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Informal Land Markets and Regularization Programs in Latin America

By Daphne Frank

A Personal Review of the Seminar at the Lincoln Institute of Policy

Over 30 participants from 12 different Latin American countries were invited by the Lincoln Institute of Land Policy in Cambridge, Massachusetts, to participate in the seminar supervised by Edesio Fernandes and Martim Smolka (supported by Laura Mullahy and Joseph McNiff), which took place from November 18-22, 2002. Participants came from different backgrounds: most of them work in public administrations at the local, intermediate, or national level. Some political representatives also joined the seminar.


The objective of the seminar was to systematize and consolidate the knowledge and understanding of topics related to informality and land ownership, and to consider this issue from various perspectives based on Latin American and international cases.


Over the course of the week, presentations and debates took place, as well as discussions and roundtables, which allowed the participants to exchange their views and experiences. Both academic and political reviews of different countries were presented, and on the last day representatives from various donor agencies (World Bank, Inter-American Development Bank, UN Habitat, Cities Alliance, HIS, German Technical Corporation GTZ) provided an overview of the main aspects that international projects focus on in this context.


The seminar was successful in encouraging initiating critical thinking and discussions about the conceptual, methodological, legal, political, and social aspects of the subject among the participants. This text summarizes some of the lessons and conclusions of the seminar.

Informal (and Formal) Land Markets

Generally speaking there are two land market systems: the formal one and the informal one. They have different characteristics but do depend on each other. In Latin America, two different processes of informal land markets can be identified: the first one can be described as "land invasion," the second one as "unauthorized land fragmentation" (lots are divided into several small plots without municipal permission). It is known that informality is not necessarily a result of poverty and that it occurs in high-income areas, too. Often it has to do with complex market rules and opportunities for profit: the informal land market generally generates higher prices than the formal market.


During the seminar participants focused on the informal land market system of the poor and did not discuss the process of the "rich" system, implying that the "rich informal land market system" is often not perceived as a problem. The reasons for this are numerous, but it is clear that rich land owners benefit from minimizing the impact of informality: they have the financial means to urbanize first and legalize the land afterwards. The legalization and regularization process is far more rapid than in the low-income areas, which often remain in an illegal status and without infrastructure and city services for years or even decades.


It seems to be widely accepted that the informal way of land "production" has several advantages, such as flexibility and the lower price of urban land that cannot be compared with the formal serviced land market. Therefore the provision of informal land, both for the high-income but also for the low-income sector, has been recognized as a valid means of getting access to land. Therefore, informality in general should not be avoided, also because for the poor it often still is the only option to gain access to land. But, while informality itself was not perceived as a problem by the participants, its negative impacts on its poor inhabitants, such as the lack of basic infrastructure and services, were underlined.


Various experiences show that the informal system should be recognized as being very much alike to the formal system, because it remains until today as the only option to provide cheap land. Of course conditions must be created to avoid or reduce its negative impacts. For example, basic urbanization standards must be implemented and inexpensive and fast access to infrastructure made possible. New rules are needed and it will take a huge effort to implement them, especially as such actions must take into account the political way of thinking and the decision-making process of policy makers. The implementation of some sort of cooperation between the two land markets would bring new opportunities, which have not yet been fully explored and could, perhaps, permit tapping the advantages of both systems.


An even more complex issue is the question of international land markets: what happens when land- or housing-owners are migrating or even live in another country and are buying land in their home country. Very little is known about the impact this has on local informal land markets.

Regularization/Upgrading Programs

During the seminar participants also discussed the advantages and drawbacks of legalization and regularization program. Do these cause more problems than they solve?


Besides the provision of infrastructure, the initial aim of such programs is to provide secure tenure by individual land titling. However, experiences so far seem to indicate that providing individual land titles does not necessarily lead to a socio-spatial integration within the informal settlements. As land titling often leads to an increase in prices, poor inhabitants are forced to move and new informal settlements arise elsewhere.


Individual land titles are not the only option to provide security for to inhabitants of informal settlements. Innovative examples of legalization of land tenure from different continents, such as the "anticretico" tenure system in Bolivia or the community land trusts in Kenya, were presented and discussed during the seminar. (For more information see Geoffrey Payne Associates: "Land Rites, Innovative approaches to secure tenure for the urban poor," London, June 2001.)


However, the majority of the participants were not convinced that providing new forms of land titles would result in equal opportunities for the inhabitants. Rather, participants believed that it would lead to two different kinds of legal property systems: one for the poor and one for the rich. The prevailing view was that the poor have the right to be treated equally with an individual land title. They also believed that the alternative land title system will not necessarily grant the same security as an individual land title, it would only be a temporary solution. This question is still to be discussed in the future: How should secure tenure for poor inhabitants be provided or improved and what conditions are required?


During the seminar, participants also discussed whether regularization programs overall so far have been a success or a failure. The general consensus was that it was not clear whether they can help to reduce poverty, particularly it is not clear yet, if land titling does help the inhabitants to borrow on mortgages. Participants were convinced that the roots of poverty lie much deeper and cannot be addressed with only regularization programs. Such programs are "curative politics," and while they are being implemented new informal land production may occur elsewhere. The roots of the problem are to be found not only in the availability and affordability of land and housing, but also in the political will for change. So far it has been established that for the regularization programs to have a positive impact on poverty reduction, they must be combined with a political process enabling the key actors to influence the framing conditions, which currently prevent the integration of informal settlements. A political process is needed to create effective reforms and laws that will lead to urban politics that better serve the low-income segments of the population. The negative impacts of informal settlements relate directly to the price of the land and there is still much to be learned about how prices evolve in informal land markets. A recent study from Brazil has already revealed that the price system of informal land markets follows a different logic than that of formal markets.


Many questions still have incomplete answers: How can affordable housing and access to secure land be provided? How can land be urbanized and equipped with infrastructure and basic services without increasing costs unproportionally? A deeper understanding of the "rules" of the informal game is required.


As a general conclusion, it can be noted that the informal and formal markets can only function well as two parts of a system and not in competition with each other. This can be achieved through the participation of the private sector and civil society and with the support of the local government. The future will show whether or not it will be possible to create a dialogue between informal and formal land market systems, leading to a political process of changing the conditions towards a better integration of informal settlements. If this happens it will be an important step towards good governance. Learning from other experiences is one part of the solution, developing the right local solution in every country is the other part. The seminar at the Lincoln Institute of Land Policy was successful in initiating further discussion but both organizers and participants agreed that the difficult part of this process has just begun.

Further Information

Daphne Frank has worked as technical advisor at the German Technical Cooperation (GTZ) in Quito, Ecuador since December 2000. In March 2003 she transferred to the University of Darmstadt in Germany to work as a Research Assistant in Urban Development for Developing Countries. She graduated with master's degrees in Architecture and Urban Planning from the University in Kassel, Germany, in 1996. Daphne can be reached at daphnefrank@hotmail.com.