How the other half lives: Urbanization and Land Markets in a Global Perspective

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How the other half lives Urbanization and Land
Markets in a Global Perspective

• Robin Rajack
• Urban Anchor
• (Finance, Economics and Urban Development
  Department
• World Bank)
• Nov 19th 2007

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Overview

1. Urbanisation and Land Consumption
2. Evolution in the Banks Urban Land and Shelter
   Portfolio
3. Land as the Binding Constraint on Urban Shelter
   Affordability
4. Emerging Lessons and Future Research
5. Land Policy Dialogues are we speaking the same
   language?

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1. Urbanisation and Land Consumption

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Urban Growth Management Initiative (UGMI) a
global representative sample of 120 cities
Source Sheppard 2007
Regions Population Size Class Income (annual per Class capita GNP)
East Asia the Pacific Europe Latin America the Caribbean Northern Africa Other Developed Countries South Central Asia Southeast Asia Sub-Saharan Africa Western Asia Source Sheppard, 2007 100,000 to 528,000 528,000 to 1,490,000 1,490,000 and 4,180,000 gt 4,180,001 lt 3,000 3,000 - 5,200 5,200 - 17,000 gt 17,000
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Expansion of Accra, Ghana 1985-2000
Source The Dynamics of Global Expansion. World
Bank 2005.
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Source The Dynamics of Global Expansion. World
Bank 2005.
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Source The Dynamics of Global Expansion. World
Bank 2005.
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Global Urban Expansion

Built-up areas are increasing in developing
country cities and could triple by 2030
Source The Dynamics of Global Expansion. World
Bank 2005.
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Hypotheses Tested/Supported

• The data produce estimates that are consistent
  with our hypotheses

Hypothesis Description
1. Strongly confirmed doubling population increases urban land cover by 44 to 77 percent.
2. Strongly Confirmed doubling national income increases urban land use by 46 to 52 percent
3. Confirmed doubling fuel cost decreases urban land use by 8 to 15 percent
4. Strongly confirmed doubling the value added per hectare in agriculture decreases urban land use by 17 to 23 percent
5. Confirmed increased accessibility to global markets increases urban land use increasing the number of direct international flights increases urban land use by 6 to 16 percent,
Source Sheppard 2007, UGMI
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Policy Implications

• Use models to determine excess urban land use
• Use models to predict required new urban land per
  year
• Using history between T1 and T2 as a guide, we
  can determine the required amount of land to make
  available for new urban development

Source Sheppard 2007, UGMI
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• Demand for housing services is growing
• More than 2/3 of new households in developing
  countries cannot access the formal housing
  market.
• Approximately 1 billion people are living in
  slums (as defined by UN-HABITAT).
• As urban population doubles between 2000 and
  2030, land consumption by cities is projected to
  triple.

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A tale of two continents Urbanisation in Latin
America and Africa

• Latin America and the Caribbean
• Urbanized continent 77 in 2005 and 81 in 2020
  25 of inhabitants live in Informal housing.
• Slums exist in all capitals and large cities.
• Poverty and exclusion associated with residence.
• Sub-Saharan Africa
• Urbanizing rapidly 35 in 2005 to 63 in 2020.
• Only 10 of city populations have access to
  formal housing.
• Harsh conditions no access roads, no water, no
  sanitation, no solid waste pick up,
  overcrowding, lack of community facilities.
• Inexistent land management obsolete land
  registration.

• Slums and poor housing conditions bring
• High child mortality greater violence and crime
  persistent discrimination in income and
  employment.

Source FEU, 2007
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II. Evolution in the Banks Urban Land and
Shelter Portfolio
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What have we done?

• Evolution of focus
• 1970-80s Focus on urban upgrading and sites and
  services (together comprised about 75 of
  portfolio)
• 1990s-00s Shift to policy-based lending and
  housing finance (together comprised 60 of
  portfolio)
• Lending Portfolio
• In the last 30 years 16 billion for shelter
  over 180 projects in over 80 countries
• Ratings/performance over 80 satisfactory

Source FEU, 2007
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Composition of Shelter Lending, 1997-2005 Over
8.5Billion (in 2001 dollars) approved since
FY97 in over 90 projects
Source Thirty Years of World Bank Shelter
Lending. World Bank 2006.
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Urban land Interventions per say

• Sites and Services, Land Development for
  Relocation
• Tenure Regularisation as part of Upgrading or
  post-conflict/ post-disaster assistance
• Regulatory Audits, associated studies and
  Capacity Building
• Town Planning and Capacity Building
• Mapping/GIS/Addressage

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• III. Land as the Binding Constraint on Shelter
  Affordability

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Review of 30 Years of Shelter Lending

• While ancillary markets are a factor, Land is the
  binding constraint to shelter affordability
• Land Market Constraints particularly acute
• Regulation
• Public Land Management
• Tenure

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Source Dunkerley, 1983
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(A)REGULATION

• Zoning
• Plot Sizes
• Floor Area Ratio/ Floor Space Index
• Development Rights
• Legislation e.g. Urban Land Ceiling Act, India

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Impact of Plot Size Regulation Ethiopia
(Source Bertaud 2004)
An Example from Addis Ababa The chart bellow
shows how standards
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Impact of Floor Area Ratio Regulation in Mumbai
(source Bertaud and Brueckner (2005)).
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(B) PUBLIC LAND MANAGEMENT

• assertion that many developing country cities are
  characterized by substantial public land assets
  which are sub-optimally managed, leading to land
  supply constraints and price distortions.
• Garba and Al-Mubaiyedh (1999)
• Deininger - PRR (2003)
• Buckley and Kalarickal (2006)

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Direct Intervention 4 ways public land
management may affect land market outcomes

• (i) withholding of land from the market
• (ii) high transactions costs
• (iii) limited functional decentralization and
• (iv) unfair competition with private sector
  developers

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Conclusions of Public Land Review

• tentative positive relationships between less
  dominant public sector involvement in land
  development activity and better land market
  outcomes.
• This result was supported by other findings that
  better and more conservative public land
  management practices (limited or no land banking
  auctioning of land and patrol of sites to detect
  encroachment) as well as decentralization are
  also correlated with better land market outcomes.
  
• These correlations were observed for indicators
  of affordability, encroachment and access and not
  for the indicator of spatial form.
• this is potentially important and suggests that
  significant direct participation by the State to
  address land market deficiencies on average may
  not yield better land market outcomes for the
  poor.

Source Rajack, 2007
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Results House Price to Income Index
Variable Log of GDP PPP Log of total Population Extent of Public Land Extent of Public Dominance of Land Development Public Land Index 3 Public Land Index 4 N R2 and Adj R2
House Price to Income Ratio (2005) 0.84 0.39 0.28 3.08 -1.62 0.63 34 0.33 0.19
Source Rajack, 2007
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Results Shelter Price Inflation 2000-2005
Variable Log of GDP PPP Log of total Population Extent of Public Land Extent of Public Dominance of Land Development Public Land Index 3 Public Land Index 4 N R2 and Adj R2
Estimated Shelter Price Inflation 2000-2005 -0.17 0.12 0.28 0.45 -0.61 -0.05 41 0.26 0.14
Source Rajack, 2007
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Results Proportion of Firms Citing Access to
Land as a Major Constraint
Variable Log of GDP PPP Log of total Population Extent of Public Land Extent of Public Dominance of Land Dev. Contiguity Index Public Land Index 5 N R2 and Adj R2
of Firms Citing Land Access as a Major Constraint -4.22 -0.28 4.26 7.71 -8.19 -1.28 36 0.33 0.18
Source Rajack, 2007
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Results Proportion of Firms Citing Access to
Land as a Major Constraint
Variable Log of GDP PPP Log of total Population Extent of Public Land Extent of Public Dominance of Land Dev. Contiguity Index Public Land Index 5 N R2 and Adj R2
of Firms Citing Land Access as a Major Constraint -4.22 -0.28 4.26 7.71 -8.19 -1.28 36 0.33 0.18
Source Rajack, 2007
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(C)TENURE

• Absence of Secure Tenure is one of the key
  amenities used in the UN-HABITAT definition of
  slums
• Wide array of emerging ways of consolidating
  informal tenure
• Street Addressage a cost-effective starting
  point

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Land Tenure Security matters to Urban Operations
because

• It affects the ease and price at which often high
  value land can be alienated to different uses and
  users
• It is a fundamental ingredient in the process of
  connecting growing urban populations with housing
  finance which is rapidly expanding in several
  parts of the world e.g. India, China, Europe
• It is an important ingredient in ensuring that
  target populations can choose to remain the
  beneficiaries of subsidised infrastructure in
  Upgrading Programs
• Access to housing assistance in reconstruction
  programs usually requires proof of a regular
  claim to land because the asset to be built is
  spatially fixed

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IV. Emerging Lessons and Future Research
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What have we learnt?

• REGULATION We now appreciate that the economic
  costs of inappropriate regulation of land markets
  including impacts on land prices and welfare
  costs to the urban poor can be very substantial.
• PUBLIC LAND The hands-off enabling approach
  that the international community has advised and
  supported has not resulted in meaningful progress
  in meeting the land supply needs of the urban
  poor.
• TENURE Improving land tenure security for the
  urban poor can be achieved through less
  conventional and less costly approaches than
  formal land titling. We now have better
  understanding of the potential benefits and
  limitations of improving land tenure security.

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Priority Areas for Research

• REGULATION Research on the implications of
  various land market distortions on urban welfare/
  quality of life, particularly for the poor and
  consequences of these distortions on the efficacy
  of donor/ government interventions
• PUBLIC LAND Research on elements of good
  practice for public land management in relation
  to infrastructure provisions, land readjustment/
  redevelopment, urban sprawl control, and slum
  policy.
• TENURE Research on the implications of the
  continuum of property claims/ rights and
  associated formalization strategies that exist in
  developing country cities and access to credit,
  municipal infrastructure and public services.

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Land Studies in the Urban Anchor

• Expanding land access through less conventional
  policy instruments
• Governance and urban land management
• Land management and natural hazards
• Public land management and land market outcomes
• Stocktaking of Urban Land Portfolio FY96-FY06
• Strengthening Citizenship through Slum Upgrading
• Land Policy Dialogues Urban and Rural Synergies

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What are the challenges?

• Data deficiency remains a major challenge to
  effectively addressing land market issues.
• Corruption in land markets is a serious threat
  especially in emerging markets.
• The biggest threat to policy success in the
  future is a public policy and governance
  framework that is too slow or too captured to
  respond to the rapid demographic growth that is
  occurring.

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V. Land Policy Dialogues Are we speaking the
same language?
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Cross-sectoral linkages

• Land conversion in the peri-urban areas
• Land Policy impact on food security issues
• Land use planning, zoning regulations, land
  readjustment
• Compensation for the land acquisition
• Institutional integration for land administration
  
• Political economy concerns
• Development priorities

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Lessons learnt

• Dialogues are not as Divergent as initially
  thought but some of the big picture being missed
• Link between Balanced Dialogues and Balanced
  Projects is weaker
• Team mixture normally occurs at the Peer review
  level rather than core team composition
• Some encouraging examples of cross-sectoral team
  and project composition e.g. Albania