EMERGING LAND MARKETS IN AFRICAN CITIES.EVIDENCE AND POLICY IMPLICATIONS

Conference on New Challenges for Land Policy and Administration

February 14-15, 2008, The World Bank, Washington DC

Alain Durand-LasserveCentre National de la Recherche Scientifique – France

SEDET, University Denis Diderot, Paris

Objectives

> Identify and characterise emerging land markets in African cities

> Emerging land markets : new formal and informal land markets, or market that are developing comparatively faster others

> Analyse the policy implications of current changes in land markets

Scope

> Approach limited to land markets for housing development

> Based on observations made over the last ten years

> Reference to situations in West African cities (Benin, Burkina Faso, Mali, Senegal) and in Rwanda

Preliminary remarks

> Dynamics of land markets reflected in the growth patterns and rate of formal and informal settlements

> Continuum and interactions between formal and informal land markets

> Diversity of local situations

1. MAIN CHARACTERISTICS OF LAND MARKETS IN AFRICAN CITIES

1.1. Weakness of formal land markets

Only 10% to 30% of African urban population have access to formal land markets

1.2. Obstacles to the development of formal land markets: well known and documented

Government practices

> Sate monopoly on land > Weak land administration & inappropriate tools (LIS & cadastres, records & registration)> Government practices and governance in land administration (corruption)

Limits in access to land

> Tenure systems (dualisms, role of customary practices) hinder the expansion of formal land markets> Availability of land suitable for urban development in urban areas

Obstacles to the development of formal land markets: well known and documented

Affordability

> Urban poverty (more than 40% of urban residents live in poverty)

> Formal land development for the poor is not profitable

> Increasing gap between incomes and price of urban land

Weak housing finance system (mortgage finance)

> Access to short-term finance for developers is improving

> Long-term mortgage finance for purchasers remains a major problem

1.3. Key role of informal and customary land markets in Africa

> Difficult to draw a line between informal and customary land markets - Customary land markets sometimes recognised by the State

- Customary practices frequently similar to informal ones, but different legitimacy

> Highest rate of tenure informality compared with other regions in the world

> 50% to 90% of African urban population rely on informal land delivery systems

1.4. Why do customary/informal land markets develop?

> Failure of formal private and public sectors to provide land for housing the poor

> Informal and customary land markets: provide faster, simpler and cheaper access to land

> Limited options for the urban poor: squatting, informal/customary developments, rental

2. DRIVING FORCES THAT IMPACT ON LAND MARKETS IN WEST AFRICAN CITIES:

2.1. Informal land markets adapt to diversity of demand for urban land

> Informal developments comply more frequently with planning norms and standards (layout, rights of way, land reserved for services and infrastructure. (formal recognition and tenure regularisation easier)

> Land transfers recorded or registered (better security of tenure; evidence in case of regularisation; better compensation in case of eviction)

> Impacts on land prices

2.2. Ongoing changes in government policies regarding informal settlements

> Less repressive attitude regarding informal settlements: political agenda, role of civil society, international thinking, lessons from experience

> Better protection against evictions (ensure social peace / stability)

> Informal land markets increasingly recognised by the State

> Implementation of tenure regularisation in selected settlements, sometimes followed by citywide programmes (Senegal)

> Systematic land titling attempts (Rwanda, Tanzania): difficult to implement

> Compensation / relocation in case of eviction (WB Operational Policy statement on Involuntary Resettlement)

2.3. Changes in governments land policy and administration

> State monopoly on land is being challenged in most sub-Saharan African countries (private ownership)

> Public land allocation system is on the decline (administrative permits converted into property title after development)

> Improved governance in land administration to speed up land delivery (simplified delivery and registration procedures)

> Continuum in land rights and incremental tenure upgrading frequently integrated in government land policies

> Ongoing trends observed: informalisation/flexibility of formal practices. Government does not enforce its own rules and procedures (ex. Senegal)

2.4. Land for housing is made available through two main land delivery channels

In urban areas: redevelopment/renewal of land already informally occupied makes land available for housing development.

Three main processes:

> Evictions: less common than it used to be> Expropriation for public interest following tenure regularisation (Rwanda)> Progressive market-driven displacement processes

In peri-urban areas: public provision of land for urban development stimulates formal land markets

> Private land and housing development targeted towards MIG and HIG> Relocation of households evicted or expropriated from informal settlements, either on public or private land

The limits

Scarcity of land suitable for urban development:

> Public land reserves already allocated

> Customary land in peri-urban araes sold out / exhausted

> Land occupied by informal developments

3. EMERGING LAND MARKETS

3.1. Formal urban land marketsMainly in prime urban areas or in serviced land in suburban areas

Targeted towards medium-high and high income groups

Driven by

> Land administration more responsive to market requirements (LIS, registration procedures)

> Privatisation

> Tenure regularisation policies and programmes

> Economic growth and investments (foreign investment)

> Money transfers from immigrants (Senegal, Mali, Burkina Faso, …)

> Speculative investments in land (domestic and foreign investments)

The limits in the development of formal land markets

> Limited demand from MIG and HIG (income distribution in cities)

> Formal land and housing development for LIG not profitable

> Legal & regulatory framework not adapted to large-scale tenure regularisation programmes (Senegal)

> Weakness of housing finance systems (mortgage credit)

> Insufficient public resources to provide infrastructures and basic services in new areas open to urban development

3.2. Informal & customary land markets: two dynamics at work

Inclusive dynamics: related to formalisation of informal land developments

> Active land markets within existing informal settlements in urban and peri-urban areas (improved security of tenure, expected tenure regularisation).

> Commercial informal/customary land developments in areas suitable for urban development in peri-urban areas (less repressive attitudes of governments)

Driven by

> Demands/supports from IFIs, aid and co-operation agencies, civil society organisation and NGOs

> Changes in policy approaches regarding informal settlements (lower risks of eviction, expectation of tenure regularisation)

> New approaches of planning (attempts to streamline urban sprawl; guided land development / trunk infrastructure grid)

> Incremental provision of services

Exclusion dynamics: land price are tending to increase in both formal and informal land markets

> Inelasticity of land supply

> Domestic and foreign investments in property development induces increases in urban land prices

> Land prices increase usually faster than incomes

As a result: market mechanisms are tending to strengthen

> Polarisation of formal land markets on HIG

> Marginalisation of LIG

In informal markets

> New governments approaches to tenure regularisation reduce risks associated with tenure informality

>Impacts on land prices in settlements eligible for tenure regularisation

> Benefits to LIG but can affect the poorest

> Narrows the gap between prices on formal and on informal land markets

These dynamics

> Tend to secure land markets

> Tend to exclude the poorest from access to land

As a result: further marginalisation of land markets for the lowest income groups

> In areas not suitable for urban development

> In areas far from city centres

4. POLICY IMPLICATIONS

4.1. So far, most policies have focussed on consolidation of formal land markets

Three main orientations: finance, land and taxation

> Set up housing finance system: limited achievements because depends on macro-economic factors

Limited achievements in mobilizing domestic financial resources and channelling them to productive investments

> Improve access to land through formal procedures (tenure formalisation through systematic land titling programmes) (Tanzania)

Failure of theses policies in African cities: legal dualism, weak governance in land administration

> Provide tax incentives / exemptions (Senegal)

Impact on the development of formal land and housing development sector, but rather negative impact on informal markets

May have negative impact on informal markets (competition for access to land)

4.2. Emerging policies priorities: reducing the gap between formal and informal land markets

Two complementary approaches

Formalisation of informal land markets

> A long-term objective / process

> An incremental process

Justified because

> No other alternatives than informality for the poor

> Ensuring social peace and stability

> Expected impacts on local government revenues (taxation)

> Expected impacts on implementation of urban planning

Support the development of formal land markets

> Not rely only on tax incentives (for developers), access to credit (for developers and buyers) , provision of serviced and titled land

> If no redistributive mechanisms, attempts to formalise land markets through massive investments (MDG, MCC, Systematic land titling programmes) may increase rather than reduce inequalities in access to land

Policy objective: stimulate demand for land on formal market through > Payments of fair market price, in case of land sale following regularisation

> Payment of fair compensation in case of eviction (squatters) or expropriation (of regularised households) to facilitate their access to formal land markets.

> Provide alternative resettlement option

Dealing with market driven displacements

> Market driven-displacements that usually follow tenure regularisation must not be discouraged

> Restrictions to transfers of property rights (Senegal) are counterproductive and disadvantage the poor (land sold below its market price)

> If conditions are met, land sales following tenure regularisation can be an effective tool of wealth redistribution. They can benefit LIG more effectively than subsidies or tax incentives provided to formal developers (to produce services land and housing for the low-incomes)

4.3. Implications/requirements to promote viable land markets in the context of SSA cities

At legal level

> Appropriate legal and regulatory framework: valuation, expropriation, compensation

> Tenure regularisation (and compensations paid in case of expropriation) should not depend on compliance to planning and development norms (Kigali)

At planning level

> Guided land development (involving customary “owners”): provision of basic infrastructure; development of trunk infrastructure grid; incremental upgrading processes

>The majority of the urban population usually cannot comply with norms and standards regarding planning, development & construction

> This can be achieved only through incremental processes

In government practices regarding tenure regularisation

> Rehabilitation and generalisation of adverse possession procedures > Adopt less restrictive eligibility criteria

> Combined with improved land taxation…

> … based itself on street addressing (Comby & Gerber 2007)