Affordable Housing Institute 15-Feb-14 Formalizing the informal slum When the law and.

Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023

Formalizing the informal slum

When the law and the facts clash, how can this be resolved?

Presented at the South Asia Housing Forum: Delhi, India, January, 2010

David A. Smith ♦ Founder ♦ Affordable Housing Institute

[email protected]

Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 2

Affordable Housing Institute:What we do

Non-profit (US §501c3) pro-poor consulting and research firm– Boston, MA, USA: work worldwide, mainly global south– “Developing successful affordable housing financial ecosystems

worldwide”– India, Colombia, South Africa, Kenya, Brazil

Consulting– “Pro-bono/ low-bono investment banker”– Financial product design/ program design– Program development:

Market principles + government aid = affordability

Research– Develop, explore, test, refute what we believe– Two-day working symposium in Mexico City, October 2009

Major grant from Bill & Melinda Gates Foundation


Affordable Housing Institute:What we believe

1. Housing is the key to improving cities• Improve housing and cities improve• Fail to improve housing and cities worsen

2. Mission Entrepreneurial Entities (MEEs) are key to improving housing

3. Scalable finance is key to MEE growth

4. Municipalities are the right level of government to ‘own’ slum upgrading


Is a slum good or bad?

Spontaneous community Private investment

outruns public infrastructure– People do for

themselves Business incubator Busy, lively Hive of innovation Self-built, self-improved Ever-changing Neighborhoods Voice of the poor

– Vote bank?

Density, overcrowding Private investment

outruns public notice– No infrastructure

Wealth extraction machine

Unhealthy for children Haven of crime Physical and legal reality

diverge Alternate power

structures


Informal settlements and slums: Some economic/ political definitions

Spontaneous community

“Economically rational” solution to the challenge of rapid urbanization

Private investment has outrun public infrastructure

Wealth-extraction machine– Investing in property does not yield increased property value

Physical reality and legal documentation are wildly at odds– In the formal city, physical and legal are the same


When physical and legal diverge, whole community suffers

If investing in property yields no increase in property value, why do it?– Slums do not physically improve– Cannot go above single-story (ergo, they must spread out)

If formal government does not recognize and protect real estate property rights, who will?– People transact informally, invisibly, without touching the

electronic or credit world– People live in an “economic parallel universe”

If formal government does not provide order, who does?– Alternate power structures (e.g. organized crime) replace

formal ones– Government loses legitimacy with slum dwellers


Financing formalizing communities:Two flows of forces: money and voice

Local government

Municipals

BusinessesCo-ops

Equity in entities

Program related investments

Domesticprivate capital

Hard capital (foreign providers)

Nationalgovernment

Public capital/ subsidy

Intermediate FI’s

Micro FI’s

Public goodsPrivate goods

Water Sanitation

Political expression

Cash flows


Enumeration of informal settlements:Once it’s mapped, it has formal existence


Slum formalization in São Paolo: Financing slum upgrading as health and sanitation Collaboration between water company

SABESP, World Bank & city Water and sanitation retrofit Little demolition – streetscape transformed Cleaning up the water by cleaning up the

slums– Slum upgrading purely incidental

Link to formal registration systems– Named streets, numbered addresses

Upgrading package comprehensive– Pavement and landscape– Collection of sewerage– Channeling storm drains– Retaining walls– De-densification

Going up!


Formalization in Nagpur:Propositions and working conclusions

Four propositions define slum upgrading1. Existing housing backlog already

2. Customers are very poor … cannot pay more

3. Local government needs capacity support

4. Will government put subsidy on the table? Money. Land. TDR’s. Infrastructure. Financing

Three working conclusions1. The state should stop trying to ‘solve’ it

2. The private sector will not rush in to solve the problem

3. Already most solutions come from the poor themselves


Slum resettlement and slum upgrading:Going up means formalizing

Mankhurd: co-op housing built after slum dwellers resettled from

rail right-of-way

Oshiwira II: SPARC/ NSDF new co-operative high-rise


“Prevailing winds” of slum formation and formalization

1. Unstoppable and continuing inflow of very poor people into cities

2. Self-organizing groups of poor people are emerging at unprecedented rates

3. People become urban without moving

4. All great cities grew by formalizing their slums

5. Informal markets have huge economic might

6. A home is a process, not a product (“Housing is a verb”)


Slum dwellers’ formalization of identity is a step toward citizenship

Front

Back

Family identity card (Mumbai, India)

•Enumeration of slum dwellers

•List household, domicile

•Basis for making people visible to the government


A theory of slum formalization:“Just do it … but pay for it” “Just do it”: transfer land rights to the poor

– Recognize they’re never moving out– Once transferred, state must be guardian of poor’s ownership

Poor become economic citizens

Theory of Change: to break the stalemate, durable rights transfer¹ of built² land³ to its very poor existing dwellers– Use eminent domain to transfer land ownership

Poor pay what they can afford Land owner receives the land’s fair market value

– Lack of infrastructure, adverse occupancy, political risk/ cost of relocation

Government pays difference – 1. Rights transfer is grant, cheap sale, or sale with debt – 2. Built and occupied with informal housing– 3. Extant or equivalent (if extant is unsafe or uninhabitable)


Formalizing informal slums:Obstacles to government action

1. Local government hesitant to use compulsory purchase/ eminent domain

2. “Amnesty” creates moral-hazard risk

3. “I don’t know how to do it” – lack of precedent

4. “Not on my shift” – cannot finish during time in power


Formalizing informal slums:Imperatives to compel change

1. Facts on the ground are strategically irreversible

2. “They vote … or they will vote”

3. It’s the only way property has ever regularized Roman soldiers sovereign land grants homesteading

London’s East End New York’s Lower East Side

4. By regularizing, you can “make more land”

5. Improves health and safety for the middle class

6. Global competitiveness rests on efficiency of cities Cities without slums are more attractive to global business


Questions?

Sao Paolo: “We’re building a house.”

Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023

Formalizing the informal slum

When the law and the facts clash, how can this be resolved?

Presented at the South Asia Housing Forum: Delhi, India, January, 2010

David A. Smith ♦ Founder ♦ Affordable Housing Institute

[email protected]

Date post:	27-Mar-2015
Category:	Documents
Upload:	jeremiah-henderson
View:	215 times
Download:	1 times

Affordable Housing Institute 15-Feb-14 Formalizing the informal slum When the law and.

Documents