This is the second in a four-part series of blog posts recapping the 2017 Urbanization and Poverty Reduction Research Conference and the presentations of its speakers.
The informal economy that dominates many African and Southeast Asian cities is, at the same time, a hindrance to growth and an ingrained part of urban lives. The process of formalizing work and bringing human capital to formal sectors is a significant challenge in cities facing population growth, but there is another area of informality that is similarly difficult to change: the informality of land use. A large portion of available land in an areas such as West Africa is informal, untaxed, and unregulated.
While studies have found that informal land markets tend to open possibilities for the poor and underrepresented, the long-term impact of institutionalizing such extensive informalities has been disastrous for cities facing urbanization. Session One of the Urbanization and Poverty Reduction Research Conference explored the complexity of land use policy and the negative impacts that informal housing has on the urban poor and the future of local economies.
— IIEP at GWU (@IIEPGW) September 8, 2017
Session One began with a mini-keynote by Harris Selod of the World Bank’s Development Research Group. Selod spoke on the formal versus informal land markets, both globally and in the context of West Africa. In West African cities, there is a scarcity of formally supplied land, a limited formal land market, an absence of effective urban planning as well as land taxation, and overall poor governance. These factors, which slow growth, are a result of pre-colonial and colonial land policy that differed and overlapped, creating inconsistencies over time that permeate today’s land markets.
The complexity of formalizing land in West Africa has given rise to a norm of informal land markets, creating a need for new, formalizing policies to take into account the complexity and existence of these informal markets moving forward. Anthony Venables of the University of Oxford spoke about his paper, “Building the City: Sunk capital, sequencing, and institutional frictions.”
Venables developed a dynamic model of a growing city to help understand more efficient land use, highlighting the need for in-depth knowledge of an area’s firms and jobs, residential real estate market, and public infrastructure when planning growth. He then focused on data from Nairobi, calculating the cost of delaying the city’s formalization. Formalization of the housing market implies the government can enforce contracts in the housing market, and can have greatly positive quality of life impacts if handled correctly.
In contrast, informal housing is inextricably tied to slum formation and poverty figures of an area. Daniel da Mata of IPEA, a Brazilian government-led research organization, and Alain Bertaud both spoke on informal housing in the context of developing cities. De Mata explained that the three factors of poverty, inequality, and rural-urban migration explain 80 percent of slum growth in the past two decades.
The removal of barriers to formalization is one key solution to improve quality of life in informal housing units and reducing the amount of slums that aggregate in a city. This can be partly accomplished by lowering property taxes and formalization costs, which in Sao Paulo had the impact of reducing informality by 50 percent and slum occupancy by 15 percent.
This session of the conference explained broad concepts regarding the complex topic of land use, using case studies and research to illustrate the intricacies of formalizing land, for example. Harris Selod’s presentation on the formalization of land in West Africa, Anthony Venables’s model of more efficient land use applied to Nairobi, and Daniel de Mata’s examination of contributors to slum growth all highlighted a pressing issue in developing cities that suppresses tax collection, contributes to health crises, and perpetuates urban poverty.