Urbanization 2018 Session 1 Minikeynote Harris Selod

5th Urbanization and Poverty Reduction Research Conference
September 7, 2018 – Washington, DC
Informal land use
Harris Selod (The World Bank)

What is informal land use? What causes it?
Informal land use refers to various situations

- Unclear, contested or weak property rights (land tenure informality)
- Land accessed or developed outside formal processes (violation of zoning)
The informal land market is a response to…

- Unavailability/unaffordability of formal land and housing
- Inadequate legal framework and excessive regulations
- Costly or difficult process of formalization/regularization
2
Why informal land use matters
Informal land use exacerbates the costs of urbanization
- Insecure, inequitable and costly access to land
- Social, economic, and environmental externalities
- Pressure on infrastructure provision and costly regularization
It also weakens the benefits of agglomeration

- Land misallocation
- Suboptimal investment in land
- Missed opportunity of land taxation (needed to fund infrastructure)
There are positive aspects

- It is a constrained response to other upstream distortions (consequence, not cause)
- Informal land use provides “access to the city” to the poorest (social function)
3
The role of policy
How to address market failures (efficiency)
How to protect vulnerable groups (equity)
How to accommodate the need for land, housing and services for urban
development? A key question in the face or rapid urban expansion
(This may be THE big challenge of the 21st century, especially in SSA)
Policy implementation clashes with sensitive political economy issues

Why studying informal land use is relevant
Informal land use is only partially understood
- There is multidisciplinary research on some forms of informality (e.g., squatter
settlements)
- An economic literature is currently emerging
Main lesson: informality cannot be studied in isolation (it is part of a system)
It evolves over time and needs to be studied in a dynamic perspective
Assessing the benefits & costs of informality should inform policies
This requires a detailed understanding of informality
5
Embedding informality
in a land-use simulation model for Cape Town
(Pfeiffer, Rabe, Selod and Viguié, work in progress)
6
“Workings” of the simulation model
A basic urban economics model to guide urban planning analysis
(simulating broad trends in the city)
Supply of housing
Formal buildings (responds to real estate prices and constructions costs)
Exogenous zoning, regulations, state construction programs
Informal housing on exogenously defined zones (inf. settlements & backyarding)
Demand for housing
Trade-off between accessibility to jobs (polycentric city) and real estate prices
Local amenities
Disamenity from informal housing
The model is calibrated on existing data for a 2011 benchmark

7
Housing market pools and flows in the model
Group 1 Informal
Backyard capacity
Very low income Settlements RDP/BNG
Population growth
(<R 3,200/hh) (+5 000 per year)
47% of population
Group 2
Low income
(R 3,200-R 12,900/hh)
Backyarding
28% of population
Groups 3-4
Middle and high
income Formal private housing
(>R 12,900/hh)
25% of population
Exogenous
Endogenous
8
Housing types by income group
Data (Census 2011) Simulation
9
The spatial distribution of formal property prices
10
The spatial distribution of population in formal housing
11
Density of formal housing
Data (2011) Simulation 12

Density of informal settlements

Density of backyarding

Example of a policy simulation
We compare two land management scenarios (as proof of concept)
What would be the long-term impact of the Urban Edge that was
adopted in 2012 (but no longer binding)?
Scenario 1: Urban edge remains binding

Scenario 2: Urban edge is removed in 2018 (see MSDF)
Assess (some) impacts of the two scenarios in 2040
15
The Urban Edge reduces
Household densities in 2040 the urban footprint by 20%
Urban Edge binding Urban Edge removed in 2018 16

The Urban Edge increase
Rents in 2040 CBD rents by 10%
Urban Edge binding Urban Edge removed in 2018 17

The Urban Edge increases
Housing types in 2040 informal housing by 10%
(mainly in backyards)
18
Conclusion
A city with informal land use “behaves” differently from a fully formal city
Urban planning can (and should) account for informal land use
- Informality cannot be overlooked (not a marginal phenomenon)
- Informality interacts with other land uses (systemic perspective)
- Informality changes over time (dynamic perspective)
Models can sheds light on trade-offs and unintended consequences of

policies
19

Urbanization 2018 Session 1 Minikeynote Harris Selod

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5th Urbanization and Poverty Reduction Research Conference

September 7, 2018 – Washington, DC

Informal land use

Harris Selod (The World Bank)

Informal land use refers to various situations

The informal land market is a response to…

It also weakens the benefits of agglomeration

There are positive aspects

How to protect vulnerable groups (equity)

Policy implementation clashes with sensitive political economy issues

Assessing the benefits & costs of informality should inform policies

This requires a detailed understanding of informality

The model is calibrated on existing data for a 2011 benchmark

Data (Census 2011) Simulation

Data (2011) Simulation 12

Data (2011) Simulation 13

Data (2011) Simulation 14

Scenario 1: Urban edge remains binding

Assess (some) impacts of the two scenarios in 2040

Urban Edge binding Urban Edge removed in 2018 16

Urban Edge binding Urban Edge removed in 2018 17

Models can sheds light on trade-offs and unintended consequences of

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