Land, Housing and Urban Services

Tenure Security, Property Rights and Land Development Regulations

Most of the urban poor do not have tenure security because their dwellings are:

• built on public land; or

• constructed on private property not belonging to the owner; or

• built on shared title land; and/or

• constructed without occupancy or construction permits; or

• rented in slums without formal renting contracts

Many of the urban poor have to house themselves illegally because:

• Land policies do not make sufficient developed land available: 

  Urban planning tools, including master planning, zoning and plot development regulations, are not appropriate to make land available in pace with rapid urbanization, resulting in insufficient land supply and increases in land prices. Master plans in many developing and transition countries are too centralized, take too long to prepare, and fail to address implementation issues or the linkages between spatial and financial planning. Resulting regulations are outdated and inappropriate.

   

  Policies and/or regulations as well as public authorities' approach are not conducive to regularization of tenure because:

  • There is a widespread assumption by authorities that regularization may encourage illegal practices

  • Issuance of land documents can create considerable conflict, especially in places with multiple forms of property rights

  • Authorities may prefer to retain the informal status of some spontaneous settlements, as the land may be demanded by other uses, and informal occupation provides a sufficient ground for eviction

   

• Land and housing regulations make housing unaffordable: 

  Unrealistically high standards for subdivision, project infrastructure, and construction make it impossible to build low-income housing legally. Furthermore, urban land supply can be limited by: (i) extensive public ownership of land and unclear land transfer procedures (most common in transition countries); (ii) unrealistic standards for land and infrastructure development; (iii) complex procedures of urban planning; and (iv) unclear responsibilities among public agencies. Limited land supply will cause the prices to increase.

• Land and housing regulations make it difficult for the poor to follow cumbersome procedures: 

  Procedures can be unduly cumbersome, difficult for poor people to save time and to follow. Observations from many developing countries show that the processes of obtaining construction and occupancy permits are complicated, not well-understood by the poor, especially immigrants, time consuming and costly. The result is invasions of state land or purchases of unplanned land from illegal agents.

• Lack of access to credits: 

  There is ample evidence from Africa, Asia, Latin America and Caribbean countries that low-income and even moderate-income households do not have access to housing credits. When housing loans are not available, households have to use their own savings, sweat equity, and/or loans from relatives. Estimates from various countries show that it takes from 15 to 30 years of saving (30-50 percent of monthly income) for low-income households to afford a minimum standard unit in authorized stock. It should be noted that in reality households in the lowest deciles of the income distribution cannot save (like the households in upper echelons of income distribution), as in most cases monthly incomes are irregular and hardly sufficient for minimum nourishment requirements. Thus, building in illegal areas, without construction and/or occupancy permits, remains as the only option for the urban poor.

Lack of tenure security leads to:

• Loss of physical capital, damage of social and informal networks for jobs and safety nets, and sense of security. 

  Several million urban dwellers are forcibly evicted from their homes each year, most without any form of compensation.

• Inability to use the house as a resource when other sources of income reduced. 

  For poor people, housing is an important productive asset that can cushion households against severe poverty during economic hardships. Renting a room or creating an extra space for income generating activities are the common coping strategies. When the poor have secure ownership of their housing, they often use it with particular resourcefulness when other resources of income are reduced (Moser 1996).

Suggested Policies

• Public authorities need to establish systems to provide tenure security (e.g., free-hold or use rights) in view of the country's cultural context and communities' particular circumstances. The aim should be to incorporate common practices into a formal system (see: Section Program Menu). If the majority of land acquisition practices and tenure systems do not fit into the current legal system, regulatory and policy frameworks have to be adjusted to incorporate current practices. Systems need not be restricted to free-hold titles, but can be flexible. For example protected use rights can be gradually upgraded to full ownership rights. In general, public authorities need to establish and publish guidelines for property registration and development. Also, property rights should be designed to allow free transaction of property. Owners should also be allowed to use their property as collateral.

• It may often be possible to sell occupied public lands to the resident communities or individuals. Such initiatives may, however, require arrangements with community groups to prevent exploitation through illegitimate claims by people who had not established residence there. For example, the National Community Mortgage Program of the government of the Philippines made it possible for squatters to buy the land they had occupied for an extended time.

Regulations both at the national and city level should also support:

• Transparency in land provision by establishing a clear division of authority among public agencies, simple rules and mechanisms of provision (which are accessible by everybody), and by establishing private property rights.

• Easy market transactions through clear and simple sales and registration procedures and taxation policies. In some countries, high rates of sales taxes constrain official transactions, which lead to illegal transactions. This perpetuates the lack of clear ownership.

• Cities and national authorities should explore practical but transparent methods to promote the better utilization of public land while improving access for the poor. Public land owned by national authorities (e.g., treasury or crown land) can be a major problem since cities may not have planning or development rights to such land. In many countries (including, Pakistan, Turkey, and Egypt), such land is often occupied and subdivided by informal agents and sold to the poor.

• Policies at the central level should set out a broad framework, while more detailed planning policies should be designed at the local level. For example, density levels in different parts of the city and infrastructure standards should be decided at the city level, in consultation with local communities.

• Flexibility should also be extended to building standards, construction material standards, and codes. Regulations that can be eliminated without jeopardizing safety should be eliminated in order to keep construction costs down.

• Procedures to apply for and acquire construction and occupancy permits should also be made simple so that they are accessible to poor people with limited education and time. Lengthy and complex planning procedures also delay the provision of serviced land and housing production, leading to increases in land and housing prices.

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Housing Finance

There is ample evidence from Africa, Asia, Latin America and Caribbean countries that low-income and even moderate-income households do not have access to housing credits, because:

• They cannot afford the debt service required to finance the cost of a minimum unit. They cannot meet the criterion used to qualify households (i.e., the mortgage payment to income) by financial institutions. For example, the ratio of mortgage payment to income for low-income households is 104 percent in Bolivia and 40 percent in Colombia which far exceeds the maximum (25 percent and 30 percent respectively) allowed by commercial financial institutions in these countries (Ferguson 1999).

• Mortgages require payments every month for a long period of time. However, low-income households are often self-employed, their incomes vary greatly, and they occasionally face crises -- such as sickness and injury -- that absorb all their available resources (Ferguson 1999).

• Commercial financial institutions usually have little interest in lending to low-income households (even if financial conditions allow) as the small loans required by these households are much less profitable (Payne 2000).

When housing loans are not available, households have to use their own savings, sweat equity, and/or loans from relatives. Estimates from various countries show that it takes from 15 to 30 years of saving (30-50 percent of monthly income) for low-income households to afford a minimum standard unit in authorized stock. It should be noted that in reality households in the lowest deciles of the income distribution cannot save (like the households in upper echelons of income distribution) as in most cases monthly incomes are irregular and hardly sufficient for minimum nourishment requirements. Thus, building in illegal areas, without construction and/or occupancy permits, remains as the only option for the urban poor.

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Service Provision

Access to serviced land may also be limited by unrealistic standards and regulations which impede entry. Infrastructure standards should be made relevant to the effective demands and incomes of the poor. Households can make their own tradeoffs between cost and quality of services. Limited access to urban services not only deteriorates human capital, i.e., health education, but hampers the productivity of small- and micro-enterprises and home-based activities.

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