For cities to be productive and liveable places, urban land needs to be used efficiently and intensively. Well-functioning cities typically cluster firms and people together around productive central business districts and manufacturing centres that form the city’s employment engine. By contrast, many low-income cities are failing to use their land efficiently, instead growing outwards through sprawling self-built informal settlements.
Inefficient land use and insufficient investment, both in private properties and in public infrastructure, is often underpinned by weak land rights. In many cities, land is gridlocked in a web of competing ownership claims and overlapping tenure systems. This inhibits the private sector from either making substantial investments on land, or transferring it to a more productive user. It also prevents governments from coordinating a virtuous cycle of infrastructure provision, co-ordinated land-use planning and land taxation to fund these investments.
Given the politically challenging nature of reforms to land tenure, inertia has been a common policy response across many developing cities. However as demonstrated by experiences from Rwanda to Thailand, decisive public policy, backed by strong political support, can prevent these patterns of low investment and inefficient land use.
- Secure, legally enforceable and marketable land rights underpin successful urban development. Secure land rights encourage owners to invest in improving their properties. Legally enforceable land rights enable governments to tax and plan land use. Marketable land rights allow land to be transferred to its most productive use.
- Informality is not the same as insecurity. Informal tenure systems can convey varying degrees of tenure security, but lack the benefits of legal enforceability and are not easily marketable.
- Cheaper intermediate formal forms of tenure can capture the benefits of legal enforceability, but are typically less marketable than freehold or long-term leasehold titles.
- Policymakers can learn from successes and failures in land tenure reforms across developing countries.
A PDF version of this section of the policy toolkit is available here.