers in this sector. Students enrolled in the association will learn from distinguished guest speakers, visit sites from which they can learn the “know-how” of the real estate development business, do field trips to buoying cities, and network with industry experts who can ultimately facilitate them internships and job opportunities.
Finally, it is my pleasure to announce the creation of a Professorship in Real Estate, sponsored by BNP Paribas Real Estate Spain and starting in January 2019. As the faculty in charge of this professorship, I will conduct high quality research in the field of real estate and organize events and conferences that will make ESCP a reference point for the real estate industry. BNP Paribas Real Estate Spain has also kindly accepted to offer four internships to our master students every year. Innovative applied learning opportunities like this one are a hallmark of our curriculum, and help reinforce the role of ESCP as a world-leader in business education.