The effect of residential land market regulations on urban welfare

Abstract

Developing countries, unlike most developed ones, may have a large informal housing sector that exists outside the formal sector and outside direct regulation. At the extreme it may involve squatter settlements on invasions of land that originally might have been owned by the government or subject to title dispute. However, it may also involve illegal developments of private land, where the houses constructed do not meet regulatory standards and the properties sold may offer limited property rights over the housing and none over the land. The government may be politically unable to shut down the informal sector, and poor institutions may leave significant portions of urban land without proper title. While the informal sector avoids direct land use regulation, the local government may attempt to indirectly regulate the scope of its development by not providing it with certain public infrastructure services (such as connections to general road, water, and sewerage systems) or by threatening the tenure security of residents. © 2009 Springer Netherlands.