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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 1 Overview I. Urbanisation and Land Consumption II. Evolution in the Bank’s Urban Land and Shelter Portfolio III. Land as the Binding Constraint on Urban Shelter Affordability IV. Emerging Lessons and Future Research V. Land Policy Dialogues – are we speaking the same language? 2 I. Urbanisation and Land Consumption 3 Urban Growth Management Initiative (UGMI)– a global representative sample of 120 cities Source: Sheppard 2007 Regions East Asia & the Pacific Europe Latin America & the Caribbean Northern Africa Other Developed Countries South & Central Asia Southeast Asia Sub-Saharan Africa Western Asia Population Size Class 100,000 to 528,000 528,000 to 1,490,000 1,490,000 and 4,180,000 > 4,180,001 Income (annual per Class capita GNP) < $3,000 $3,000 - $5,200 $5,200 - $17,000 > $17,000 4 Expansion of Accra, Ghana: 1985-2000 5 Source: The Dynamics of Global Expansion. World Bank 2005. 6 Source: The Dynamics of Global Expansion. World Bank 2005. 7 Source: The Dynamics of Global Expansion. World Bank 2005. Global Urban Expansion Built-up areas are increasing in developing country cities and could triple by 2030 Built-Up Area Projections, 2000-2030 (by Region) 900 800 Area ('000 Sq.Km.) 700 600 500 2000 400 2030 300 200 100 0 N.Amer. Europe LAC Africa Asia Ind Dev Region Source: The Dynamics of Global Expansion. World Bank 2005. 8 Hypotheses Tested/Supported • The data produce estimates that are consistent with our hypotheses Hypothesis Description 1. x 0 L Strongly confirmed – doubling population increases urban land cover by 44 to 77 percent. 2. x 0 y Strongly Confirmed – doubling national income increases urban land use by 46 to 52 percent 3. x 0 t Confirmed – doubling fuel cost decreases urban land use by 8 to 15 percent 4. x 0 rA Strongly confirmed – doubling the value added per hectare in agriculture decreases urban land use by 17 to 23 percent 5. x 0 w 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 9 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 10 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. 11 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. 12 Source: FEU, 2007 II. Evolution in the Bank’s Urban Land and Shelter Portfolio 13 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 14 Composition of Shelter Lending, 1997-2005 Over $8.5Billion (in 2001 dollars) approved since FY97 in over 90 projects Disaster Relief 20% Slum Upgrading 13% Sites and Services 17% Slum Upgrading Sites and Services Housing Policy Housing Finance Disaster Relief Housing Finance 31% Housing Policy 19% Source: Thirty Years of World Bank Shelter Lending. World Bank 2006. 15 Urban land Interventions per say… • Sites and Services, Land Development for Relocation • Tenure Regularisation as part of Upgrading or postconflict/ post-disaster assistance • Regulatory Audits, associated studies and Capacity Building • Town Planning and Capacity Building • Mapping/GIS/Addressage 16 III. Land as the Binding Constraint on Shelter Affordability 17 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: A. Regulation B. Public Land Management C. Tenure 18 19 Source: Dunkerley, 1983 (A)REGULATION • Zoning • Plot Sizes • Floor Area Ratio/ Floor Space Index • Development Rights • Legislation e.g. Urban Land Ceiling Act, India 20 Impact of Plot Size Regulation – Ethiopia (Source: Bertaud 2004) 21 Impact of Floor Area Ratio Regulation in Mumbai (source Bertaud and Brueckner (2005)). 22 (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) 23 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 24 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. 25 Source: Rajack, 2007 Results: House Price to Income Index Variable Log of Log of GDP total PPP Popula tion House 0.84 Price to Income Ratio (2005) 0.39 R2 and Adj R2 Extent of Public Land Extent Public Public of Land Land Public Index 3 Index 4 Domin ance of Land Develo pment N 0.28 3.08* 34 0.33 0.19 -1.62* 0.63 26 Source: Rajack, 2007 Results: Shelter Price Inflation 2000-2005 Variable Log of GDP PPP Estimate -0.17 d Shelter Price Inflation 20002005 Log of total Popul ation Exten t of Publi c Land Extent Public Land of Index 3 Public Domi nance of Land Devel opmen t Public N Land Index 4 R2 and Adj R2 0.12 0.28 0.45 -0.05 0.26 0.14 -0.61*** 41 27 Source: Rajack, 2007 Results: Proportion of Firms Citing Access to Land as a Major Constraint Variable Log of GDP PPP Log of total Popul ation % of -4.22* -0.28 Firms Citing Land Access as a Major Constrain t Exten t of Publi c Land Extent Contiguity of Index Public Domi nance of Land Dev. Public N Land Index 5 R2 and Adj R2 4.26 7.71* -1.28 0.33 0.18 -8.19 36 28 Source: Rajack, 2007 Results: Proportion of Firms Citing Access to Land as a Major Constraint Variable Log of GDP PPP Log of total Popul ation % of -4.22* -0.28 Firms Citing Land Access as a Major Constrain t Exten t of Publi c Land Extent Contiguity of Index Public Domi nance of Land Dev. Public N Land Index 5 R2 and Adj R2 4.26 7.71* -1.28 0.33 0.18 -8.19 36 29 Source: Rajack, 2007 (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 30 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 31 because the asset to be built is spatially fixed IV. Emerging Lessons and Future Research 32 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. 33 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. 34 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 35 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. 36 V. Land Policy Dialogues – Are we speaking the same language? 37 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 38 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 39