affordable housing institute 15-feb-14 formalizing the informal slum when the law and
TRANSCRIPT
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
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 www.affordablehousinginstitute.org Apr 10, 2023 // Slide 3
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 4
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 5
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 6
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 7
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 8
Enumeration of informal settlements:Once it’s mapped, it has formal existence
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 9
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!
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 10
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 11
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 12
“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”)
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 13
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 14
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)
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 15
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 16
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
Affordable Housing Institute www.affordablehousinginstitute.org Apr 10, 2023 // Slide 17
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