The radical Chilean architect Alejandro Aravena, known for his pioneering social housing projects in Latin America, has been named as the winner of the 2016 Pritzker prize, the highest accolade in architecture.

The 48-year-old, who is also the curator of this year’s Venice Architecture Biennale, has made a name for himself over the past decade with projects that reinvent low-cost housing and engage residents in the design of their own homes. It is a refreshing choice for the Pritzker, usually awarded to later-career architects whose portfolios brim with grand cultural monuments.

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Announcing the news, Tom Pritzker, whose father founded the prize in 1979, said Aravena’s work “gives economic opportunity to the less privileged, mitigates the effects of natural disasters, reduces energy consumption, and provides welcoming public space … He shows how architecture at its best can improve people’s lives.”

Aravena and his architecture practice, Elemental, first came to international attention in 2004 with a project that redefined the economics of social housing. The challenge was to rehouse 100 families who had been squatting illegally on half a hectare of land in the centre of Iquique in northern Chile. The government’s housing subsidy of US$7,500 (£5,200) per family was nowhere near enough to buy the land and build new homes, particularity on such a valuable site. The usual solution would have been to relocate the residents to the outer suburbs, cutting them off from their families, friends and jobs.

“If there wasn’t the money to build everyone a good house,” said Aravena, on the telephone from his studio in Santiago, “we thought: why not build everyone half a good house – and let them finish the rest themselves.”

Facebook Twitter Pinterest Top: Interior of a house in Iquique financed with public money and, bottom, developed by residents. Photograph: Tadeuz Jalocha

Elemental’s terraced houses provided a basic concrete frame, complete with kitchen, bathroom and a roof, allowing families to fill in the gaps, and stamp their own identity on their homes in the process. The result was a far cry from the identikit slabs of nearby social housing blocks. The value of the properties has since increased five-fold, while the model has been rolled out in different forms on other sites in Chile and Mexico involving 2,500 homes.

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Aravena is one of a number of young Chilean architects coming to international prominence – along with Serpentine pavilion architect Smiljan Radic, Mathias Klotz and Pezo von Ellrichshausen – a flowering that Aravena partly attributes to scarce resources. “The toughness of the circumstances can work as a useful filter against arbitrariness,” he says. “This environment of scarcity stops you from doing things that are not strictly necessary – whereas abundance can sometimes lead to a culture of doing things just because you can.”

Trained at Universidad Católica de Chile Santiago, Aravena’s first project was a new mathematics faculty for his alma mater, built in 1998. A medical school followed, then the refurbishment of the architecture school, along with a classroom tower and innovation centre, which stands on the Santiago skyline as a startling stack of monolithic concrete blocks.

While Aravena has built an impressive portfolio of buildings, it is the bigger strategic questions that really drive his work, and for which he has been awarded the Pritzker. The judges say he “epitomises the revival of a more socially engaged architect” and gives the profession “a new dimension”.

Facebook Twitter Pinterest The medical school at the Universidad Católica de Chile Santiago. Photograph: Roland Halbe

Elemental is an partnership between a group of architects, a university and the country’s national oil company, Copec – which provided the initial funding. This Robin Hood structure runs throughout Elemental’s work, split three ways between social housing, urban planning and more lucrative commercial contracts. Projects like a new headquarters for pharmaceuticals giant Novartis in Shanghai help to subsidise the more public work, which includes a post-tsunami reconstruction plan for the city of Constitución.

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Aravena’s team was charged with devising plans for everything from new housing and public buildings to tsunami mitigation and energy infrastructure in just 100 days. They began by building an “open house” in the city’s main square, a drop-in centre where people could come to discuss and contribute to evolving plans. Dolores Chamorro, a 78-year-old local resident who has lived through a good number of Chilean earth tremors, said their approach was a refreshing change. “I went to every meeting,” she told the Guardian. “It was fantastic having these young architects come in to really make us think about the kind of city we wanted.”

As poster boy for a more critical model of architecture practice, Aravena intends to use his Venice Biennale – titled Reporting from the Front – to raise the volume of debate around global urbanisation. “We will have to house a new city of 1 million people per week over the next 15 years, using resources of just $10,000 per family,” he says.

“One of the biggest mistakes that architects make is that they tend to deal with problems that only interest other architects,” he adds. “The biggest challenge is to engage with the important non-architectural issues – poverty, pollution, congestion, segregation – and apply our specific knowledge. It’s not enough to raise awareness. I want people to leave with more tools. We must share the challenges so we are aware of the coming battles.”