Regularization of Informal Settlements in Latin America

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Policy Focus Report • Lincoln Institute of Land Policy

E d é s i o F e r n a n d e s Regularization of Informal Settlements in Latin America Edésio Fernandes

Policy Focus Report Series The policy focus report series is published by the Lincoln Institute of Land Policy to address timely public policy issues relating to land use, land markets, and property taxation. Each report is designed to bridge the gap between theory and practice by combining research findings, case studies, and contributions from scholars in a variety of academic disciplines and from professional practitioners, local officials, and citizens in diverse communities.

About This Report This report examines the prevalence of informal settlements in Latin America and analyzes the two primary paradigms for regularization programs that have been used with mixed results to improve conditions in these areas. The first, exemplified by Peru, involves the narrow legalization of tenure through titling. The second is Brazil’s broader approach to regularization that combines legal titling with the upgrading of public services, job creation, and community support structures. The author takes a sociolegal approach to this analysis. While local practices vary widely, most informal land developments in Latin America exhibit violations of the prevailing formal legal order governing land use, planning, registration, building, and taxation, and therefore have fundamental problems of illegality. Resolving these problems does not link directly to improvements in public services unless service upgrading is provided as part of a broader regularization program.

Regularization itself remains a work in progress, and the Lincoln Institute of Land Policy’s Program on Latin America and the Caribbean has long been concerned about how to address informality and its impacts. This report is part of an ongoing set of research, education and training programs, and related publications that document the work of many colleagues in countries throughout the region and the world. Additional information on this topic is available on the Institute’s Web site at www.lincolninst.edu/aboutlincoln/latin-america-caribbean.asp.

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Email: [email protected] O n t h e c ov e r : Web: www.lincolninst.edu A regularized settlement has new roadways and other services in the ISBN 978-1-55844-202-3 Nova Conquista area Policy Focus Report/Code PF023 of Diadema, Brazil.

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Contents

2 executive Summary

4 chapter 1. The Challenges of Informal Development 5 Sociolegal Aspects of Informality 6 Burdens of Informality 8 Interventions to Resolve Informality

10 chapter 2. Defining and Measuring Informal Development and Assessing its Causes 10 Problems of Definition 12 Challenges of Measurement 14 Causes of Informal Development 17 Summary

18 chapter 3. The Regularization of Consolidated Informal Settlements 19 Challenges of Regularization 19 Why Regularize? 21 Who Can Regularize? 22 Who Pays the Bill, and How? 24 What Are the Results? 25 Summary

26 chapter 4. Experiences with Regularization: The Cases of Peru and Brazil 27 Titling as a Trigger for Development: The Peruvian Experience 31 Tenure Security as an Integrated Program: The Brazilian Experience 34 Assessment of Regularization Experiences 35 Unanticipated Consequences 37 Summary

38 chapter 5. Additional Legal Issues Related to Regularization 38 Types of Tenure Rights 39 Legal Issues of Land Occupation 41 Ensuring the Durability of Benefits for the Poor 43 Gender and Land Rights 44 Environmental Protection 44 Summary

45 chapter 6. Recommendations on Regularization Policy

47 References 48 Glossary 49 About the Author 49 Acknowledgments 49 About the Lincoln Institute of Land Policy

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Executive Summary

An expanding informal wellings in informal settlements that informality comprises a significant settlement on the generally lack formal legal titles, share of urban development in large Latin periphery of Lima, and they may exhibit irregular American cities, ranging from one-tenth Peru, serves an active community. development patterns, lack essen- to one-third of urban residences. Dtial public services such as sanitation, and A key aspect of informality is the lack occur on environmentally vulnerable or public of de jure or formal title, although many land. Whether they are built on private or urban residents feel secure with de facto public land, informal settlements are devel- property rights of ownership based on oped progressively over many years, and customary practices. Residents in informal some have existed for decades. settlements developed on private land often Such settlements often become recognized have bills of sale or related documents, legally as part of the regular development and these properties are bought and sold of the city—through either official actions regularly. or the accretion of rights over time. Accord- Informality is attributed to many causes, ingly, the definition of informality is impre- including low income levels, unrealistic urban cise and multidimensional, covering physical, planning, a lack of serviced land and social socioeconomic, and legal aspects. Differences housing, and a dysfunctional legal system. It in definitions lead to noncomparable metrics generates large costs for residents, including across space and over time, yet it is accepted insecurity of tenure, lack of public services,

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discrimination by others, environmental household, these programs are much more and health hazards, and inequitable civil costly than Peru’s titling system, and Brazil rights. It also poses both high direct costs for has had more modest coverage of house- local governments when they undertake up- holds. Ironically, service upgrading occurs grading programs and substantial indirect more often with little or no change in legal costs when coping with other impacts of tenure status, although the number of titles informality, such as public health, criminal is increasing. The few evaluations that exist violence, and related social problems. indicate that the increase in property values Policies to regularize informal settlements associated with upgrading exceeded its have been attempted in most Latin American cost, as in Peru, albeit at a lower rate than countries, and experience demonstrates that in new urban developments. regularization programs need to be designed Recommendations for improving regu- carefully to avoid either making conditions larization policy and specific programs must worse for the low-income residents the pro- address the following issues: grams are intended to help or stimulating 1. Evaluate the performance of regulariza- the development of new informal settle- tion programs, including the collection of ments. While the financial costs of regular- both baseline data before program imple- ization programs vary widely, residents mentation and subsequent data on proof regularized areas rarely contribute any gram costs and outcomes. payments to compensate for those costs. 2. Customize policies and programs, because Overall, the lack of revenue associated with a single approach is unlikely to work well regularization has inhibited the scaling up across all situations. of such programs. 3. Use appropriate titling systems (freehold, Regularization programs follow two main leasehold, cooperatives, land trusts, paradigms. The first, exemplified by Peru, or communal ownership) to ensure the involves the narrow legalization of tenure socioeconomic sustainability of the through titling. This approach is inspired by community. Hernando de Soto’s hypothesis that tenure 4. Seek the participation of both men and security is a trigger for development, stimu- women to avoid building gender bias into lating access to finance, economic activity, the process and to increase its long-term and residential upgrading. From 1996 to effectiveness. 2006 Peru issued over 1.5 million freehold 5. Make regularization more self-sustaining titles at an average cost of $64 per household. financially through property taxes; charges Evaluations indicate that tenure security on urban infrastructure and service improve- had little impact on access to credit, yielded ments to capture part of the resulting some investment in housing, and may have land value increment; and equitable fiscal contributed to some poverty alleviation, burdens on all segments of the society. although the causal channels for the last 6. Support more research and analysis to effect are not clear. Secure tenure did increase determine if the situation is improving property values by about 25 percent, well or worsening in particular cities and to in excess of the titling cost. prevent the establishment of additional Brazil’s broader regularization programs informal settlements, particularly when combine legal titling with the upgrading of they are thought to be caused by public services, job creation, and community regularization programs themselves. support structures. At $3,500 to $5,000 per

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C h a p t e r 1 The Challenges of Informal Development

Improvised housing offers an alternative but inadequate option for low-income families in Villa Nueva, Guatemala.

nformal settlements constitute a who occupy public, communal, or private long-standing form, and often a large land. In most cases the developers or resi- share, of urban residential development dents demarcate lots and begin to construct in most Latin American countries. rudimentary dwellings. Public services such ISuch development results in part from the as pavement, street lighting, water, and illegal occupation or unlicensed subdivision sanitation are initially absent. Over time, of land, and in part from exclusionary prac- buildings are expanded, more durable con- tices that have contributed to historically struction materials replace temporary ones, unequal conditions of economic growth and and some public services begin to appear. wealth distribution. While informal processes Public service provision often stimulates more to obtain access to land have provided housing building construction. This physical consoli- to large numbers of the urban poor, they dation can go on for many years, creating are ultimately an inadequate and inefficient communities with substantial masonry means to meet the growing need for the buildings with two or more floors, paved sustainable development of safe and secure streets and sidewalks, and commercial communities in Latin America and around centers. the globe. In the early stages of such settlements, Typically informal settlements are estab- tenure is often insecure, particularly if the lished by illegal developers or new residents settlement takes place on public, communal,

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or private lands that have been occupied This latter view holds that the same legal illegally by the new residents. Settlements on order can accommodate rights generated private land typically lack any formal regis- through both formal statutory processes and tration of ownership, but occupants often informal customary rules, such as some social purchase illegally demarcated lots from the practices (marital relations, for example) parcel owner or previous occupiers, and that simultaneously accommodate statutory they may even possess bills of sale. and customary laws and norms. Over time, tenure security may increase, It is also evident that informal rules but it is normally de facto rather than de jure. do not emerge spontaneously; they reflect In many cases, the informal settlements are traditional processes and practices—such regularized much later through formal rec- as those regarding building rights, permits, ognition by public authorities, the provision rights of way, sale, inheritance, and registra- or upgrading of public services, and formal tion—and they are constantly adapted to acknowledgment of individual or other suit the specific needs of the affected social forms of plot ownership or legal possession. groups. The distribution of rights and jus- The continued lack of legal recognition of tice in informal settlements is usually highly legal tenure can impede service provision, but informally regulated. In many consoli- the availability of other urban infrastructure, dated settlements, informal land use and and the overall legality of urban residency. development are strictly governed by estab- Public authorities, and public opinion, lished practices, and many transactions are tend to be more tolerant of informal settle- authorized (with fees charged) by informal ments in which precarious legal documents powers, even including an informal regis- (e.g., bills of sale, contracts, receipts) establish tration process. the successive links in the chain of property However, legal systems undoubtedly transfer, but they deal more severely with favor those socioeconomic groups that can settlements originally resulting from land more easily find the instruments and mech- invasion (Fernandes 2007). However, a basic anisms they need to effectively defend their legal principle holds that time generates rights, land rights and interests. More often than and precarious land claims may become full not, the “other form of legality” of informal land rights over time, as through adverse settlements means the recognition of second- possession. class rights for second-class citizens. Residents in informal settlements not only lack full S o c iol e gal A sp e c ts land rights, but they also lack the financial of I n formalit y and other resources—literacy, information, While local practices vary widely, most in- education, networking, and access to lawyers formal land development in Latin America —that are often necessary to have access exhibits violations of the prevailing formal to the administrative and judicial systems. legal order governing land use, planning, Informal settlers are especially vulnerable registration, building, and taxation. Thus, as regards eviction and “negotiated” from a legal perspective, informal settlements relocation. have fundamental problems of illegality. Acknowledging the illegal aspects of However, this is often minimized by those informal development does not in any way who dismiss the legal order as illegitimate and mean that the people living in informal set- use instead the notion of “legal pluralism” tlements have no rights, or that they should to explain informal land development. be repressed or evicted. In some cases they

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may not have land rights of their own or the reflected in the daily practices of these right to stay on the land they occupy, but they informal settlements. almost always have other rights resulting from their occupation status. These rights need to B u rd e n s of I n formalit y be recognized by policy makers and judges From a broader perspective, the combined —for example, in the case of eviction, the burdens of informal development have been resident’s rights to be fairly compensated fundamentally harmful to cities, to the over- for their own building construction and all urban population, and to the residents of community facilities. informal settlements themselves. The impli- Such rights do matter, and therefore cations of the phenomenon are serious and the legal dimensions of the phenomenon of manifold in numerous ways: legal, social, informal development cannot be dismissed, environmental, political, and economic. underestimated, or taken for granted by policy makers. Above all, those who fail to Legal Burdens understand the extent to which informal Informality principally means a lack of development is a result of the prevailing full security of tenure, which exposes the legal order often foster a legal status quo residents in informal settlements to the that excludes a large number of people. ever-present risk of eviction by the public Rather than opposing legitimacy and legal- authorities or landowners. Forced eviction ity, the challenge is to construct a legitimate was a regular public policy in some cities in and inclusive legal order that respects the the past, but the practice was largely aban- informal processes of distributive justice doned after political democratization in

Forced evictions and destruction of informal settlements make room for new high-rise development in Recife, Brazil.

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the 1980s and 1990s. However, worrying Urban-Environmental Burdens evidence shows that eviction has been recur- Informal development has generated ring in both urban and rural areas in Latin fragmented cities and precarious neighbor- American. One study indicates that between hoods, profoundly marked by many forms 2004 and 2006 nearly 150,000 people were of health and safety hazards, environmental evicted in 15 Latin American countries, with degradation, pollution, and inadequate sani- the largest numbers in Brazil (70,637), Peru tary conditions. The overall living conditions (42,728), Mexico (10,374), and Venezuela in these settlements are substandard: narrow (6,848) (COHRE 2006). streets, dense occupation, precarious construc- The lack of fully recognized land titles tion, difficult access and circulation, lack of frequently means that the residents of in- ventilation, lack of sanitation, and lack of formal settlements are deprived of basic public spaces. In many cities, the informal citizenship rights. In many cases, they do occupation of areas near water reservoirs, not even have an official address, which areas prone to landslides and flooding, or makes it virtually impossible for them to protected forests is another looming problem. have access to credit in shops and banks, receive mail, prove they are city residents, Political Burdens or require police to have a warrant to The maintenance of ambiguous legal situations enter their premises. that are not fully recognized, and in which people do not have clearly defined rights, Social Burdens has long subjected the residents of informal Communities in informal settlements have settlements to political manipulation by par- long been excluded from regular access to ties from all sides of the political spectrum. the benefits of urban development, includ- The academic literature has repeatedly shown ing public services, infrastructure, public that traditional forms of political clientelism spaces, and collective facilities. Public au- —where politicians make electoral promises to thorities, such as police or fire services, are resolve the problems affecting informal settle- usually deficient in consolidated informal ments—have tended to perpetuate informality. areas. The urban poor have often been disenfran- The cultural stigma attached to informal chised and excluded by the political process communities also means that residents are in many ways, and living in informal settle- often excluded from the formal labor mar- ments has made them even more vulnerable. ket and their communities are sometimes literally walled off from adjacent areas. Economic and Fiscal Burdens Moreover, residents in informal settlements Economic burdens are perhaps the least dis- have often been identified by the public au- cussed dimension of informal development, thorities and by popular opinion as marginal but the costs to society are surprisingly high. individuals, and as such they have been Although many believe that informality is targeted by repressive policies, including an inexpensive option for gaining access to the widespread use of indiscriminate police urban land and housing, informal develop- violence. The socioeconomic vulnerability ment generates intrinsically inefficient cities of these communities has made them easy and costly urban management. Regulariza- targets for predators, including drug-related tion programs cost up to three times more and organized criminals, notably in cities than new, licensed urban development in Colombia, Brazil, and Mexico. (Abiko et al. 2007).

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The informal provision of services, such provide services on the grounds that the as water, is much more costly than formal situation is informal. In other cases, resi- provision. In Bogotá, the costs of regularizing dents have sought to pay property tax as informal settlements have been calculated as a means of strengthening their legal hold 2.8 times higher than the costs of developing over the land. serviced urban land for the poor. Improvised access to services is also more expensive, I n t e r v e n tio n s to R e solv e as illustrated by the case of Monte Olivos, I n formalit y Guatemala, where the price of water from Eliminating informality requires two types a truck is seven times higher than from the of interventions. One is to prevent the es- pipe system. The irony is that the same pri- tablishment of new informal settlements. vate “utility” company provides both services The other is to address the deficiencies of —a perverse incentive against private invest- existing settlements through programs that ments in extending pipe service (Smolka (1) provide formal legal recognition of the and Biderman 2011). communities, as well as individual or other Some informal settlements are excluded forms of ownership and legal possession; from official property tax systems, resulting (2) remedy gaps in public services; and in a loss of potential revenue for public ad- (3) promote local economic opportunities Informal settlers living on a former garbage ministrations. This limited tax base makes and growth. dump in San Salvador, it even more difficult for public authorities While stressing the crucial importance El Salvador, wrote: “We to provide services (Smolka and De Cesare of conceiving and implementing a set of want you to fulfill your 2006). preventive policies that widen the condi- promises to the people At the same time, in other informal set- tions of access to serviced urban land and for water, housing, light- tlements the residents are charged property housing, this report focuses primarily on a ing, wood, and roofing materials. Comply with tax by the public authorities despite their review of experience with the regularization accords that exist in lack of valid land titles. Sometimes the same of existing informal settlements. Within this the constitution.” administrations that levy the taxes refuse to experience, it pays particular attention to the legal aspects of regularization, and it also refers to other dimensions—such as access to infrastructure and service provision, upgrading requirements, building quality, and socioeconomic programs—particularly when these actions interact with legal dimensions. Recognizing the difficulties involved in drawing general conclusions from policies and processes that are intrinsic expressions of national and local realities, this report organizes the main conceptual aspects of the sociolegal discussion on land regularization efforts in Latin America by focusing on the two most distinct legal paradigms in the region, those of Peru and Brazil. The report aims to provide elements for a general assessment of the Latin American

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Metrovivienda, a public agency in Bogotá, Colombia, produced this new social housing development in the Nuevo Usme area.

experience by international, national, authorities from simply applying traditional and local institutions and organizations, contractual rules to public property. as well as by national and local govern- By the same token, regularizing a ments, all of which have been involved in Brazilian favela that originated from individ- the formulation of regularization policies ual or collective land occupation requires in different ways. It also provides informa- a different legal approach from that used to tion to guide new regularization policies in confront an irregular land subdivision created other regions where the phenomenon of by the illegal actions of land developers informal development is beginning to be and promoters. Moreover, communal lands, recognized in a more consistent way, espe- such as the Mexican ejidos, have their own cially in Africa, Asia, and the Middle East. legal status. It is not surprising that the evidence While much can be learned from experi- indicates that successful regularization initia- ence, understanding how to regularize in- tives have to be designed to fit the facts and formal settlements is still very much a work history of the particular informal settlement in progress. Different countries have tended and country context. To illustrate this, con- to utilize different approaches, and each sider the narrow issue of how legalizing approach has strengths and weaknesses. land titles must vary with the situation. In However, current experience makes it well Colombia, addressing the occupation of worth assessing what is currently known privately owned land cannot be treated with about the advantages and weaknesses of the same legal approach as the occupation various regularization strategies. of public land, since the law prevents public

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c h a p t e r 2 Defining and Measuring Informal Development and Assessing Its Causes

Informal settlements, new public housing developments, and established neighborhoods spread across the periphery of Panama City.

n important debate has continued P robl e ms of D e fi n itio n for nearly 50 years concerning the Several sets of characteristics are relevant magnitude and persistence of in- in trying to define informality. formal access to urban land and Ahousing in Latin American countries. Policy Development Features makers, legislators, and academics regularly Informal development encompasses many discuss the causes and implications of infor- dimensions and variations in Latin American mal development, and consider the nature cities, including: and context of the public policies necessary • occupation of public, communal, and to confront it, both to regularize existing private land, followed by self-construction informal settlements and to prevent the (favelas, barriadas, villas-miseria, villas-emergencia, phenomenon from expanding. Progress is chabolas, tugurios), sometimes in originally often difficult, however, because of a lack of approved subdivisions; agreement about what constitutes informal- • the unlicensed subdivision of private, ity, and analysis has been hindered by long- communal, and public land followed by standing, intertwined problems of definition the sale of individual plots and self-con- and measurement. struction (barrios, loteos piratas, loteamentos irregulares, loteamentos clandestinos);

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• irregular public housing projects (conjuntos consolidated Brazilian favelas are better habitacionais), some of which have gradu- equipped with urban infrastructure, services, ally become extralegal; or solid building construction than newer for- • the urbanization and development of mal land subdivisions on the urban periphery. areas defined as rural; Indeed, incremental consolidation over time • the unauthorized subdivision of previously has been the general rule of informal devel- existing legal plots for the construction of opment in Latin America. additional buildings (casas-de-frente-e-fundo); The Brazilian Institute of Geography • the widespread occupation of riverbanks, and Statistics (Instituto Brasileiro de Geo- water reservoirs, mountain sides, and grafia e Estatística; IBGE 2000) defines a other environmentally protected areas; and “subnormal” census block as one that satis- • the occupation of public spaces such as fies the following conditions: (1) forms a streets, pavements, and viaducts. group of more than 50 housing units; (2) occupies the land illegally; and (3) exhibits While differing in specific characteristics, a disorderly pattern of urbanization and/ settlements with one or more of these features or lack essential public services. are often categorized as informal. Such a general term has the advantage of being Socioeconomic Characteristics broad in scope, but its generality can impede The socioeconomic profile of the individuals effective public policies. For example, Calderon living in informal settlements cannot be the (1998) distinguished between illegal, irregular, main criterion to define informality. Most and clandestine settlements to discuss the people living in informal settlements are in- different situations of informal land devel- deed poor, and most socioeconomic indicators opment in Peru. —literacy, education, health, mortality, income, and employment—demonstrate their Physical Characteristics low incomes and poor-quality living and The various criteria used to identify existing housing conditions. However, residents in developments as informal settlements often many informal settlements represent a wide reflect the distinct professional backgrounds range of socioeconomic categories, especially and academic or institutional outlooks of in high-value established urban locations the involved policy makers and analysts. Such where many residents are considered more physical criteria may include precarious urban middle-class. infrastructure, public services, and collective Moreover, many poor people live in for- equipment; inadequate construction; envi- mal settlements. According to the Pereira ronmental degradation; absence of public Passos Institute (2002), 64 percent of the spaces and of leisure, community, and cul- poor in Rio de Janeiro (here defined as fam- tural facilities; and predominance of poor ilies living on the equivalent of less than one residents. In some of the surveys mentioned Brazilian minimum wage) resided outside below, possessing one or two of these criteria favelas in peripheral (both irregular and has been enough to classify a settlement as regular) loteamentos (IBGE 2000). informal. Neither is informal employment a hall- However, the presence of one or more mark of informal settlements. Rocinha, Rio of these features does not necessarily distin- de Janeiro’s largest favela, has a dynamic and guish these settlements from other so-called diversified informal economy involving several formal settlements. For example, some long- social and capital networks, as well as the

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C h all e n g e s of M e as u r e m e n t The large scale of informal urban land development is confirmed by various indicators from many sources. In Latin America, informal development has been one em- blematic characteristic of rapid urban growth as millions of people have gained access to urban land and housing primarily through informal mechanisms. However, precisely quantifying informality remains a challenge. Information and data at all levels, from global to local, tend to be fragmented, imprecise, and often questionable. UN-HABITAT, the World Bank, Cities Alliance, and other international bodies have attempted to provide reliable statistics. In a Informal housing increasing presence of formal providers of widely referenced report, UN-HABITAT expands upward in consumption goods and services. (2003) suggested that more than one billion this neighborhood of people were living in slums or informal set- La Plata, Argentina. Legal Aspects tlements globally, and that this number would If there is an underlying and characteristic grow to 1.4 billion by 2020. UN-HABITAT determinant in virtually all types of infor- more recently defined informal development mal settlements, it is the violation of the or slums as encompassing at least one of prevailing legal order in one way or another. five specific criteria (box 1). Informal settlements often have similar Based on an assessment of the situation physical characteristics, but their different, in 15 Latin American countries, MacDonald specific legal problems have varying impli- (2004) estimated that at least 25 percent of cations. Informal development usually in- the urban population lives in informal set- volves the existence of one or more intrinsic tlements, increasing from 111 million to 127 forms of illegality, through violations of pri- million between 1990 and 2001. The World vate, public, or communal land ownership Bank (2007, 1) reported that informal rights; urban, environmental, or building tenure “is common, accounting for about regulations and standards; registration re- one third of home ownership.” quirements; and taxation provisions. The statistics vary in different countries, The key issues in addressing informal but the realities are similar. For example, land development in Latin America are the 20 to 25 percent of the dwellings in the main determinants of legal security of land ten- cities of Brazil are estimated to stem from ure and effective access to serviced urban illegal land occupation. In Argentina, the land and housing. Unlike the matter of ur- population living in villas-emergencia in Buenos ban upgrading, the lack of full legal security Aires has grown 25 percent over the past of land tenure depends largely on the action few years, housing some 200,000 people, of the public authorities, as there is a limit- a figure equivalent to almost 7 percent of ed scope for what the individuals and com- the city’s inhabitants (Clichevsky 2006). munities can do by and for themselves. Different estimates of the size and growth

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of informal developments reflect the difficult Box 1 task of defining informality. For example, in UN-HABITAT’s Definition and Measurement of Slums Buenos Aires the percentage of households without secure tenure jumps from 1.37 per- N-HABITAT has developed a household level definition in cent, if the measure is defined as households U order to use existing household level surveys and censuses not owning the land they occupy, to 10.19 to identify slum dwellers among the urban population. A slum percent, if it is defined as the lack of title household lacks any one of the following five elements: or legal documents proving tenure security (Smolka and Biderman 2009, 14). Data in the • Access to improved water (access to sufficient amount of water Brazilian census indicate that the population for family use, at an affordable price, available to household living in “substandard” urban settlements de- members without being subject to extreme effort); clined from 7.0 million in 1990 to 6.5 million • Access to improved sanitation (access to an excreta disposal in 2000. Improved cartographic analysis system, either in the form of a private toilet or a public toilet may be able to identify more precise infor- shared with a reasonable number of people); mation on informal settlements. • Security of tenure (evidence of documentation to prove secure Although most censuses and surveys tenure status or de facto or perceived protection from evictions); have been more precise in determining the • Durability of housing (permanent and adequate structure in levels of public service provision, they have non-hazardous location); and not been able to measure the number of • Sufficient living area (not more than two people sharing the dwellings with illegal land tenure. A recurrent same room). survey problem is self-perception. When asked if they own their house, residents often re- Using this definition, UN-HABITAT estimates indicate that in 2001, spond positively, because this is how they 924 million people, or 31.6 percent of the world’s urban popula- perceive their status. The lack of efficient tion, lived in slums. In developing regions, slum dwellers account land cadastres and centralized land registries for 43 percent of the urban population, compared to 6 percent of in many countries also limits the option of the urban population in Europe and other developed regions. collecting alternative data on illegality. In 2001, Asia had 554 million slum dwellers, or 60 percent of While recognizing that the basic illegal the world’s total; Africa had 187 million (20 percent of the total); nature of informal development may make and Latin America and the Caribbean had 128 million (14 percent its definition more precise, the many potential of the total). It is projected that in the next 30 years, the number and overlapping layers of illegality also make of slum dwellers worldwide will increase to 2 billion if no firm or quantification of the problem a serious chal- concrete action is taken to arrest the situation. lenge. The essential legal dimensions involve

both land tenure aspects (occupation of pri- Source: UN-HABITAT (2006). vate, public, and/or communal land, and informal subdivision of land) and urban planning aspects (mainly the unlicensed is by no means new. Informal settlements subdivision of one’s own land). Other legal in cities such as Rio de Janeiro and Bogotá aspects such as lack of registration, violation span many decades and have increased of building rules, and taxation matters are significantly over the last 30 years. Most certainly important and need to be acknowl- informal land development used to take edged, but they are not essential determinants place in capital and large cities, but it is of informal development. also observed in middle-sized and even The process of informal access to small cities (table 1). urban land and housing in Latin America

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Table 1 Number of Favelas in Brazilian Municipalities by Population Size, related to the configuration of the spatial 2000 order. The current situation reflects what has been called the structural inability of Occupancy of Favelas Total public administrations in Latin American Municipal Population Number of Total Number Total Households Size Category Municipalities of Favelas in Favelas countries, especially at the local level, to guarantee sufficient access to accessible and Up to 5,000 1,371 61 1,995 affordable serviced land and/or housing units 5,001–20,000 2,688 436 39,104 in urban areas (Smolka and Larangeira 2008). 20,001–100,000 1,275 1,693 132,834 Infrastructure investment has typically been 100,001–500,000 194 3,373 532,047 underfunded or spatially biased to high-income More than 500,000 32 6,191 1,654,736 areas. Public authorities have rarely made TOTAL 5,560 11,754 2,360,716 a consistent effort to recapture for the community any surplus value generated Source: IBGE (2000). by public infrastructure service provision c A u s e s of I n formal and changes in land use and development D e v e lopm e n t regulations. Low Income Poverty and underlying global and national Shortage of Social Housing macroeconomic factors, especially wealth Informal development is also affected by distribution and job creation, play a central the nature and scope of government housing role in determining the process of informal policies. Insufficient social housing production development. Although most inhabitants of is aggravated by the inadequate conditions informal settlements are indeed poor, poverty of existing housing projects (many of which is not the sole cause of informal land devel- are illegal in some way, often because of lack opment. Some data indicate that the levels of registration or municipal licenses, or vio- of absolute poverty have decreased while lations of zoning and building standards). informality has grown (IPEA n.d.). Moreover, the credentials required by many In Rio de Janeiro, for example, the rates lending agencies to approve mortgage appli- of informal growth have been higher than cants have excluded most poor people from the growth rates of both urban population access to loans and even to many public and poverty. In 1961, when the city had a housing programs. population of about 3 million, an estimated In Brazil, for example, even following 300,000 people (10 percent of the popula- the recent launch of a significant national tion) lived in favelas. By 2009, the city had housing program, little formal housing is a population of 6 million, and reportedly available for low-income families (those living about 1.25 million dwellers (more than on less than three Brazilian minimum wages). 20 percent of residents) lived in favelas and Only recently have the housing programs of other informal settlements. In São Paulo, Caixa Econômica Federal (the largest public informal dwellings were 6.9 percent of the bank in Latin America) started to reach out total in 1991, but their share increased to to lower-middle income groups (families living 11.4 percent by 2001 (Dowall 2007). on less than five Brazilian minimum wages). Chile is one of the few countries in the Sociospatial Issues region that has implemented a large-scale The process of informal access to urban social housing policy, but it has been criticized land and housing results in part from factors for concentrating the production of social

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Public housing provides an alternative for low-income residents in Santiago, Chile.

housing in distant peripheral areas, thereby practices also encourages more informal reinforcing sociospatial segregation development. Questionable titles to public (diPasquale and Cummings 2002). land have often been promised by politicians, who also have influenced which public areas Formal Market Outcomes are to be occupied. In some situations, false Combined with the unequal spatial distri- land titles have been given to the residents bution of urban infrastructure by the public or official agents have benefited from new authorities, the overall process of land and developments, both financially and politi- housing delivery through the formal market cally. The actions of public authorities thus is characterized by prices that are high rela- can affect the growth of informality as well tive to incomes, and these high prices carry as the action of land markets. over to informal developments. Private developers traditionally have not catered to Unrealistic Planning the needs of the urban poor in Latin Amer- The urban planning tradition in major ican cities, especially in the absence of sig- Latin American cities has reinforced informal nificant public subsidies, thus making room processes, together with the lack of system- for informal land development opportunities. atic public investment and service provision Even in many informal developments, prices in the areas where most of the urban poor for land, property, and rents are high, and live. The resulting lack of serviced land then services such as water supply are expensive. has the effect of creating more informality. Informal development processes often A recurrent criticism of urban planning involve highly profitable informal market highlights its poor integration of land, hous- operations (Abramo 2009; Smolka and ing, environment, transportation, taxation, Larangeira 2008). and budgetary policies. With few exceptions, local administrations have failed to promote Political Clientelism a more inclusive urban order. Both existing The long-standing political manipulation planning laws and the approval (especially of informal communities through clientelistic by local administrations) of elitist urban

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New housing in this eroded area of Tegucigalpa, Hon- duras, is indicative of uncontrolled development and lack of planning.

planning regulations based on unrealistic (Larangeira 2002; Goytia, de Mendoza, technical standards often fail to take into and Pasquini 2010 ). account the socioeconomic realities deter- The imposition of strict obligations, the mining the conditions of access to land requirement of inflexible guarantees, and and housing. the lack of one-stop-shops to help potential Regulations such as large minimum developers or residents all contribute to high plot sizes, excessive development and con- transaction costs. However, it remains diffi- struction restrictions, and prohibition of cult to quantify the extent to which bureau- services, commerce, and small businesses cratic costs are imbedded in land and in residential areas have had a fundamental property prices (Biderman, Smolka, and role in generating high land and property Sant’Anna 2008). prices. Only recently has research started The cost and time needed to register to quantify how urban and environmental land also discourages many people from regulations have been translated into land obtaining legal security of tenure through prices and impacted the dynamics of that process. In Peru, for example, transac- urban land markets. tions in titled settlements are recorded for only one-fourth of sales, indicating that many Problems of Urban Management others simply ignore the process (Calderon Informal settlements also stem from the 2010). However, registration is the sole fac- exclusionary nature of the regulatory frame- tor that constitutes legal ownership in many work governing land development, as well Latin American national legal systems. as the bureaucratic nature of land and urban management systems that are arbitrary and A Dysfunctional Legal System fail to involve effective popular participation. This complicated picture of informality is In many Latin American cities, the licensing reinforced by the obsolete and contradictory of subdivisions can take up to five years workings of the overall legal and judicial

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system in most Latin American countries. S u mmar y Tolerance for violating laws and the wide- Informal development encompasses a wide spread lack of enforcement of existing laws range of activities from unauthorized private are due in part to the public’s lack of legal and market-based land subdivision to information and limited access to extrajudi- wholesale occupation of public land. While cial conflict resolution, and to the judicial this breadth of characteristics makes it diffi- system itself. cult to measure the extent of informality In short, the combination of unrealistic precisely, all estimates indicate that it consti- technical criteria, financial obligations, in- tutes a large share of existing residences in flexible guarantees, lengthy licensing proce- Latin American cities. One key attribute of dures, formalistic contractual rules, obsolete informality is illegality, often including the registration practices, and inefficient conflict lack of a formal title to the occupied land resolution mechanisms has produced a parcel. Unfortunately, public records do not highly prohibitive legal context contributing readily support estimates of the number of to informal development. The poor lack the illegal parcels now or in the past. legal, financial, and other resources necessary The causes of informal development are to defend themselves and their land rights, many and varied, involving a range of socio- and more than other social groups they economic, spatial, and institutional factors have felt the impact of the exclusionary such as exclusionary planning, bureaucratic legal order. inefficiency, and the legal system itself. There The prevailing urban-legal order in is also a dynamic aspect to informality. Over most Latin American cities has contributed time its patterns and the importance of its This sign in Bogotá, Colombia states: “This to the formation of comparatively high land various causes continue to change. In this land is not for sale. and property prices in both the formal and respect, our understanding of both the Unscrupulous people informal markets, abetting a pattern of socio- causes of informality and how to regularize may try to fool you. Get spatial segregation. These problems are more existing settlements is still evolving. information at: Tel XX.” common than often realized, and violations involve socioeconomic groups other than the urban poor. For example, the widespread establishment of exclusive gated communities that prevent free access to public street systems and coastlines lacks a proper legal basis in many countries. The occupation of public or environmentally protected land by more privileged groups is also common, and the systematic disrespect of building standards is widespread. The municipality of Belo Horizonte (Brazil) has acknowledged that 70 percent of its construction was irregular, including favelas. In Brasilia, land subdivisions, gated communities, and unauthorized construction are common (Distrito Federal 2006).

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c h a p t e r 3 The Regularization of Consolidated Informal Settlements

Matinha is a densely olicy makers increasingly are mality, a great deal can be done at the consolidated favela in responding to the phenomenon national and local levels to reverse the process Rio de Janeiro, Brazil. of informal land development by of informal development. The promotion implementing land regularization of inclusive land, urban, and housing policies policies,P and a recent survey identified such can widen legal access to serviced neighbor- policies in 17 Latin American and Caribbean hoods. This involves redefining land ownership countries (Angel et al. 2006). Many different rights; integrating urban law and management; procedures have been attempted—some broadening popular participation in the de- more comprehensive or expeditious than cision-making process; facilitating access to others—with variable and often questionable the judicial system; and, above all, creating results. Like informal land development, the bases of a process of land governance land regularization includes many different to support the democratization of access conceptual approaches and corresponding to land and housing. institutional frameworks. It is in this broad and complex sociolegal While global and macroeconomic factors context of land governance that land regular- are part of the causal nexus supporting infor- ization should be discussed. While stressing

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the need for preventive policies, it is crucial relocation. However, suitable alternatives in to also recognize the need for the appropriate nearby areas must be offered by the public treatment of existing consolidated settlements authorities and even private landowners, involving millions of people. and negotiated with the affected residents Because few policy makers fully under- to help them retain existing social networks. stand the nature and dynamics of informal This principle has been expressed in inter- development processes, their poorly designed national standards, national laws such as regularization policies often reinforce urban the 2001 City Statute in Brazil, and judicial informality and sociospatial segregation, can decisions in Colombia and Argentina. be detrimental to the interests of the urban An additional challenge is to define the poor, and may result in benefitting land level of consolidation that would justify regu- developers and other privileged socioeco- larizing a settlement and keeping the residents nomic groups. Gentrification, for example, in place. Factors such as the number of resi- may be one outcome of land regularization, dents and buildings, the degree of overall but it often results from inappropriate regu- development, the level of existing services, latory policies. and especially the duration of occupation However, given the scale and welfare costs are the main criteria being used. Political of informality, as well as the land rights created factors undeniably play a role as well. over time, not to regularize informal settlements is no longer politically sustainable. W h y R e g u lari z e ? Regularization policies must be based on a Approaches to land regularization vary more consistent foundation that addresses greatly as they reflect the specific character- security of tenure, legal rights for property istics of different informal developments, owners, and the provision of urban infra- but the following arguments are often used structure and services. to advance the transformation of existing informal communities into consolidated C h all e n g e s of settlements. R e g u lari z atio n • Insufficient supplies of serviced land Regularization policies deal with complex make it infeasible to require large-scale socioeconomic and urban-environmental relocation. realities and involve multiple aspects of land, • Cities have insufficient financial resources registration, financial, urban, and environ- to implement major relocations. mental laws. They seek to ensure that resi- • Enormous social costs would result from dents of consolidated informal settlements uprooting communities that do not want are not evicted or relocated, but can remain to be relocated, given the rich social and on the land they have occupied with access capital networks they have formed over to better living conditions. Moreover, to the years. some extent regularization policies promote • Public authorities have a legal obligation social justice and compensate for historical to enable the urban poor to have access inequalities. to adequate housing. This approach does not exclude all relo- • Relocating communities would often entail cation, however, since not all situations can environmental costs and consequences. or should be regularized. Environmental and • In many cases, communities have a legal public health concerns and the need for public right to remain where they are living. spaces are legitimate reasons to justify some

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Thus, a wide range of humanitarian, ethi- degradation, and informal development. cal, religious, sociopolitical, economic, and A growing countervailing force based on environmental arguments can justify regu- the social function of property has called larization policies. More recently, arguments for the legal empowerment of local admin- for regularization are also based on the legal istrations in matters of urban regulation notion of the social function of property. and territorial organization, and for citizen In most Latin American countries, laws, participation in local decision-making public policies, and judicial interpretations processes (box 2). have generated a legal culture stressing indi- Legal reform has been initiated in some vidual property rights, without a consistent countries, and others have begun to recog- concern for the fulfillment of a social func- nize the individual and collective rights tion of property—a principle embodied of residents in informal settlements to stay in many national constitutions (Fernandes on the land they occupy as an integral part and Maldonado Copello 2009). of the social right to adequate housing. In The legal culture that emphasizes the Colombia and Venezuela, for example, land privileges of owners to the detriment of regularization has already become a funda- their obligations and other social, environmental element of the constitutional social mental, and cultural responsibilities resulting right to adequate housing. from property ownership has supported an The 1988 Brazilian Federal Constitution essentially speculative, laissez-faire urban recognized that those who had lived in infor- development process that has contributed mal urban settlements for at least five years to sociospatial segregation, environmental had rights to the regularization of their legal

An informal settlement in Guayaquil, Ecuador, exemplifies disregard for environmentally sensitive areas.

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ownership of occupied land up to 250 square Box 2 meters. Individual and/or collective freehold The Social Function of Property and Urban Development rights were granted for settlements on private land through adverse possession, n important process of legal reform is underway in some while individual and/or collective leasehold A Latin American countries, particularly in Brazil (mainly through rights were granted for settlements on public the 1988 Federal Constitution and 2001 City Statute) and Colombia land. In 2000, the social right to adequate (mainly through the 1991 Constitution and Law 388/1997). This housing was given constitutional status. The reform is based on two structural principles: the social function 2001 City Statute regulated the constitutional of property, and the integration of law and management with the provisions and established a broad approach governance of land and urban areas. to land regularization, combining legalization, upgrading, and other supporting urban The emerging, redefined legal-urban systems aim for: planning policies. • a just distribution of the costs and opportunities of urban Over time, situations long ignored or development between owners, developers, the public authorities, tolerated by governments eventually lead and society; to the generation of rights for the residents. • an affirmation of the public authorities’ central role in determining This shift is accompanied by an erosion of an adequate territorial order through planning and management; the government’s discretionary power over • a clear separation between property rights and development/ consolidated informal areas, even on public building rights; land. It can also result in the loss of public land ownership in cases where adverse • new criteria for calculating compensation under expropriation; possession rights are applicable. • reduced duration of occupation for adverse possession to take place; and W h o c A n R e g u lari z e ? • strengthened recognition of the rights of occupiers and tenants. The locus of responsibility to formulate and In Brazil, the social function of property is fulfilled when the current promote regularization policies is directly use of land is consistent with the master plan. The concept of the linked to the question of who has the power social function of property has also been extended to public property to regulate urban land development. In more and property registration. A range of collective rights has been ap- centralized countries (e.g., Peru and Mexico), proved to guide the processes of land use and development, such national governments tend to be in charge as the right to urban planning; the social right to adequate housing; of regularization policies. In more decen- the right to a balanced environment; the community’s right and public tralized countries (e.g., Brazil), local govern- authorities’ obligation to recapture the land increment generated ments have played a leading role. by the action of the public authorities and urban legislation; and Several assessments of regularization the right to the regularization of consolidated informal settlements. policies have stressed that their efficacy (and the integration of all territorial organization Source: Fernandes and Maldonado Copello (2009). and land development regulations) can be guaranteed only when all governmental levels participate in their formulation (Alfonsin tions. In Venezuela, for example, community 1997; 1999; Smolka and Larangeira 2008; organizations (Comités de Tierras Urbanas) Angel et al. 2006). have taken the lead in the regularization In addition to intergovernmental coordi- process. Academic institutions and interna- nation, several types of partnerships have been tional development agencies also have had formed between the public authorities, the a fundamental role. private community, and voluntary organiza-

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Given the interdisciplinary nature of more self-sustaining (Smolka and Larangeira regularization, professionals from planning, 2008). This will require obtaining funds architecture, engineering, and legal back- from new sources, such as city revenues grounds have begun to work together more from linked development, urban operations, closely. In countries such as Venezuela and and surplus value recapture processes. Brazil there is a growing public architecture Bogotá has promoted this kind of financial and engineering movement that aims to redistribution in the Nuevo Usme urban oper- provide technical solutions that address the ation, which integrates several public mech- realities of informal settlements. The involve- anisms to intervene in the land market. Of ment of legal professionals—e.g., registration special note is Colombia’s policy of capturing officials, prosecutors for the government, public private land value increments for public defenders, lawyers, judges—also is crucial benefit in order to offer affordable serviced to help solve the complex legal problems land to the urban poor, with the public ad- accumulated over the years. ministration thus replacing the traditional pirate developers (Maldonado Copello Who Pays the Bill, and How? and Smolka 2003). Regularization programs traditionally have Cities have had little success in getting been financed by national and local budgets, residents of informal settlements to contribute titling fees, loans from international financial to the financing of regularization policies. institutions, and contributions from bilateral Over the years, popular participation has been New housing produced development agencies. Providing public ser- encouraged in many ways, from the discussion by private developers vices, especially sanitation infrastructure, of project layouts to decisions regarding relo- in Bogotá, Colombia, offers public subsidies makes such policies expensive. cation and allocation of resources, but resident to assist low-income To achieve the necessary scale of public payment of the resulting costs has been residents. intervention, regularization policies need to be strongly resisted. A recurrent argument holds that the regularization of a consolidated informal settlement is the payment by the public authorities and society of a historical debt to the urban poor, who should not be penalized further by the imposition of financial obligations. A counter argument is that regularization directly benefits residents and raises their property values. In some cases, land titles have been granted freely or for a small or symbolic sum, as in the case of CORETT in Mexico, where the typical titling fee levied is only $0.50–$2.00 per square meter (Angel et al. 2006).

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Nuevo Usme, a large area south of Bogotá, Colombia, was earmarked for public investments and planned development, but some areas have been sub- divided and occupied by “pirate” developers.

The same argument of trying to help the mutual-help building process (mutirão), a poor lies at the root of decisions not to practice imbedded in the Brazilian culture charge property tax, even after the legaliza- whereby neighbors help build each others tion of settlements, because the financial bur- houses. Nevertheless, few communities den of formalization would fall too heavily have taken the initiative of formulating and on the residents. Belo Horizonte’s pioneer- implementing regularization plans and proj- ing 1983 regularization law is one example ects, even when a public policy framework and with this provision. However, the failure to technical assistance are available. Communities impose a property tax limits the possibility also rarely take the initiative to demand the of expanding regularization policies and judicial declaration of their nominal land jeopardizes the continued provision of ser- rights, partly because of the costs. vices (Smolka and De Cesare 2006). The In some proactive communities, negotia- lack of a tax also contradicts the principle tions led by public officials and/or private that paying taxes is a condition of citizenship brokers have been more fruitful than legal that is necessary for strengthening legal rights. proceedings. The founder of one such private Not paying taxes contributes to the stigma company in Brazil, Terra Nova, won the already affecting residents of informal 2008 Social Entrepreneur of the Year settlements. Award in recognition for his successful ne- Absent any financial contribution from gotiations with former landowners that have residents, regularization policies are unlikely benefitted thousands of families in several to achieve the scale necessary for sustain- municipalities. Another example is the social able programs. In-kind payments have been urbanizer experiment in the metropolitan used in some cases, such as the collective area of Porto Alegre (Damasio 2006).

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W h at A r e t h e R e s u lts ? served exceed 40 percent of the target. While scores of regularization projects The small number of comprehensive have been introduced across Latin America, evaluations of regularization programs systematic reports on their results remain suggests they have not been fully successful relatively rare. Most common are reviews at all governmental levels, generally due to of project implementation and outcomes fundamental problems of scale, format, and without much quantitative information, let content (Alfonsin 1997; Smolka and Larangeira alone any comparative analysis of alternative 2008; Rojas 2010). Government policies and procedures to address regularization issues. programs tend to be isolated, fragmented, More than 120 such projects in Brazil are sectoral, marginal, and seriously underfunded described in a report by Carvalho and de (Payne, Durand-Lasserve, and Rakodi 2007). Campos Gouveia (2009). At the same time, ad hoc regularization A handful of other reports by imple- programs have become a component of menting agencies and a few independent the national housing policies in several Latin third parties cover several projects or expe- American countries, together with public riences across cities or countries. Examples policies favoring housing subsidies, the de- include a review of the experiences of ten regulation of the urban-environmental legal cities in Brazil (Larangeira 2002); a comparison order, and indiscriminate amnesties for illegal of experiences in Mexico, Brazil, and Peru developments. (Angel et al. 2006); a comparison of experi- Nevertheless, lessons can be learned ences in Brazil, South Africa, and India from the 40 years of experience with regu- (Krueckeberg and Paulsen 2002); and a larization programs, dating from the original review of experiences in 13 countries with Peruvian regularization law in 1961 and 71 programs (Clichevsky 2006). Mexico’s CORETT program in 1974. Relatively few reports use evaluative Peru’s COFOPRI program, introduced methods and present quantitative findings. in 1996, reduced the time to obtain a title Thus, it is often difficult to determine how from 7 years to 45 days, the number of many households actually received access to required steps from 207 to 4, and the cost urban services or titles. In addition, the lack from US$2,156 per title to essentially zero of an evaluative element in the project often (Guerinoni 2004). Other reports of experi- means there are no baseline data for com- ences in multiple countries show consistent parisons before and after implementation. results from titling in terms of its effects on Furthermore, few reports evaluate land values (around 25 percent increase); its projects in terms of their own objectives, relatively low cost; and the benefits of titling utilize evaluative criteria such as efficacy in relation to the timeframe of related reforms and efficiency, or present information on (Brakarz, Greene, and Rojas 2002; Angel et how actual costs and implementation times al. 2006). Some also indicate that regular- compared to those proposed. Typically, ization can have the effect of sanctioning a both costs and implementation times exceed process of systematic improvements that projections, while results fall below expec- produce functioning neighborhoods. tations. For example, of the 71 programs Project reviews also indicate less produc- reviewed by Clichevsky (2006), only six in- tive approaches. For example, regularization cluded comparisons of actual numbers of has been more successful in addressing set- people served with original projections, and tlements on publicly owned land than on for none of the programs did the number privately owned land because of the high

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costs of clarifying titles (Clichevsky 2006). Because many regularization projects have been done in isolation as special cases and at a small scale relative to the size of the problem, they are subject to administrative discontinuities and lack integration with other policies. As mentioned, rigorous evaluations are rare, and most projects have little or no data on costs, making it impossible to analyze project efficiency. These examples provide enough elements to indicate what should not be done, yet potentially contradictory programs continue. For example, the Brazilian Ministry of Cities has two parallel and ongoing land regularization programs. Habitar Brasil BID–HBB (Housing Brazil), sponsored by the Inter- American Development Bank, focuses on urban upgrading, whereas the National Program to Support Sustainable Land Regularization in Urban Areas proposes an integrated approach to achieve sustainability (Fernandes 2006). Even today regularization policies, such as UN-HABITAT campaigns, the Millennium Development Goals, and other as the solution in their impacts on new Before and after national, regional and/or local programs, informal settlements (Smolka 2003). images show the Parque Royal address only a small part of the problem. settlement in Rio For example, Target 11 of Millennium De- S u mmar y de Janeiro that velopment Goal 7 is to reduce the worldwide It takes many years to implement a fully was upgraded number of people living in informal settle- integrated regularization program, especially through the ments by 100 million by 2015, but this is if legal and judicial disputes are involved. Favela-Bairro only one-tenth of the one billion such resi- Given the diversity of existing situations, program. dents estimated by UN-HABITAT (2003). there are no automatic, magic, or simplistic The very fact that informal develop- answers, or one-size-fits-all solutions. It is ment has not ended, either inside or outside easier, faster, and cheaper to prevent the regularized settlements, is a clear indicator process of informal land development from of the limits of these programs. In Belo happening in the first place. However, with Horizonte, for example, the municipal regu- all their shortcomings and constraints, it is larization policy and supporting programs undeniable that regularization policies deci- have been implemented continuously since sively contribute to improving the precarious 1983, but the percentage of people living living conditions of those in the affected in favelas has remained virtually the same. communities. The challenge is to improve In many cases, regularization programs their design and implementation in ways have been as much a part of the problem that do not stimulate new informality.

24 policy focu s r e p o r t ● L i n c o l n I n s t i t u t e o f L a n d P o l i c y E d é s i o F e r n a n d e s ● R e g u l a r ization of I n f o r mal Settlement s 25 ......

c h a p t e r 4 Experiences with Regularization: The Cases of Peru and Brazil

Villa El Salvador is one pproaches to regularization efforts titling, mostly on ejido communal land. Over of the most well-known vary, reflecting the different country 30 years, 2.5 million titles have been distrib- informal settlements contexts and objectives of policy uted, but the process has lost momentum in in Lima, Peru. Through various public programs makers, but there are two main recent years, partly due to changes in 1992 and self-organized local Aparadigms. The first envisions formal legal- to the ejido legislation allowing privatization. initiatives, some houses ization of ownership through issuance of The PROCEDE program, implemented from have titles and services individual freehold titles as a catalyst or trig- 1992 to 2006, ultimately provided individual whereas others do not. ger that will promote private investment in land titles to the residents of 26,000 ejidos housing, facilitate access to official credit and (about 90 percent of the 29,000 ejidos in markets, and lead to poverty alleviation. the country). While the Peruvian experience with this The second paradigm has a broader approach is best known, Mexico’s legalization scope and consolidates legal security of tenure program is much older. Since 1974, Mexico’s using a set of sociospatially integrated inter- CORETT program (and later PROCEDE) ventions that link land tenure legalization with promoted the regularization of informal upgrading of public services, urban planning, settlements through expropriation and and related socioeconomic policies. This

26 policy focu s r e p o r t ● L i n c o l n I n s t i t u t e o f L a n d P o l i c y E d é s i o F e r n a n d e s ● R e g u l a r ization of I n f o r mal Settlement s 27 ......

approach is reflected in Brazilian national Box 3 legislation that embodies a social right to Hernando de Soto’s Proposition adequate housing. While there is more evaluative evidence about the approach used ernando de Soto’s international bestselling books—The Other in Peru than that in Brazil, summaries of H Path (1989) and The Mystery of Capital (2000)—intertwine experience with regularization in both several dimensions: the dynamics, innovation, creativity, and entre- countries reveal useful lessons. preneurism of informal processes; the close links between informal housing and informal businesses; the economic value of informally T itli n g as a T rigg e r created assets; and the impediments caused by complex legal and for D e v e lopm e n t : registration systems and by bureaucracy and corruption. However, T h e P e r u v ia n e X P e ri e n c e de Soto’s key point is his proposal that formalizing property rights The dominant approach to land regulariza- triggers economic development in low-income and transitional tion internationally and in Latin America for countries. the last two decades has focused on legalizing tenure of individual plots—also referred to His proposition is that poverty and economic underdevelopment as titling or formalization—as a self-contained will be reduced by removing legal and institutional barriers to the program. This has been the focus of Peru’s ownership and transfer of economic assets produced informally. regularization policy, which has been greatly Providing legal tenure security in the form of land titling and regis- influenced by the ideas of Peruvian econo- tration would enable occupants of informal settlements to access mist Hernando de Soto (box 3). These ideas official credit and finance their housing and business investment. have dominated the debate on land regulariza- de Soto’s ideas are appealing because they are simple and his tion, and have been translated into large-scale estimates of their benefits are very large. He projected that land legalization policies. titling would mobilize US$9.34 trillion of “dead capital” (US$6.74 Many countries, including Peru, El trillion in informal housing alone) resulting from informal develop- Salvador, Cambodia, and Vietnam, have ment. This would integrate the urban poor into the market and implemented large-scale titling programs, eradicate poverty. while others such as Albania are starting to As a result, large-scale legalization policies have been proposed initiate them. All of the programs have pro- widely as the antidote against urban poverty, and de Soto’s propo- moted changes in the national legal order, sition has been supported by both multilateral and bilateral devel- created a centralized institutional apparatus, opment agencies. In 2006—with support from de Soto, former and invested heavily in data, mapping, and U.S. Secretary of State Madeleine Albright, and the United Nations cadastres. As a result, millions of individual Development Programme (UNDP)—the High Level Commission freehold titles have been given to residents on Legal Empowerment of the Poor was created with an original of informal urban settlements. mandate that emphasized property rights and land titling. Peru is a leading practitioner of titling programs. In 1996, then-president Alberto Fujimori created the Commission for the Formalization of Informal Property (CO- three stages: (1) the production of infor- FOPRI), an organization supported by the mation on land and on existing obstacles to Urban Building Registry (Registro Predial Urbano) formalization of settlements; (2) identifica- and other legal instruments (especially for tion, demarcation, and registration of plots prescriptive acquisition). The titling program and buildings; and (3) identification of enti- has been financed with national, interna- tled occupiers. Nearly 1,600,000 freehold tional, and World Bank funding. titles were distributed in Peru between The formalization process has involved 1996 and 2006 (table 2).

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Critiques of Titling A central feature underlying the use While praising the scale of the Peruvian of titling as a singular intervention regards program, academics and policy makers de Soto’s (2000) evocative notion of “dead have debated the nature and validity of its capital.” Besides embodying the value of underpinnings and evaluated the results of informal property that could be used as col- its implementation. Some critics believe that lateral, this notion implies that the economic the narrow focus on the formalization of resources amassed by the urban poor through settlements broke with the earlier tradition of informal housing and business processes are regularization policy in Peru, which included outside the boundaries of national accounts upgrading policies and other socioeconomic and finances. programs to promote the sociospatial inte- However, this notion that the capital gration of the informal areas and communi- generated through informal processes is “dead” ties (Riofrio 2008). is misleading. In developing countries, indi- Rather than discussing settlements, rect taxation on services and consumption neighborhoods, and communities, formal often produces more revenue than direct titling focuses on individual units, property taxes on land, property, and capital. Recent rights, and free market transactions regard- official data from Brazil, for example, indi- less of the social context and consequences. cate that the poor pay a larger share of their Titling is implemented without mention income in taxes than the rich because most of social safety nets and welfare, or cooper- taxation is indirect (IPEA 2009). Although atives and public goods. Moreover, Peru’s a recurrent argument holds that regulariza- titling approach utilized old-fashioned uni- tion policies benefit people who do not pay versal registration, when other models, such taxes, most citizens living in informal areas as land recording, would likely be more suit- decisively contribute to the national economy. able to the realities of informal settlements A Georgist critique stresses that the focus (Arruñada 2009). on freehold titles to land (in order to provide

Table 2 Titles Granted Annually in Peru, 1996–2006 Year # Total Registered Titles # Titles in Lima % Titles in Lima to Total 1996 33,742 32,750 97 1997 129,392 125,768 97 1998 149,574 107,490 72 1999 322,053 110,986 34 2000 419,846 170,250 41 2001 115,599 29,457 25 2002 123,827 38,450 31 2003 70,401 16,696 24 2004 65,598 12,002 18 2005 71,300 8,866 12 2006 68,468 8,194 12 1996–2006 1,596,800 660,909

Source: Calderon (2007a).

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Santa Maria in San Juan de Lurigancho, a district of Lima, Peru, is a 15-year-old informal settlement where most properties have had titles for more than 12 years, yet the area has barely been improved.

financial collateral) fails to recognize land and Rakodi 2007). Research findings address rent resources and serves the interests of the three main points of de Soto’s agenda: propertied elites by shifting the burden of access to credit; investment in housing; and paying for public services away from title- poverty alleviation. holders of natural resources (Batt 2004). A line of legal criticism notes that the 1. Access to credit. Formalization pro- focus on individual rights fails to take into grams have not led to significant changes account social property relations and other in access to formal credit (Deininger and Feder forms of collective, customary, restricted, 2009). Rather, employment status seems to and temporary rights that may benefit soci- be more important for obtaining credit than ety. Implementation questions abound. For an ownership title. Studies have shown that example, who actually receives the titles, wage workers with land titles have had greater the occupiers and tenants or the owners? access to official credit than unemployed Should social transgressors (e.g., drug dealers) people with titles, and employed workers receive titles to public land? What distinctions without property titles have had better access should be made between informal settlements to formal credit than unemployed people on public versus private land, and between who have titles (Calderon 2006; Field and property rights and housing rights (Payne Torero 2006). and Fernandes 2001)? The answers to such Official credit is a more common re- questions depend on a broader definition quirement to purchase building materials of property rights. (table 3), but it usually does not require titles (Miranda 2002). As has long happened in Empirical Evaluations of Titling several countries (e.g., in Brazil with Caixa Enough time has passed since the imple- Econômica Federal), official credit has been mentation of the Peruvian and other titling offered regularly for the acquisition of build- programs for international research to assess ing materials through several governmental the outcomes (Payne, Durand-Lasserve, programs that do not usually require proof

28 policy focus report ● L i n c o l n I nstitute of Land Po l i c y E d ésio F e r n a n d e s ● R e gularization of I n f o r m a l S e t t l e m e n t s 29 ......

Table 3 want official credit from commercial banks, Lending for Building Materials Increased in preferring other informal, more flexible sources Peru, 2003–2006 of credit through their social networks. More- Number Titles with % of Average over, they fear the risks involved in pledging Year of Titles Mortgages Total Credit their sole property (usually the family home) 2003 1,332,481 52,000 3.9 US$5,596 as collateral to obtain the rather limited 2006 1,549,340 306,000 19.7 US$2,075 financing offered by the commercial banks Source: Riofrio (2008). (Field and Torero 2006).

Figure 1 Peru’s Poverty Rate has Declined Faster than Latin America’s 2. Investment in housing. Titling helps, but is not a sine qua non to promote invest- 60 ment in housing consolidation. Most Latin Peru % poor (a) American cities demonstrate that titles are Peru % extremely poor 50 LAC % poor (a) not needed for people to invest systematical- LAC % extremely poor ly in their informal houses and businesses. 40 Once residents feel secure and do not fear

30 eviction, they routinely increase their housing investment activities (Payne and Fer- 20 nandes 2001).

Percent poor/extremely poor 10 3. Poverty alleviation. There is more to poverty than the lack of property titles, 0 2001 2009 and more to informality than poverty, but titling per se may have some association with Source: CEPAL (2010). Note: (a) includes the extremely poor. poverty alleviation. For example, figure 1 shows that while Peru was implementing of property titles. Access to credit has also large-scale titling programs over the 2000s been linked to other factors such as con- decade, its poverty rate declined compared tacts, language, and education (Smets 2003). to the rate for Latin America as a whole. Despite the existence of land titles and Of course, effective poverty eradication the increase in property values averaging 25 requires consistent and significant invest- percent after titles were issued (Angel et al. ments in public goods such as infrastructure, 2006), most banks still have difficulties lending education, and social policy, as well as in to the poor, require collateral valued higher employment and income generation strate- than loans (especially in peripheral areas where gies. Research does indicate an association properties have low market value), and do between formalization policies and increases not trust the repossession system (Calderon in children’s nutrition rates, improved edu- 2006). The financial and technical criteria cation, and reduced number of days missed used by the commercial banks, the associated at school (Galiani and Schargrodsky 2004); bureaucracy, and the required proof of in- increased labor force participation (Field come all create high transactions costs for 2007); or lower teenage pregnancy rates the poor to borrow. (Field 2006). However, the causal linkages Ironically, research also shows that most remain obscure, and it is difficult to attri- people living in informal settlements do not bute these changes to land titling.

30 policy focus report ● L i n c o l n I n stitute of Land Po l i c y E d é s i o F e r n a n d e s ● R egularization of I n f o r m a l S e t t l e m e n t s 31 ......

T e n u r e S e c u rit y as Motivating this integrated approach in Brazil a n I n t e grat e d P rogram : is the social right to adequate housing, pro- T h e B ra z ilia n e X P e ri e n c e moted by the UN Housing Rights Programme While it is in the interest of all urban dwellers (UNHRP) among other organizations, which to have all consolidated settlements properly includes the right of all to live in dignified regularized, the challenge for policy makers conditions and to participate fairly in the has been to reconcile the individual interests opportunities and benefits created by urban and rights of the residents in informal settle- development. ments with the public interests and obligations The question is how to achieve both of all. The sociospatially integrated approach tenure security and sociospatially integrated to regularization tries to ensure individual regularization. Some regularization policies tenure security while maintaining commu- have combined tenure legalization (also formal- nities in their original locations in order to ization or titling) with upgrading of informal ensure that the main beneficiaries will indeed areas, and others have also had a socioeco- be the urban poor. Of course, the full recog- nomic dimension (to generate income and nition of legal tenure security remains a goal, job opportunities) or a cultural dimension as it guarantees that residents are not evicted (to overcome the stigma attached to residing or pressured by public authorities or land- in informal areas). owners. Legalization has not necessarily followed However, achieving sociospatial integra- upgrading easily, and vice-versa. Providing tion requires a broader set of strategies and tenure security without considering other measures, ranging from promoting urban and issues has sometimes created new urban, environmental sustainability to strengthening environmental, and financial problems. For local communities and empowering women. example, legalizing some plots complicates

The Rio das Pedras favela in Rio de Janeiro, Brazil, spreads out next to a newer public housing complex.

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Table 4 residents in 73 settlements and expenditures Regularization and Titling Results in Brazil, 2009 of about $4,000 per family. The program Households and its successor aim to promote their inclu- Regularization Titles Titles sion in the formal sector of the city, after an Initiated Issued Completed initial physical and urban planning upgrade Number 1,706,573 369,715 136,974 that involved residents and local NGOs. Percent 100% 21.7% 8.0% Only recently was legalization introduced Source: SNPU/Mcidades (n.d.). in some of the occupied areas, through both adverse possession claims and leasehold titles. the widening of streets or other infrastructure The program had lost momentum in recent investment and raises the cost of necessary years after changes in the local political expropriation related to upgrading. administration, but recently it has been repackaged and renamed. Successes and Failures One particular problem has been the Brazilian municipalities have been far more failure to scale up interventions (Rojas 2010). successful in upgrading informal settlements Most existing regularization policies have than in legalizing them, although the majority addressed only a small number of informal of the upgrading programs did not lead to settlements. For example, of the 1,200 favelas titling. The internationally acclaimed Favela- in Rio de Janeiro, the costly Favela-Bairro pro- Bairro program in Rio de Janeiro resulted in gram has covered fewer than 100 in number, only 2,333 titles in a universe of more than although they are among the largest settle- 50,000 families, but only 145 actually com- ments. Over the years even as some regular- pleted the registration process (Larangeira ization policies have become more technically 2002). One reason for this low titling rate is sophisticated, more environmentally sensitive, that occupants have to work through a com- and more participatory, they continue to plex bureaucracy on their own to complete the benefit a small number of people mainly process. A review of regularization programs because of their high financial costs. in 385 municipalities in 27 states involving Porto Alegre’s regularization program 2,592 settlements indicates that the issuance is limited in scale, but is among the most and registration of titles is making some pro- comprehensive because it integrates socio- gress, but the completion rate is low (table 4). economic, financial, and urban-environmental The Favela-Bairro program, recently sustainability through physical upgrading; replaced by the Morar Carioca program, introduces legalization; and provides socio- involves a large public investment in infra- economic and cultural programs aimed at structure, services, public spaces, and com- generating income and jobs (Smolka and munity facilities, combined with continuous Damasio 2005). Moreover, spatially limited housing consolidation by the residents. It regularization programs do affect population has improved living conditions even without mobility and increase land and property full legal tenure security, but has also led to prices. Such impacts might be much smaller higher land and property prices and rents if policies were applied more widely. accompanied by significant changes in the socioeconomic composition of the local Costs and Benefits community (Abramo 2009). Regularization programs are costly. While Introduced in 1994, the first two phases upgrading expenditures by country are not of the Favela-Bairro program involved 253,000 available, total expenditures on projects

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Figure 2 Total Expenditure on IDB Funded Upgrading Programs, 1986–2008

Guyana Honduras Barbados Panama Haiti Nicaragua Bolivia Peru Ecuador El Salvador Trinidad & Tobago Uruguay Colombia Chile Argentina Mexico Brazil 0 200 400 600 800 1000 1200 1400 1600 1800 2000 US$ millions

Source: Rojas (2010, 142).

sponsored by the Inter-American Develop- Salvador were about $3,600 per household. ment Bank (IDB) indicate that Brazil has Paving, sewerage, and drainage costs in spent much more than other countries on all projects comprised 50 to 60 percent of such programs (figure 2). In contrast, the expenditures (Abiko et al. 2007). One driver IDB-related expenditures by Peru, with less of costs has been the increasing complexity emphasis on urban upgrading, have been of upgrading projects over time—for example, about 4 percent of those by Brazil. by adding components related to health, Upgrading costs per dwelling vary a income generation, and community great deal depending on the specific geo- development. graphy of the neighborhood, its distance Only a few analyses have calculated from existing infrastructure, and the extent benefit-cost results for upgrading projects. to which households need to be relocated A report by the IDB for the Favela-Bairro to provide infrastructure. However, exam- program used increases in property values ination of several projects does produce to measure benefits (Rojas 2010). For exam- meaningful averages, and the results sub- ple, Cuenin (2010, 206–207) reports that stantiate that retrofitting services in estab- calculations for property valorization result- lished neighborhoods is two to three times ing from improvement programs in Pando as costly as service installation at the time Norte in interior Uruguay and the northern of original construction. area of Montevideo produced internal rates Upgrading costs in the Favela-Bairro proof return of 28 and 25 percent respective- gram in Rio de Janeiro were around $4,000 ly—much higher than the reference rate per household. Comparably calculated up- of 12 percent. In the Favela-Bairro program, grading costs for the Guarapiranga project the rate of return was found to range from in São Paulo were $5,000 per household, 13 to 71 percent with an average return of and those for the Ribeira Azul project in 42 percent (Cuenin 2010, 207).

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(1996–2004) was US$66.3 million, co- financed by a 1998 World Bank loan and the Government of Peru. During this period, 1,481,000 property titles were issued, benefitting some 5.7 million urban dwellers. No substantial user fees were charged to the beneficiaries for titling or registration (Angel et al. 2006). The apparent low cost (averaging $64 per title) seems to contradict the argument that large-scale titling policies are not financially self-sustainable. Indeed, many of the beneficiary households could have paid for the titles in Peru, especially considering that their property values increased. Moreover, they could also pay property taxes, although many legalized areas have not been integrated into the property tax system. The Favela-Bairro Even with their existing shortcomings, Where land regularization has been program provided a sociospatially integrated regularization poli- reduced to its titling dimension alone, little community center for a cies can have enormous social and economic attention has been paid to the need to pro- neighborhood in northern Rio de Janeiro. importance. They can promote the socio- mote sociospatially integrated urban devel- economic development of the communities, opment, which is very costly. This approach their political stability, the rationality and has not addressed the underlying causes of efficiency of urban management, and the informal development or of poverty. More- minimization of social and environmental over, such titling programs have created the impacts. They certainly will not end urban expectation that all informal settlements will poverty, but they can improve the housing eventually be legalized. This expectation has and living conditions of millions of people. stimulated further informal development, especially on public land, where the vast A ss e ssm e n t of majority of titles in Peru have been issued. R e g u lari z atio n Unfortunately, some settlements that have e X P e ri e n c e s been regularized are not sustainable from Large-scale titling programs in Peru have an urban and environmental perspective. increased tenure security within informal Most formalization programs have failed settlements—a major accomplishment. They to reform the obsolete registration system have also increased the value of the proper- for land and property rights, and they some- ties of the affected residents at relatively low times generate parallel and conflicting systems. cost. However, those programs have also Only recently have efforts been made in Peru created many problems that could be solved to reconcile the public registry system with by implementing more sustainable processes. the parallel urban land cadastre created Given their low cost, it is ironic that one by COFOPRI. This is an important matter issue with titling programs is financial sus- because in many Latin American countries tainability. The immediate financial cost of the registration of the land title at the public the first phase of COFOPRI’s operation registry is what constitutes ownership.

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The Brazilian approach to informal settlements has emphasized that security of tenure and sociospatial integration should be pursued jointly to guarantee the permanence of communities, with better living and housing conditions on the land they have long occupied. Brazilian regularization policies have linked legalization with upgrading policies—and sometimes socioeconomic programs—and also emphasized effective popular participation in all stages of the process. The Brazilian experience applies different legal solutions to different situations, uses different legal instruments to address informal settlements on public land versus private land, entails much higher costs per household given the costs of urban upgrading, and has covered many fewer households. he prevention of new informal develop- Speculators improvised Nevertheless, Brazil now has approximately ment, although the PRIMED program possession of open land 1 million titles in process, albeit through a in Colombia is an exception. in anticipation of future public improvements fragmented system led by local administra- While several expected objectives of and titling in Chincha, tions, unlike the centralized process in Peru. large-scale titling programs such as those a coastal area of Peru. It is not sufficient to “legalize the illegal” in Peru have not materialized fully, research without provoking changes in the legal-urban has revealed unintended consequences related system that led to the illegality in the first to the impacts on informal land markets; the place—especially in the name of fighting formalization of unsustainable settlements; poverty. Titling per se provides legal security gentrification; political manipulation of of tenure to the residents, a necessary step, regularization policies; and problems with but it is not sufficient to promote sociospa- the registration of new land titles. tial integration and may undermine the Some studies indicate that regularization permanence of the legalized communities. policies have increased land prices in informal markets. Physical improvements have U n a n ti c ipat e d attracted more people to live in these areas c O n s e q u e n c e s and to exhaust the remaining capacity of By failing to confront the nature and causes newly implemented infrastructure, equip- of the phenomenon of informal development ment, and services. Distortions and abuses directly, regularization policies often generate of titling also have occurred, such as so-called unanticipated consequences. When conceived “tourist plots” in Peru, where people who in isolation from the broader set of land de- do not live in a neighborhood demarcate velopment, urban, housing, and fiscal policies, plots there in expectation of being given regularization policies have borne little relation land titles (Riofrio 2008). to other issues such as vacant land, under- New informal settlements have been utilized properties, and available public formed in the expectation that they will land. Typically they have not addressed be legalized, and titling has been viewed as

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a kind of license to invade. While approxi- Rio de Janeiro. A newspaper article reported mately half a million title deeds were dis- that a developer had been gradually buying tributed in Lima between 1996 and 2000, parcels in the informal market (prices have for example, land invasions also multiplied been around R$35,000 or US$20,000), in during those years at an unprecedented rate the expectation that the area will be legal- (Calderon 2007b). An increased likelihood of ized. He planned to construct a hotel but land regularization thus has had the ironic was denied a license to operate one there effect of stimulating the process of informal (Azevedo 2010). development (Smolka 2003; Smolka and Some regularized areas were, and remain, Larangeira 2008). unsustainable in urban-environmental terms, While regularization programs provide such as precariously constructed buildings. individual security of tenure and protection Many legalized settlements still lack sanitation, against legal eviction, they can also cause water, utility services, infrastructure, and gentrification, especially in centrally located public spaces—in some cases 10 years after and valuable areas where land developers their regularization. Few measures address and promoters may pressure residents to sell the mitigation of existing environmental their parcels (Durand-Lasserve 2006). Many problems, and only recently have systematic traditional communities in São Paulo, for efforts been made in Peru to provide infra- example, have been converted from informal structure and services. settlements to middle- and upper-class Regularization policies have sometimes developments. been used as vehicles for political patronage Legalization policies have also led to in “titles for votes” schemes. In other cases, growing expectations for gentrification in the political process fails to redress historical Vidigal, an old and well-located favela in gender imbalances. Many women in infor-

Modern commercial buildings tower over the remnants of Favela Coliseu near Faria Lima Avenue in São Paulo, Brazil.

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mal settlements still lack full legal control S u mmar y over their assets. In Peru, however, 56 per- Regularization has employed two primary cent of COFOPRI titles have been granted approaches that have been explored in two to women, which is also related to increas- case studies: legalizing tenure through titling ing female participation in the labor market. in the expectation that it will trigger develop- Given this mixed record, has titling ment, as applied in Peru; and upgrading ser- failed, and would the residents in consoli- vices more broadly while legalizing tenure, dated informal settlements be better off if as applied in Brazil. left to their own devices? The answer is no. Peru’s legalization was implemented Such titling programs are partial housing at a large scale, covering nearly 1.6 million policies, and to be fully successful they need households over ten years and at the rela- to be reconceived within the broader con- tively low cost of $64 per household. No text of preventive land, urban, housing, and fees were charged to households, and prop- fiscal policies that effectively widen the con- erty values increased an average of 25 per- ditions of access to serviced land and hous- cent—an increment greater than program ing. From this perspective, the question of costs. Of the expected accompanying effects, legalizing informal settlements becomes there were some dwelling improvements even more relevant, and more complex. and some reduction in poverty, but little Titling policies are very important to: evidence of improved access to credit. • promote tenure security and offer protection Brazil’s broader upgrading program against forced eviction; has been much more limited in scale and • help governments to fulfill their obligation had per household costs of $3,500 to $5,000 to ensure the social right to housing; —from 50 to 80 times higher than those • ensure that proper compensation is paid in Peru. Though there are few benefit-cost to residents in cases of relocation; studies of Brazil’s program, those that exist • minimize future family and neighborhood find that property value increments exceed legal conflicts by clarifying property rights; upgrading costs, yet at a rate below the in- • define land and property regimes to secure crement resulting from new urbanization. future investments by residents and others, Both programs have experienced counter- within the conditions imposed by regu- vailing or unanticipated effects. A main issue, larization policies; as in most amnesty programs generally, is that • make it easier for residents to offer their they stimulated more of the negative behavior properties as collateral, or to gain access —in this case, informal settlements—that to other types of formal housing or con- the programs were trying to remedy. Other sumer credit; effects included gentrification, mainly in • strengthen communities, recognize basic centrally located neighborhoods. Overall, citizenship rights, and promote sociopo- both programs have been successful in pro- litical stability; viding more secure tenure and producing • redress gender imbalances; and benefits that exceed program costs, although • generate data on plot boundaries and neither one met all of its objectives. existing buildings for the local property tax system.

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c h a p t e r 5 Additional Legal Issues Related to Regularization

Private developers have built serviced housing on former ejido lands in Mexico, but self-built occupation continues outside the walls.

romoting progress in the complex their property if their newly titled property field of land regularization en- is subject to urban and environmental regu- counters a number of legal issues lations. However, land titling should matter and collateral objectives. Given to all of those living in consolidated infor- Pthe importance to society of housing its mal areas because the understandings that people, policies that relate to regularization generate the perception of tenure security will be expected to address social objectives shared by many residents can and do change. beyond tenure security, which itself is com- Land titling remains the main way to plicated because there are many forms of promote full legal and durable security of tenure other than freehold title that can tenure, although tenure security can be pro- provide security to occupants. vided to occupants by many different types of titles or enforceable rights: T y p e s of T e n u r e R ig h ts • full individual or collective freehold, The residents of consolidated settlements obtained mainly through sale, donation often do not consider titling to be a top pri- by the public authorities, or adverse ority because they already view their tenure possession; as secure. Some even think that titling is • individual or collective leasehold over harmful to their interests, as it entails poten- public land (including variations of tial future financial burdens and may con- long-term leases such as the Concession strain their ability to use and dispose of of Real Right to Use and Concession

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of Special Use for Housing Purposes of the communities on regularized land, widely used in Brazil); leasehold titles may be a better option than • the demarcation of Special Zones of Social freehold, while collective titles may be better Interest (ZEIS) allowing the initiation of options than individual ones. The choice of a new chain of property transfer, made legal instrument depends on the realities in possible by a 2009 Brazilian federal law; each given situation. • surface rights, which refers to ownership Collective legal solutions—such as of the surface land only, with other rights collective freehold or leasehold, community being reserved; land trusts, social property (propiedad social as • the anticretico right, as used in Bolivia and in Venezuela), collective property (propiedad Ecuador. This is a rental contract where- colectiva), and other forms of communal in the renter pays the landlord a fixed rights such as the Mexican ejidos—may sum at the start of the rental period in correspond more closely with the collective lieu of monthly rent; at the end of the nature of many informal development pro- rental period the tenant receives the orig- cesses. Such solutions may also make sense inal advanced rental payment back from where defining individual plots is difficult the landlord; should the landlord fail to because of densely configured settlements return the money, the tenant acquires and where it is necessary for regularization ownership; programs to reach a sustainable scale. • community land trusts, where a com- However, collective titling requires rules munity organization owns the land in to be established to define the collective a given settlement; decision-making process for a wide range of • cooperatives (still influential in Uruguay, issues, including the future sale of legalized for example); land and buildings, or how property and • titulos supletorios (supplementary titles) building matters will be decided by a collec- that acknowledge possession, as used in tively titled community. Economic pressure Nicaragua and Venezuela, for example; to bypass such rules and sell plots informally • temporary permits or occupation became widespread in Mexican ejidos locat- authorizations; and ed near fast-growing cities, thus undermin- • social rental contracts. ing the original community goals.

When land rights are ill-defined or not L e gal I ss u e s of L a n d clearly recognized by the legal system, titling O c c u patio n policies may adopt an incremental approach Three main legal situations of informal that augments the residents’ legal status over land development require different legal time. But this does not mean there is always approaches and therefore different regu- a continuum of rights or an automatic pro- larization policies: cess leading from a more precarious legal • settlements mainly occupied by the form of occupation to a freehold title. urban poor, in which the residents have For example, leaseholders may become their own (individual or collective) rights freeholders as a result of evolving land poli- to the regularization of the occupied areas cies, but there is no guarantee that this will and are recognized by the legal order; happen. Nor is there a reason to believe • settlements mainly occupied by the urban that leasehold is an inferior form of tenure. poor, in which the public authorities As a means of enhancing the permanence have broader discretionary power to

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Box 4 individual freehold titles to land. In fact, for Regularization of Nonpoor Settlements many settlements on public land, individual land ownership may not be the best option. lthough it is in society’s interest to regularize informal settle- Legal systems also vary regarding the A ments occupied by the nonpoor (sometimes called regulariza- legal recognition of ownership by adverse tion of specific interest), these settlements cannot be treated with possession. Some countries require a judicial the same legal and technical approach as that used to regularize declaration and others, such as Peru, use settlements occupied by the urban poor. After all, nonpoor resi- administrative channels. Adverse possession dents had the option of formal access to land and housing, but of private land is often based on the social chose to live outside the law. function of property: occupiers of someone’s private property are eventually entitled to When nonpoor informal settlements are on public land, the direct being recognized as the legitimate owners transfer of the plots to the occupiers without an auction process to following a period of their continuous and achieve the highest possible price cannot be justified using the pacific occupation. They, unlike the original same laws that authorize the transfer of public land to the poor landowner, have given a social function to residents of informal settlements for reasons of social interest. the property. Local laws establish the specific Middle- and upper-class occupiers of public land may be entitled to conditions for operationalizing this right, preference rights at an auction, and to compensation if they are such as duration of occupancy and maxi- outbid, but in principle they should not be entitled to free direct mum size of land to be adversely possessed. transfer and privatization of the public land. Brazil’s adverse possession policy, known as a special urban entitlement (usucapiao espe- cial urbano) requires five years of uncontested determine the conditions of regulariza- occupation and is applicable up to 250m2. In tion programs; and Colombia, for cases where the possession • informal settlements in which the occu- was obtained irregularly without good faith piers are not mainly the urban poor (box 4). or any fair titling, only three years are currently required with no area maximum. One fundamental legal aspect to be taken This rule applies only to social housing cur- into account is the original regime of land rently defined as being worth the equivalent ownership, since the regularization of con- of about US$35,000, as defined by article solidated settlements on public land must 51 in the urban land reform act of 1989 be implemented differently from the regu- (Ley 9 de 1989 [Ley de reforma urbana] ). larization of settlements on private land. Although this is a civil matter between Direct transfer of public ownership to land private parties, the public authorities can occupiers, be it through sale or donation, support communities in having their land usually requires specific legal authorization. rights fully declared, for example, by provid- When transferring public property under ing them with technical, legal, and financial regularization programs, a common confu- help. Whenever adverse possession rights sion is often made between property rights apply, the public administrations need not and housing rights. expropriate the occupied land to promote The main legal role and obligation of its regularization, as the residents already the public authorities normally is to ensure have rights that only need administrative or access to adequate social housing to those judicial declaration. who need it. This is by no means the same The same rationale does not usually ap- as exclusively granting ownership titles or ply for occupations of public land. Unless

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the legal system explicitly recognizes ad- located in central city areas) have prompted verse possession of public property, regular- developers to encourage residents to sell ization can be implemented by granting the their houses. Many residents have reportedly occupiers tenure status other than freehold. done so and some have then occupied pub- Leasehold forms (such as those being used lic or private land illegally, thus starting the in Brazil) constitute real rights promoting process over again. Accordingly, in Peru, in tenure security and can be registered, trans- the Brazilian cities of Recife and Porto Alegre, ferred, or inherited. Leasehold and social and in Buenos Aires among other places, rental housing are two valid alternatives that policy makers have restricted the transfer may be more suitable to the interests of both of newly legalized properties by requiring policy makers and residents of informal set- sales to be approved by residents’ associa- tlements. Privatizing public land is not nec- tions, or they have banned sales for several essary to fulfill the social right to housing; years. Such schemes have not worked out on the contrary, maintaining public owner- well and have merely generated new types ship of land might well be the best way to of informal transactions (Angel et al. 2006). guarantee the permanence of communities. Learning from these experiences, some local administrations have moved from E n s u ri n g t h e D u rabilit y focusing on the actions of current residents of B e n e fits for t h e P oor to seeking ways to guarantee that the land No specific form of land titling protects res- upgraded and legalized at public expense idents against pressures exerted by market remains in use as housing for less-favored forces. In some cases, increases in the value social groups. Rather than imposing constraints of legalized properties (especially when on future sales, public authorities use urban

High- and middle-income residents of Rio de Janeiro expand penthouse apart- ments informally, with the expectation that they will be regularized later.

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planning regulations and land management Interestingly, such zoning strategies have tools to guarantee that low-income house- not been questioned in the same way that holds continue to be in the majority in the the demarcation of land for social hous- regularized areas, thus minimizing “eviction ing has been. by the market” or capital gain events. A 2006 study of the ZEIS in Recife Some Brazilian municipalities have created concluded that antigentrification zoning Special Zones of Social Interest (ZEIS) that measures, such as limits on plot sizes, build- include areas occupied by the consolidated ing heights, and number of plots allowed informal settlements. In line with mecha- per individual, can significantly reduce de- nisms of democratic management, each velopment pressures in newly regularized special zone has to approve its own urban communities when used in conjunction with regulations. This provides an opportunity to titling programs (Angel et al. 2006). Rather create land use and development procedures than creating urban ghettoes, as some critics to prevent these newly legalized areas from argued, this approach has provided legal being acquired by property developers and support to the poor communities. The the traditional communities from being special zones are compatible with any form replaced by other socioeconomic groups. of land titling, and some have recognized The demarcation of ZEIS is a zoning individual or collective freehold and lease- strategy like those for special land uses hold rights. Such regularization of informal (e.g., industrial districts or environmental settlements may lead to sociospatial integra- protection zones) or to meet social needs tion and guarantee the permanence of the (e.g., exclusive zones for residential use). communities.

Low-rise informal settlements are protected from removal and redevelopment through the ZEIS program in Recife, Brazil.

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A community meeting gives residents of an informal settlement in Guatemala an opportunity to share concerns and plans.

G e n d e r a n d L a n d R ig h ts evicted from their homes and lands upon Land regularization policies also address the the death of their husbands. Other tradi- rights of the women living in consolidated tional statutory laws discriminate against informal settlements (UN-HABITAT 2005). women by not enabling wives to stop their Women have long been active agents in the husbands from selling land. If they divorce informal markets in Latin American cities, or are abandoned by their husbands, they selling and buying land, building and rent- have no legal right to the land. Even when ing dwellings, and developing and main- women may legally own their land, patriar- taining vibrant social and capital networks. chal customs sometimes prevent them from In 2009, one-third of all Venezuelan house- making decisions about its use. holds were headed by women. However, The recognition of women’s equal the legal recognition of women’s land rights legal status in relation to land and property is often a challenge, as legal systems have rights is an important objective, regardless traditionally considered the man as the of the legal nature of marital arrangements. household head, and therefore presumed In both Peru and Brazil, land titles have that the man controls property rights. This been given jointly to husbands and wives. presumption is made more complicated by Progressive judicial decisions have strength- the frequently informal nature of marital ened women’s land rights, such as by can- relations in the region. celling the man’s title when separation is Although women tend to remain on the due to domestic violence. land with the children, legal systems often But, there is still a considerable way do not fully protect them. In some cases, to go. In the aftermath of the 2007 earth- customary traditions prevent women from quake in Peru, the government ignored the inheriting land from their husbands or fathers, country’s decades-long tradition of recog- and they, with their children, have been nizing women’s equal status regarding land

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rights by offering a financial bonus for opers, and the public administration. Resi- house reconstruction only to men who were dents have participated in the process by officially considered to be heads of house- preventing further land occupation, plant- holds, including in some cases ex-husbands. ing trees, implementing several ecological In other cases women have reportedly asked measures, and by helping to finance the for their names to be removed from titles, installation of local sewage treatment for example in Mexico, because they feared systems (van Horen 2001). retaliation from abusive husbands or some Other studies show that intrinsic environ- form of cultural discrimination. mental risk is relatively rare, and the problem is more often lack of risk management. E n v iro n m e n tal P rot e c tio n Experience with the PRIMED program in Many consolidated informal settlements Medellín, for example, has shown that have been formed in environmentally sen- whenever possible risk management strate- sitive areas, including wetlands, water reser- gies are more adequate and less costly than voirs, or steep slopes such as the hillsides the physical relocation of the communities. of Rio de Janeiro, Caracas, Bogotá, and Medellín. In several cases, conflicts have S u mmar y emerged, with environmental values oppos- Providing secure tenure typically involves ing public policies to regularize or legalize giving freehold title, but tenure takes many settlements. other forms—leasehold, collective owner- In other cases, the environmental opposi- ship, and cooperatives—some of which may tion may be a veil covering social prejudices be more appropriate for particular situations against the urban poor, especially those liv- in terms of enhancing the permanence of ing in central city areas. The same concern settlements. The design of regularization may not be articulated when the environ- programs will also depend on the character- mentally protected areas are occupied ille- istics of the residents, the extent of their gally by middle- and upper-income house- acquired rights, and the original public or holds. Nor are such concerns so strongly private ownership status of the land. Many manifested when the informal settlements countries do not recognize adverse posses- occupy environmentally sensitive areas sion of public land or the uncompensated on the urban periphery. transfer of public land to private owners. Of course, consolidated settlements need Maintaining neighborhood occupancy to be dealt with pragmatically. Finding solu- by deserving groups (most notably the poor) tions where environmental damage is mini- can be a challenge following upgrading, and mized or compensated to some extent has some countries, such as Brazil, have taken required compromises. An interesting expe- special steps to maintain community integ- rience of regularization in an environmen- rity. Moreover, property rights of women tally protected area of Santo André, Brazil, often need special attention, as cultural illustrates an agreement reached with the practices may contradict their legal rights. informal settlers to promote changes in their Settlements in environmentally sensitive behavior to protect the watershed. The par- areas also can raise difficult tradeoffs be- ticipatory process involved more than 10 tween protecting the environment and stakeholder groups, including residents’ maintaining the community. associations, former landowners and devel-

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c h a p t e r 6 Recommendations on Regularization Policy

egularization remains a work Recommendations for improving regular- Metrocable provides an in progress in Latin America. ization policy and specific programs must innovative solution for mass transportation and Different approaches have been address the following issues. sociospatial integration tried in different countries, rang- between peripheral Ring from those narrowly focused on formal 1. Evaluation. More systematic efforts informal settlements titling to those attempting to improve all must be made to evaluate the performance and central areas of neighborhood services. The costs of full of regularization programs, including the Medellín, Colombia. regularization are 50 to 80 times greater collection of both baseline data before pro- than those of titling alone, but available gram implementation and subsequent data evidence indicates that the benefits to the on program costs and outcomes. Concep- occupants, measured in increased property tually, program impacts should encompass values and improved services, exceed the welfare at the household level, services at costs of both approaches. the neighborhood level, and the extent of While regularization has long been resisted informality citywide. Performance evalua- or implemented slowly, it is now becoming tions also are needed for alternative modes a political imperative in Latin America. of addressing regularization issues.

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4. Gender Equity. Regularization programs also need to seek the participation of both men and women to avoid building gender bias into the process by assuming that household heads are always male. The direct involvement of all the program’s beneficiaries in its design will also increase its long-term effectiveness.

5. Financing. Regularization needs to be more self-sustaining financially. For example, payment of property taxes after regularization produces local revenue and also strengthens the legal claims for citizenship and services. Charges on urban infrastructure and service improvements to capture part of the resulting land value increment should reflect payment capacity and be A former slum 2. Customized Approaches. Successful based on principles similar to those applied area in San Salvador, regularization policies need to be adapted in formal areas that are benefited by public El Salvador, was to the facts, context, and history of each interventions. If services in formal areas are upgraded with the help of FUNDASAL, settlement, because a single approach is paid by the municipality, they should also a pioneering agency unlikely to work well across all situations. be paid in regularized neighborhoods. All in created in 1968 to Moreover, such policies are likely to require all, cost recovery in regularization programs promote improve- revisions over time as conditions and prac- should not impose a relatively higher fiscal ments in low-income tices evolve. Regularization should be con- burden on the poor than on other segments neighborhoods. sidered as part of a broader social policy of the society. aimed at social integration. This may mean that program elements go beyond infrastruc- 6. Research and Analysis. More con- ture services to include such components sistent definitions of informality should be as employment, training, public education, based on readily available data, such as and health services. census reports, so that informal settlements can be tracked reliably over time and cred- 3. Appropriate Titling. Freehold titles ible determination can be made if the situa- are most common in regularization pro- tion is improving or worsening in particular grams, but other types of titles and rights, cities. For progress to be made, more work such as leasehold, cooperatives, land trusts, is needed to prevent the establishment of or communal ownership, may be more additional informal settlements, particularly appropriate in settlements that are highly when they are thought to be caused by reg- irregular in physical layout or located on ularization programs themselves. public lands. In some cases, possession titles may be more effective than freehold titling to protect occupants and ensure the socioeconomic sustainability of the community.

46 policy focu s r e p o r t ● L i n c o l n I n s t i t u t e o f L a n d P o l i c y E d é s i o F e r n a n d e s ● R e g u l a r ization of I n f o r mal Settlement s 47 ......

r e f e r e n c e s

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48 policy focu s r e p o r t ● L i n c o l n I n s t i t u t e o f L a n d P o l i c y A bo u t t h e A u t h or Ordering Information Edésio Fernandes is a lawyer, urban planner, author, and lecturer To download a free copy of this report or to order copies of the printed report, visit associated with numerous international universities and nongovern- www.lincolninst.edu and search by author or title. mental organizations. He graduated from the Federal University of For additional information on discounted Minas Gerais in Brazil and received his Doctor of Law degree from prices for bookstores, multiple-copy orders, Warwick University in the United Kingdom. In 2003, he was appointed and shipping and handling costs, send your the director of land affairs in the new Ministry of Cities in Brazil, where inquiry to [email protected]. he formulated the National Programme to Support Sustainable Land Regularization in Urban Areas. He was a visiting fellow of the Lincoln Institute of Land Policy in 2008–2009. Contact: edesiofernandes@ Production Credits

compuserve.com P roject M anager & E ditor Ann LeRoyer D esign & P roduction Acknowledgments DG Communications/NonprofitDesign.com The ideas in this report have been developed within the context of P rinting Recycled Paper Printing, Boston the Lincoln Institute’s ongoing research and teaching activities in the field of informal markets and land regularization programs. These

programs have been led for more than 15 years by Martim O. Smolka, 92% senior fellow and director of the Institute’s Program on Latin America and the Caribbean. I have benefitted enormously from rich and stim- Cert no. SCS-COC-001366 ulating dialogues with him and other colleagues over the years, with special mention being due to Pedro Abramo, Carlos Morales, Claudio Acioly, Julio Calderón, Gustavo Riofrio, and Teolinda Bolivar. Photographs I am indebted to Dr. Smolka and Gregory K. Ingram, president and Julio Calderón: 29 CEO of the Lincoln Institute, for some of the economic data and Asa Jonsson: back cover left Eduardo Knapp: 36 analysis in this report. I also thank Anna Sant’Anna, senior research Prefeitura de Diadema: front cover, associate in the Latin America Program, and Ann LeRoyer, director back cover right of publications, for additional research, fact checking, and editing; Gustavo Riofrio: 26 needless to say, I am solely responsible for any shortcomings. I am Secretaria Municipal de Habitação da grateful to all staff at the Lincoln Institute of Land Policy for their Prefeitura da Cidade do Rio de Janeiro: 25 support during my time at Lincoln House as a visiting fellow in Martim O. Smolka: 2, 4, 6, 8, 9, 12, 15, 16, 2008 and 2009. 17, 20, 22, 23, 34, 35, 38, 41, 42, 43, 45, 46, back cover center Alvaro Uribe: 10, 18, 31 about the Lincoln Institute of Land Policy www.lincolninst.edu The Lincoln Institute of Land Policy is a leading resource for key issues concerning the use, regulation, and taxation of land. Providing high-quality education and research, the Institute strives to improve public dialogue and decisions about land policy. As a private operating foundation whose origins date to 1946, the Institute seeks to inform decision making through education, research, policy evaluation, 113 Brattle Street demonstration projects, and the dissemination of information, policy Cambridge, MA 02138-3400 USA analysis, and data through our publications, Web site, and other media. By bringing together scholars, practitioners, public officials, Phone: 617-661-3016 or policy makers, journalists, and citizens, the Lincoln Institute integrates 800-LAND-USE (800-526-3873) theory and practice and provides a nonpartisan forum for multidisci- Fax: 617-661-7235 or plinary perspectives on public policy concerning land, both in the 800-LAND-944 (800-526-3944) United States and internationally. Web: www.lincolninst.edu Email: [email protected]

48 policy focu s r e p o r t ● L i n c o l n I n s t i t u t e o f L a n d P o l i c y Regularization of Informal Settlements In Latin America wellings in informal settlements generally lack formal legal titles, and they may exhibit irregular development patterns, lack essential public services such as sanitation, and occur on environmentally vulnerable Dor public land. Whether they take place on private or public land, informal settlements are developed progressively over many years, and some have existed for decades. A key aspect of informality is the lack of de jure or formal title, although many urban residents feel secure with de facto property rights of ownership based on customary practices.

Policies to regularize informal settlements have been attempted in most Latin American countries, and experience demonstrates that regularization programs need to be designed carefully to avoid either making conditions worse for the low-income residents the programs are intended to help or stimulating the development of new informal settlements. Regularization programs follow two main paradigms. The first, exemplified by Peru, involves the narrow legalization of tenure through titling and is inspired by Hernando de Soto’s hypothesis that tenure security is a trigger for development. Brazil’s broader regularization programs combine legal titling with the upgrading of public services, job creation, and community support structures.

Recommendations for improving regularization policy and specific programs must address the following issues: • Evaluate the performance of regularization programs, including the collection of both baseline data before program implementation and subsequent data on program costs and outcomes. • Customize policies and programs, because a single approach is unlikely to work well across all situations. • Use appropriate titling systems (freehold, leasehold, cooperatives, land trusts, or communal ownership) to ensure the socioeconomic sustainability of the community. • Seek the participation of both men and women to avoid building gender bias into the process and increase its long-term effectiveness. • Make regularization more self-sustaining financially through property taxes; charges on urban infrastructure and service improvements to capture part of the resulting land value increment; and equitable fiscal burdens on all segments of the society. • Support more research and analysis to determine if the situation is improving or worsening in particular cities and to prevent the establishment of additional informal settlements, particularly when they are thought to be caused by regularization programs themselves.

ISBN 978-1-55844-202-3

ISBN 978-1-55844-202-3 Policy Focus Report/Code PF023