Public Interventions in Urban Land Markets: An Overview with African Highlights. Part 1: Land Markets, Regulation and Welfare

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1 Public Interventions in Urban Land Markets: An Overview with African Highlights Presentation at the 4 th World Urban Forum, Nanjing, China November 2008 Robin Rajack World Bank Part 1: Land Markets, Regulation and Welfare Regulation is intended to counter market failures and negative externalities 1

2 Well-intentioned regulation imposes significant costs that disproportionately affect the poor Capitalized amenity benefits of regulation More expensive land development standards Lengthier approval process Constrained supply of land/built space Discontiguous development efficiency, welfare costs South Africa: Regulatory Burden Restrictions on land sub-division Subdivision Act of 1970 still in place; Regressive land taxation Transvaal 1939 Agricultural Ordinance Duplicative environmental impact assessment regulations Old apartheid legislation, such as the Old Transvaal Town Planning and Township Ordinance Act of 1986 which forces people into standard housing patterns New, but too rigid, urban edge policies Source: Lall, van den Brink, Leresche and Dasgupta,

3 The overall impacts of specific regulations have not been well measured thereby obscuring policy implications The slate is not blank: deregulating confronts powerful lobbies and entrenched interests 3

4 Even good regulation is not enough: institutions, direct participation, fiscal policy and infrastructure are other important public interventions to enhance the welfare of the poor South Africa Informal settlements are not going away, with the burden carried by the very poor Supply: Public housing ( RDP housing ) has had an impressive roll-out in terms of numbers, but we find: no multiplier effects in terms of complementary private investments and key household consumption expenditures But does stimulate expenditures on education. Demand: The poor can afford to pay for land and housing, and do so in the informal settlements Collectively, on a per hectare basis, the very poor could compete with many high-end-of-the-market developers But land market regulations and government program modalities need to be re-engineered to allow the poor to compete, and use their own resources more effectively Source: Lall, van den Brink, Leresche and Dasgupta,

5 INFRASTRUCTURE POLYGON: NAIROBI AND DAKAR Infrastructure Polygon in Slums: Nairobi and Darkar PIPED WATER ELECTRICITY PIPED WATER ELECTRICITY 82% 84% 19% 22% PUBLIC TRANSIT 20% 25% TOILET PUBLIC TRANSIT 15% 94% TOILET 12% 12% 73% 66% GARBAGE PICKUP SEWAGE DISPOSAL GARBAGE PICKUP SEWAGE DISPOSAL NAIROBI DAKAR Source: Gulyani, 2008 INFRASTRUCTURE POLYGON: JOHANNESBURG AND LAGOS Infrastructure Polygon in Slums: Johannesburg and Lagos PIPED WATER ELECTRICITY PIPED WATER ELECTRICITY 63% 64% 98% 15% PUBLIC TRANSIT 93% 52% TOILET PUBLIC TRANSIT 61% 47% TOILET 83% 73% 82% 47% GARBAGE PICKUP SEWAGE DISPOSAL GARBAGE PICKUP SEWAGE DISPOSAL JOHANNESBURG (underserved areas) LAGOS Source: Gulyani,

6 Nairobi s Slums an Informal Rental Market Slum population estimated at 0.8 million Tenancy rate is estimated at 92% In 2004 Slum residents paid at least US$31m in rents more than city budget for investment, operations and maintenance Source: Gulyani and Talukdar, 2007 Nairobi s Slums an Informal Rental Market cont d Rents driven by unit size, quality of house (together explain about 1/3 of rent variations) Infrastructure explains about 8% Neighbourhood characteristics, location and amenities explain about 10% Perception of tenure security explains less than 1% Source: Gulyani and Talukdar,

7 Part 2: Land Market Policies and the Urban Poor Formal land markets do not reach the majority of the urban population in developing country cities. Property rights formalization does not fully bridge the gap to the formal land market Enhanced Property Values and Increased Transactions Property Rights and Taxation Revenues Property Rights and Credit 7

8 Tenure Informality is neither synonymous with Insecure Tenure nor does it exist in a vacuum 8

9 What is Street Addressing? A system that allows the identification of a building or land plot based on the identif. of a street and an entrance no. Includes installing street signs, numbering doorways, mapping, street index and data base management. Technique shifts emphasis from plot level demarcation/registration titling to occupancy units at the street level and from property rights to occupancy status. Applied today in more than 50 cities in 15 African countries with World Bank and other donor support (Benin, Burkina Faso, Cameroon, Chad, Congo, Cô te d Ivoire, Djibouti, Guinea, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Togo) Has multiple applications related to municipal management and municipal services (solid waste, road maintenance, mail, fire/ambulances, epidemic prevention, urban information systems and fiscal applications). Source: Fravacque-Vitkovic Pre-existing distortions in land and credit markets further depreciate the benefits of slum upgrading and necessitate a customized approach to sequencing upgrading interventions 9

10 Part 3: Managing Public Land When the public sector dominates land development activity, land market outcomes may be worse for the poor and for investment house price to income ratios shelter price inflation % firms citing access to land as a major constraint to their business. Public land management policies seem to matter more to land market outcomes than the extent of public land ownership 10

11 Policy discourses on public land have been lob-sided: centrist positions need to be redefined World Bank Land Projects in Africa: Learning by doing 70 s -- Sites and services and slum upgrading 80 s -- Cadastre projects 90 s -- Land development agencies and housing finance 2000 s -- Local governments and sense of urgency in view of growing urbanization Source: Fravacque-Vitkovic 11

12 World Bank Land Projects in Africa: the Future Scaled up upgrading with emphasis on infrastructure deficiencies Super-Grid/ Rights of Way for next wave of urbanization e.g. Guinea Low-tech approach to land tenure formalization: addressage etc. Central role for municipalities Source: adapted from Fravacque-Vitkovic A possible overarching framework Need to consider overall framework including land market, credit market, infrastructure bottlenecks etc. and use policy to target the specific constraint Do not suppress market indicators (prices) through land policies Rather let market indicators (prices) guide land use Redistribute through other means e.g. demand-side subsidies 12