When more subsidy wouldn't have worked

Buenos Aires committed to developing the Youth Olympic Village district on a 50-hectare site, with a target of 1,000+ apartments across 31 buildings. The city explored various public-finance mechanisms to attract private development: soft loans (subsidized interest rates), extended amortization, and other credit instruments designed to improve project feasibility. The modeling task was to determine how much financial subsidy would be necessary to pull developers into what was perceived as an undervalued market opportunity adjacent to new metro infrastructure.

We built a pro-forma model capturing the full development stack: land acquisition, construction costs, financing terms, lease-up assumptions, and required returns. The simulation tested a wide range of loan terms and subsidy levels, incrementally easing credit constraints to see at what point projects would reach development feasibility (positive NPV at market hurdle rates). Even at extraordinarily generous financing terms — low interest rates, extended payback periods, and substantial public co-investment — projects in the study area remained barely feasible or outright infeasible.

The model revealed that financing was a secondary constraint. The binding limitation was physical and regulatory: site assembly complexity, construction difficulty on the parcels, and visibility challenges in an emerging neighborhood kept developer returns low regardless of how much cheaper credit became. The implication was clear: further subsidy on the same terms would not move investment. Instead, success required direct public action on the hard constraints themselves: taking assembly risk off the table, investing in complementary public realm improvements, or anchoring demand through public housing or long-term lease agreements.