Policy towards existing informal settlements

 

Where informal settlements have already been established, policy options become more challenging. These options can broadly be divided into slum-upgrading, resettlement and land readjustment policies.

Slum upgrading

Where policymakers are content to retain land under residential use, participatory in-situ slum upgrading is a cost-effective way to enable neighbourhoods to incrementally transform into dense and liveable places. Whilst infrastructure may be cheaper to reconstruct elsewhere on a greenfield site, housing and businesses already established in these settlements are very expensive to reconstruct adequately, and the socio-economic networks developed may be impossible to relocate.

Upgrading programmes can also focus on key low-cost infrastructure or housing improvements, rather than reconstructing the whole house.

Gradually, upgrading programmes can enable informal settlements to transform into dense and liveable neighbourhoods that integrate the city’s low-income workforce into the urban fabric.

Smaller upgrading programmes typically focus on short-term priorities such as public health. These are generally best identified in close collaboration with local communities.

In the longer term, however, more significant integration of informal settlements into the city typically requires more comprehensive investments: better transport links and regularisation of land rights. Installing transport infrastructure is challenging because of costly and complex resettlement that relies on clarity of land ownership. Regularising land rights in turn presents a significant challenge in part because official land titling procedures are often very expensive, and in part because land ownership in informal settlements is often either undocumented or contested.

Rwanda’s 2009-13 land tenure regularisation programme may offer useful lessons for other low-income cities in overcoming these challenges. Instead of requiring lengthy legal proceedings and complex surveying technologies to register land, communities openly demarcated their plot boundaries and resolved disputes together. This was done with the help of a local judicial authorities and a local parasurveyor. Through this process, almost all land in the country was registered in under five years, and at a cost of only $6 per parcel. By contrast, in Tanzania, the cost of official mapping and surveying procedures can reach over $3,000. 14

Such solutions may not work so effectively in all political settings. In many cases, clarifying land ownership requires city authorities to deal with well-connected ‘slum lords’, who have exploited the lack of governance in informal settlements to make their own land ownership claims. In Kibera, Nairobi, for example, 50% of land is informally owned by well-connected government bureaucrats;15 they obtain rents through this ownership, but their rights are too weak to build on substantially or to sell to developers. 16

City governments often do not have the authority to break this stalemate, and so national leaders will need to step in. Given the importance of inner-city development for national economic growth, well-connected slumlords will either need to be faced down or bought out through compensation so that land can be reassigned to government or to existing residents. Even if compensation is necessary, it is often far less costly than the wasted productive potential that results from the current gridlock. One current estimate puts the cost of land misallocation in Kibera, a slum in central Nairobi, at over $1 billion. The market value of titled land would be high enough for each slumlord to be compensated at the value of all their future rents, and each tenant household to be compensated with £16,000 (roughly 25 years’ worth of rent payments).

Different types of land rights and the transformation of land use

Depending on government plans for future land use, different policies towards land rights will be needed for existing informal settlements. Often the best policy is to formally register individual land titles, and allow the private sector to freely buy and sell land in line with the changing economic activities of the city. However, if for reasons of social cohesion policymakers want to assist communities to remain in place, collective land rights may be appropriate. This typically means the whole community has to agree to selling the land of the informal settlement rather than individual households selling gradually.

Resettlement

Resettlement programmes are extremely costly, both to governments and to the communities affected. However, given the unplanned nature of existing development in many cities, there is likely to be some need for resettlement of informal residents. There are typically two reasons given for this: to improve the lives of those living in an informal settlement, or to redirect the land of the informal settlement for an alternative use. If the former is the aim, resettlement is unlikely to be the most cost-effective way to improve living conditions unless the settlement is located on land which is genuinely unsafe.

Even when voluntary, resettlement often harms residents

In Ahmedabad, India, in 1987, the Self-Employed Women’s Association organised a lottery whereby 110 winning households signed leases to relocate from inner-city slums to government housing seven miles away. Winners received a 50% reduction in monthly rent, as well as the possibility of eventual home ownership. However, despite far better amenities in the new housing, only two-thirds of winning households actually chose to relocate, and only one third were still in the new housing in 2007. Better living conditions could not compensate for the break-up of community, and loss of socio-economic networks created by the resettlement. 17

If the aim is to improve land use, this can be justified in order to make space for vital infrastructure for the productivity and liveability of the city as a whole, or to facilitate private investment with large-scale employment potential. Resettlement for public infrastructure may be particularly important in African cities, where the density of paved roads is less than a quarter of that in other low-income cities. However, ‘economic regeneration’ projects are clearly subject to abuse, with many such projects used to justify construction projects that are of dubious value to the city as a whole, or simply to assemble land to be held for speculative purposes.

When the city does decide to embark on a resettlement programme, one key debate centres around compensation. A benchmark for compensation typically combines:

  • Payment to landowners at the market value of their land and property before redevelopment projects are announced. This prevents speculative land investments being made after the project, and driving up the price of land being acquired. In Kampala, compensation payments for public infrastructure are based on land values after projects are announced – this has made infrastructure prohibitively expensive, and risks blocking the growth prospects of the whole city. As a result, the road connecting Kampala to its airport is the most expensive road per kilometre in the world.18
  • Further compensation for displacement to resident households and businesses in the form of compensation for lost business profits, lost employment opportunities and relocation costs.

Ensuring this happens in practice means making compensation laws clear and specific. Without this, well-connected individuals will be able to exploit legal loopholes and claim unrightful compensation.

Land readjustment

Land readjustment schemes allow governments to unlock often substantial land values in informal settlements to facilitate neighbourhood transformation. Under these schemes, governments pool together privately held land plots and creates a new land use plan for the whole area. These plans include new infrastructure provided by the government, which increases the value of each surrounding plot. Because land values rise due to better planning and infrastructure provision, private landowners are willing to give up some of their land to the government to fund the scheme. In South Korea, landowners agreed to release up to half of their land under land readjustment schemes in the 1940s, and over half of the land area of Seoul was redeveloped in this way. This enabled public investments in infrastructure and public spaces to be largely self-financing. 19

Land readjustment schemes

Government pools private land plots and creates a new land use plan for the whole area. Because land values rise due to better planning and infrastructure, private landowners are willing to give up some of their land.

Tenure disputes can also be resolved in this process through ‘land-sharing’ arrangements between official landowners and occupants. Within the new neighbourhood design, long- term occupants can be resettled in higher density accommodation, financed by freeing up previously unusable land for the owner to be used for high-value commercial or residential use.

Land readjustment schemes require effective and empowered implementing institutions – not least because landowners need to trust in government if they are to be willing to give up substantial portions of their land. Angola offers a striking example of two diverging experiences with land readjustment based on different institutional structures following a change in law in 2007.

In one successful scheme, revenues from the sale of some of the land given up by private owners went into an infrastructure development fund to cover the costs of infrastructure provision. By contrast, in a second scheme, all local revenues reverted to central government, disincentivizing local government from raising incomes from land sales. Instead, land parcels were distributed for free, and no funding was recovered to invest in infrastructure. Wealthy landowners gained control over the replotting process, and used it simply to increase their landholdings.

Footnotes

  • 14 Ali, D. A., Collin, M, Deininger, K., Dercon, S. and Sandefur, J. (2014). “The Price of Empowerment Experimental Evidence on Land
  • 15 Titling in Tanzania,” CSAE Working Paper, WPS-2014/23
  • 16 Syagga, Paul, Winnie Mitullah and Sarah Karirah-Gitau. 2002. “Nairobi Situation Analysis Supplementary Study: A Rapid Economic Appraisal of Rents in Slums and Informal Settlements’.’ Contribution to the Preparatory Phase (January-November 2002) of the Government of Kenya & UN-HABITAT Collaborative Nairobi Slum Upgrading Initiative.
  • 17 Sharon Barnhardt, Erica Field, and Rohini Pande, “Moving to Opportunity or Isolation? Network Effects of a Randomized Housing Lottery in Urban India,” American Economic Journal: Applied Economics 9, no. 1 (January 2017): 1–32
  • 18 Mwesigwa, A. (2018), “Without trust in gov’t, citizens can’t pay taxes – Prof Collier”, The Observer (Ugandan), February 13 2018
  • 19 Lozano-Gracia, N., Young, C., Lall, S. V., and Vishwanath, T. (2013). “Leveraging Land to Enable Urban Transformation: Lessons from Global Experience.” Policy Research Working Paper; No. 6312. World Bank, Washington, DC.