Discussion paper for Workshop on 'Globalisation, Climate Change and Urban
Governance: Balancing the Scales for Both Efficient and Pro-Poor Urban Futures –
The Case of Brazil and the UK'.
Oxford 9-11 March 2011
Draft Copy – Do not quote
Globalisation and land markets: the scope for pro-poor development
Ramin Keivani – OISD , OBU
This paper aims to develop a conceptual framework for examining the impact of
economic globalisations and restructuring on land use, institutional context and
development of property markets and the way this influences access to, and the rights
over land, by low income groups with a particular focus on Sao Paulo.
Globalisation and the new city economy
If we are to distinguish globalisation from internationalisation we may identify it as a
process where separate national economies regulated by national governments are largely
being superseded by, and integrated in to, a single global economy that is largely
regulated by markets (Harris, 2001).
There has, therefore, been a shift of the core geographical scale for the system of
regulation of economy from nation states to global markets on the one hand and local
(urban or regional) governments and the supra-national institutions, on the other. This of
course does not imply dismantling of the nation state apparatus and regulatory powers.
Indeed, until the stage where the above-mentioned supra-national institutions take over
the role of national governments completely nation states are essential to ensuring
“spatial congruence between the socio-political infrastructures supporting accumulation
and the distribution of its benefits or losses” (Goodwin, 1996, p1403). In addition many
nation states remain to be convinced that the gains of globalisation in terms of rapid
economic growth in fact justify relative loss of their authority over economic activities.
This is particularly in the current global economic conditions in light of the financial
crisis or the recent problems in food production that encourage major tendencies towards
protectionism and reversing of opening up policies. As a result global economic
integration may be identified as a rather partial process with endless disputes and
resistance in different fields particularly labour market regulations.
In economic terms major cities and particularly those more closely integrated in the
global economy are characterized as highly concentrated spaces bringing together in
different configurations a multitude of command and control, services, cultural, media,
information and tourist activities and industries (Graham, 1999). The network dynamics
at the heart of the social relations underpinning them and the reflexive nature of many of
these function has meant that such cities are at the same time essentially spaces of flows
(Castells, 1996, 2000). They rely on generation, control, processing and movement of
information and knowledge at both local and global levels to enable the efficient
functioning of complex trans-national networks of operation at the city level. Harris
(2001) similarly emphasises the role of cities as junctions of flows in the global economy
not only in terms of information and ideas but also of goods, people and finance.
Focusing on these flows, particularly interconnections between advanced producer
services, Pain (2009) argues that the world city network can be better understood through
the “hinterworlds of cities in which power is vested in, and flows through, network
organizations and is not a settled attribute of cities as places”.
The new phase of international division of labour occurring during this period has, therefore,
created a global network of cities with different but inter-related and complementary roles
and functions (Sassen, 2001, 1994). According to this account a few global world cities,
such as New York and London operate as the nerve centres of the globalisation process with
the higher function of accommodating the key structures of the world economy at the global
level. This is largely in terms of central command and control functions, major transport
hubs, financial and other advanced producer services, research and development activities
and knowledge based and information and media production activities with a concomitant
de-industrialisation process. There are at the same time other emerging world cities such as
Hong Kong and Singapore that are increasingly going through a similar process of deindustrialisation and a shift to central command, advanced producer service and research &
development activities. Harris (2001) for example illustrates how Hong Kong has become a
global centre for managing the logistical needs of global manufacturing drawing on a vast
network of contacts to ensure that all elements of production for different goods are
procured and supplied at the cheapest possible cost to the final producer. Similarly Pain
(2009) shows that in terms of global connectivity of advanced producer services Hong Kong
and Singapore have now risen to 3rd and 5th positions respectively above Paris and Tokyo.
As such the global city network does not imply an inherent superiority of some cities or
locations over others. Rather the opening up of national economies and the globalisation
process has led to greater specialisation and a new division of labour across the globe. In this
process certain locations with the right mix of infrastructural and human resource capacities
have been able to position themselves as the central nodes for managing global economic
flows. This is perhaps best illustrated by Pain (2009) in terms of shifting connectivity of
cities and loss of domination of Tokyo as the pre-eminent global city in South East Asia.
Thereby emphasizing a dynamic process where such locations must strive to maintain their
positions and others strive to improve and enhance their function in the new international
division of labour through investments in key infrastructures as well as human resources and
supportive institutional environments. Cities, therefore, are engaged in competitive
cooperation. On the one hand relying on complementary functions between different
locations for facilitating global economic activity and yet striving to play a bigger and
higher value role in terms of their own individual function.
This contradictory process is also reflected in simultaneous centralisation and dispersal
tendencies that can be regarded as a central proposition to the globalisation process (Rossi,
et al, 2007). In practice centralisation on the one hand leads to creation of central nodes or
gateway cities and dispersion on the other leads to bypassing of the main cities and
integration of other cities and we would argue even smaller towns or villages in to the
broader global commodity production chain.
According to Rossi et al (2007) this simultaneous tendency for concentration and dispersion
reconciles conflicting accounts of economic geography in Brazil that on the hand highlight
the verticalisation of the Brazilian economy by national and foreign firms centred on Sao
Paulo and on the other point to the development of new dynamic centres away from the
original economic power houses to areas such as Manaus, Brasilia-Goiania and Fortaleza.
However, while this may be the case their research on transactional links in eight
Brazilian cities covering eighteen firms and 218 transactions highlights the dominant role
of Sao Paulo and Rio de Janeiro with 52% of decisions and 62% of service provisions
made in these two cities. This is supported by the fact that respectively 86% and 72% of
transactions for service provision are carried out within these cities themselves.
Looking more closely at Sao Paulo we note that at the state level it accounts for 34% of the
national GDP (UN-Habitat, 2010). However, importantly and in line with changing global
imperatives what drives the city’s economy now is the service and finance sectors that
account for 47.2% of the state GDP followed by the industrial sector at 46.3%. This is also
reflected in the domination of the city as the international regional HQ and financial
service centre for the Mercosur region with one survey indicating that 39% of the largest
transnational corporations are using it as their regional base (Schiffer, 2002). Further
evidence is provided by the 60% share of Brazil in commercial office investment activity
in all of Latin America (RREEF, 2010). Importantly advanced producer services are not
only important as higher value added economic sectors in their own right but they are
also important indicators of the level of global integration in general (Rossi, et al, 2007).
Accordingly Sao Paulo is placed in 20th position in terms of it global connectivity of
selected advanced producer services ahead of cities such as Taipie and Amsterdam (Pain,
2009). It is, therefore, no surprise to see the rapid growth of the São Paulo stock
exchange, Bovespa rising by 93% in 2007 as it absorbed investors from other parts of the
world that were fleeing the economic recession and its continuing buoyant growth in
subsequent years (UN-Habitat, 2010). Having said this, however, an important
observation must be made. With a 46% share of GDP the industrial sector has maintained
a critical role in the city’s economy and employment. As such Sao Paulo is far from a
definitive transition from manufacturing to services. Therefore the degree to which the
city can be considered as a global city in terms of its structural shift to higher value
functions remains open to debate (UN-Habitat, 2010).
Impact on urban development and low income groups
Globalisation processes and responses to them have important consequences for urban
development. Rapid economic growth entails major development activities and economic
restructuring as cities strive to attract international investment and displaced production
and/or develop their global function towards higher value added economic sectors
(Sassen 2001 and Keivani and Mattingly, 2007). As such there has been a realignment of
spatial development in line with the requirements of global capital. These include dealing
with spatial after effects of large scale economic restructuring (e.g., major dereliction of
previously industrial and port areas) as well as major urban development, regeneration and
infrastructure projects initiated by both the public and private sectors that are aimed at
raising city competitiveness but have unforeseen and/or unaccounted externalities. They
often entail conflicting claims to land and city resources between local inhabitants and
actual or perceived requirements of global capital. They can occur both in established or
peri-urban and peripheral city areas.
Harris (2001) for example notes that by the end of 1990s employment in the textile
industry in central Mumbai had reduced from 250,000 to only 50,000. However, during
the same period 150,000 jobs had been created in the ‘power loom’ industry in the
periphery of the city but which was largely informal and unrecorded. Such readjustment
would have major spatial impact both in the central in terms of redevelopment of former
industrial areas and in the periphery where the new activities are shifting. At the same
time we have witnessed the transformation of the city in to the financial capital of India
with major redevelopment of the city centre and prime real estate prices that rival that of
Manhattan (Vaswani, 2007). Yet ambitious plans for redevelopment of the city spurred
on by the shortage of office space for expansion of financial and advanced producer
services is now threatening Dharavi as the world’s most famous and second largest
Asian, informal settlement with over 500,000 population and a major source of informal
livelihoods through home-based and SME activities with an estimated annual turnover of
about $600 million (Clinton, 2010).
Mumbai’s story and development trajectory through large scale urban regeneration is not
unique. In fact the same story is being repeated to different degrees and in different forms
in many cities around the world particularly those that are emerging as world business
and industrial nodes. See for example Cao and Keivani (2007) for major cities in China,
Lungo (2002) for Montevedio, Firman (1998) for Jakarta, Keivani and Mattingly (2007)
and Benjamin (2000, 2004) for Bangalore, Shatkin (2004) and Booncheun (2002) for
Bangkok and Shatkin (2000) for Manila. In many ways these redevelopments can be
regarded as an adaptation of property-led urban development strategies (with a firm focus
on physical redevelopment) that were applied in the 1980s and 1990s particularly in UK
and USA and later on across Europe (Swyngedouw et al, 2002; Fainstein, 1995 and
Davoudi, Healey, 1995). This point is also acknowledged by Orueta and Fainstein (2008)
who argue that while many of the major redevelopment projects in cities of the South
physically resemble those in the North they have radically different social, economic and
institutional contexts. They pose the hypothesis that while such developments in the cities
of the North can be seen as attempts to regain their competitive position, in major cities
of the South these projects are more a manifestation of their rise to power rather than
defensive actions in the face of global threats to their positions. The degree to which such
a proposition is true in the context of Brazil remains to be seen. In fact we would argue
that while there are certainly elements of grandstanding that apply to these projects
particularly in cities of emerging powers they are also dealing with real challenges of
economic and spatial restructuring (including urban decay and inadequate space for
satisfying requirements of international capital) on the one hand and rapid growth and
urbanization on the other, both of which are hastened by economic globalisation. In
addition as in the northern cities civic boosterism for encouraging growth and attracting
inward and global investment also plays a major role in public funding and support for
such grand projects be it in Dubai or Rio. This is to a large degree influenced by specific
institutional conditions. In Chinese cities, for example, the wide adoption of property-led
urban development is partly explained by the specific institutional context of large scale
public land ownership and subsequent sale of land use rights for local economic
development and revenue generation for local authorities (Cao and Keivani,
forthcoming).
New globally induced development projects necessarily entail a rapid pace of
construction and expansion in to new areas. In the commercial sector, for example, many
existing office buildings in traditional CBDs in developing countries lack the necessary
specifications or developers face dilapidated conditions and/or constrictions due to
planning regulation (Keivani and Mattingly, 2007). At the same time prohibitive land
costs and complications surrounding existing tenure and land ownership rights in central
areas can hinder effective and profitable market response to the new demand conditions
resulting in expansion to peripheral areas. De Magalhães (1998) noted that in the case of
São Paulo, these factors contributed to the rapid emergence of new off-centre business
districts during the second half of the 1980s and 1990s. Indeed, even in spite of all the
commercial developments that have been undertaken in Sao Paulo recent estimates
indicate that around 45% of office buildings in the city still lack air conditioning as a
basic requirement of class A international office space (RREEF, 2010). The same figure
for Rio is around 40%. Thereby indicating continued pressure for redevelopment,
refurbishment and possibly expansion of CBDs particularly as the global integration of
Brazil and demand of international investors and occupiers for class A office space
intensifies.
Sao Paulo, however, is experiencing its most rapid growth in the peripheral areas of the
greater metropolitan region. Between 1991 and 2000 the share of population in the periurban areas of the metropolitan region rose from 19% to 30% which is equivalent to an
annual rate of increase of 8.1% (Torres, et al, 2007). At the same time we should note an
overall reduction in population growth rate for the metropolitan area from 4.5 to 1.5%
and a negative growth rate of minus 2.5% a year in central areas The peri-urban areas
also show the worst socio-economic indicators with average family income at 1.7
minimum wage which is five times lower than average family income in the central city
areas.
These areas are encountering rapid and dynamic urban growth that often leads to new
patterns of agglomeration with their own unique social and economic challenges,
opportunities and developmental priorities. They can encompass a mixture of old rural,
peri-urban, informal and new urban fabric. They can include agricultural activities
interspersed with large industrial developments and smaller scale workshops. They can
house new and often walled housing estates for the middle and higher income groups in
close proximity to large scale formal or informal and spontaneous settlements of the
poorer households and established rural communities. In Sao Paulo, however, by and
large the peripheral and peri-urban areas are dominated by self built low income housing
with figures indicating that during the 1990s formal private companies were only
responsible for housing 23% of the additional 960,000 households in the metropolitan
area as a whole (Torres et al, 2007).
Nevertheless, whether in the periphery or in the centre increasing pressures from the
formal real estate market or major infrastructure projects that are often large scale and
accentuated by global economic pressures impact on low income communities with
precarious tenure rights and/or limited income generating opportunities. They can
aggravate pre-existing social inequalities and lead to major social tensions particularly as
result of forced evictions, inadequate compensation and sidelining of local requirements
particularly access to land and housing.
In Sao Paulo we are faced with major pre-existing social divides that affects both the
main city and peripheral areas in the greater metropolitan region. UN-Habitat (2010)
notes that up to 1940 Sao Paulo was a dense city with little outward expansion and where
80% of the population lived in rented and overcrowded accommodation or corticos. This
situation began to change after the 1942 rent freeze and gradual opening up of more
peripheral areas by developers allowing the prospect of cheap but unregulated subdivided
land for home ownership by lower income groups. Nevertheless, up to early 1980s
corticos were the dominant form of low income and slum housing in the city. At the same
time the metropolitan region was formed through the conurbation of 38 municipalities
that formed a continuous urban fabric of largely unplanned and un-serviced but legal and
technically urban area.
Following the recession of the 1980s and a 46% decrease in minimum wages the low
income groups increasingly turned to organized invasion of land in both the main city
limits and its periphery resulting in 1,600 favelas. In 1980 just 5.2% of the city’s
population lived on invaded land, in 1993 this had risen to about 20% and up to 43% in
the peripheral and peri-urban areas (Ibid and torres et al, 2007). Importantly, however, it
is not just illegal favelas and corticos that are in a precarious situation. An estimated 70
percent of land in Sao Paulo is covered in substandard housing with some studies
suggesting that 57% of the MSP 10.5 million population are living in precarious
neighbourhoods on the outskirts of the planned core of the city. Nevertheless, it is the
population in favelas and corticos that are most prone to overcrowding and environmental
hazards with 92% only having one or two bedrooms and 7.6% of the homes (or some
800,000 people) being prone to flooding. The same figure for those living outside of
these areas are respectively 75% and 4.4% (UN-Habitat, 2010). Nevertheless, the
difference between the two is not as great as one may have initially imagined. This is
partly due to slum/favela upgrading programmes particularly during the past 10 years or
so and also the high number of substandard and vulnerable (also largely self built)
housing outside the favelas (Ibid and Torres, et al, 2007). Inevitably these areas require
major public investment in infrastructure and transport services. However, one of the
main barriers to this is the high level of illegality of the occupation of land since diverse
institutional challenges must be overcome in order to facilitate proper provision of
infrastructure and services in such locations. For one thing irregularity is often used to
justify lack or limited provision but even if there is political will to extend services the
state must ensure that its investment is not appropriated at some future date by the “legal”
owners of the land where it is situated (Ibid). Therefore, their involvement will require
completion of complex legal procedures to ensure public appropriation of private land or
finding alternative appropriate land close to the illegal settlements for the site of publicly
provided urban services and infrastructure.
At the same time there has been a partial abandonment of the central areas as many of the
wealthier families have opted to move to new exclusive neighbourhoods and some of the
middle classes opted to buy their own plot rather than rent in the main city areas resulting
in a proliferation of abandoned buildings in the city. Overall this has led to a negative
growth rate in central areas equivalent to -2.1% per annum between 1991 and 2000
(Torres, et al, 2007). In 2007 there was estimated to be about 620,000 abandoned
buildings in the city which was more than the estimated housing deficit in the MRSP at
about 612,000 units (UN-Habitat, 2010). Eighty one percent of the housing deficit,
however, is among the poorest groups with up to 3 Minimum Salary that have the least
ability in the market and it is also occurring largely in the periphery where there is the
largest urban population growth at present.
This shifting spatial geography has other major social and environmental impacts. On the
one hand it has brought a distinct form of segregated social mix with walled high income
neighbourhoods or enclaves among or in very close proximity to poor favelas whereby
the former also creates service jobs for the a large population of the latter. In the case of
Paraisopolis the second largest favela in Sao Paulo it is estimated that 80% of the
economically active population work in the nearby up market neighbourhood of
Morumbi (Ibid).
Secondly, however, it has also brought in to conflict real estate developers against
favelados. Forced evictions by court order have been continuing to date particularly in
favelas located in the more valuable central and commercial areas. The most famous
example of this is perhaps the case of Jardim edite favela that was situated next to the
new CBD centre in the South West quadrant of the city. This favela that was itself the
last of 68 different informal settlements in the area was finally demolished in 2009
despite its designation as a Zone of Special Social Interest that should have in theory
protected it and allowed slum upgrading (UN-Habitat, 2010).. The main reason for this is
the construction of major avenues to better service the new CBD and also real estate
speculation on a land that was originally around US$100 US per square meter in the early
1980s and is now worth over US$4000 as a result of the developments that have occurred
in the area (Ibid). The case also highlights the complexities of inclusive development and
conflicting claims on land with economic and market forces on the one hand and
constitutional rights and civil movements on the other. What is important here is that in
spite of the demolitions the remaining residents have managed to mobilize and assert
their rights under the City Statute and continue to live in the rubble. Ultimately with the
support of the local public defender and civil organisations such as Uniao dos
Movimentos de Moradia (UMM) have filed a civil action against the city forcing the
municipality to pledge to build replacement housing on the same site with 240 units, a
nursery and a garden for a small fraction of the original residents who did not take any of
the options initially offered for their removal.
At the same time while industry is still an important driver of the city’s economy there
has been a gradual de-industrialisation process with a number of large factories shifting
to other parts of Brazil. This has left behind a large number of brown field sites both in
the old industrial belts and in the more peripheral locations. Some of these have now been
converted to commercial uses, e.g., hypermarket, but many other remain derelict and in
need of redevelopment. This has created highly visible pockets of urban decay that has
been accentuated in the centre with the high number of abandoned buildings and old
markets where attempts have been made for civic boosterism projects with initial public
investment for redevelopment of key buildings and areas as part of efforts for attracting
private investment for large scale regeneration of these neighbourhoods. A prime
example of this is the conversion of one of Sao Paulo’s abandoned main railway stations
(Estação Ferroviaria Júlio Prestes) in to a major concert hall (Sala Sao Paulo) in 1999 as
part of a major urban regeneration effort in the centre of the city.
Finally, an important negative consequence of the urban sprawl in Sao Paulo is
environmental degradation and deforestation of the Atlantic Rainforest Biosphere
Reserve. In the 10 year period between 1991 and 2000 the forest cover in the MRSP
region has reduced from 34.6% to 32.8% (Torres et al, 2007). While these figures tell a
relatively positive story in terms of the slow rate of deforestation, they are nevertheless
indicative of continuing expansion on to protected land. In addition the rate of highest
population growth is occurring in the peripheral areas where there is the highest level of
forest cover although there is not a direct correlation between high population growth and
deforestation in all areas (Ibid). At the same time there is unregulated expansion of
development on to protected Water Source Preservation areas. There are over 1.8 million
people living in such areas in 17 out of 39 municipalities where over 50% of their land is
protected by the relevant regulation on water sources protection.
In the view of many commentators on Sao Paulo the main driver of urban sprawl and the
distinct spatial geography of the city is the dynamics of the formal property market,
particularly the speculative high land and housing prices in the centre, concentration of
the formal housing market on middle and high income groups and abandonment
(mothballing) of large numbers of land and buildings in the centre that has pushed low
income groups increasingly to the periphery and peri-urban areas (Torres et al, 2007; UNHabitat, 2010). In our view these trends are accentuated by global drivers that are likely
to increase with the rapid global economic integration in Brazil and the role of Sao Paulo
as the main gateway city in to the country. Indeed evidence from China, Eastern Europe
and India suggests that with increasing global economic success there is both a derived
and direct impact on the real estate markets. The former addresses spatial consequences
of economic restructuring, e.g., increased demand for high quality office space,
development of leisure and knowledge based economies, regeneration of abandoned
industrial neighbourhoods as well as meeting increased housing requirements of new
middle classes and low income workers. The latter is increased direct demand for real
estate investment from both local and international investors. In Chinese cities for
example a major driver for local economic development is the investment demand of the
local population in housing developments that has in some cases created major and
unsustainable speculative bubbles leading to large scale bankruptcies at individual,
corporate and city levels (Cao and Keivani, 2007). At the same time with the opening up
of local real estate markets international funds and speculative investors become active
particularly in the commercial .real estate but also housing markets. In Brazil this is
already evident not only by the presence of international firms but also setting up of
specialist investment funds by specialist companies, e.g., DTZ corporate finance, that
specialize in acquiring minority stakes in residential, office and industrial projects in
order to facilitate greater international investment. All this has a knock on effect on the
operation of the land market at the local level that in the absence of appropriate
governance mechanisms can lean to increased marginalization of the lower income
groups from access to land and housing.
Towards an analytical framework
The degree to which low income groups can utilize the operation of land markets to their
own benefit largely depends on the institutional processes surrounding land tenure,
development, use and exchange. To this must be added actions and interactions of local,
national and international actors and ability of local inhabitants and small firms in
devising appropriate strategies for benefitting from the commercialisation process and
property market functions. In essence, therefore, it is the form and process of urban
governance in terms of facilitating and regulating urban development (including access to
and using land resources) and the function of the property market (both formal and
informal) as the implementation mechanism for physical development that are the critical
issues of consideration.
Governance is commonly defined as the relationship between the civil society and the
state and the resultant interaction and power relations in determining policy and
allocating resources (McCarney et al, 1994). It is therefore broader than government and
ultimately about exercise of power and associated networks for achieving stated
objectives (Rakodi, 2004). Drawing on an extensive 10 city research in developing
countries Devas (2001) argues that it is in the conjuncture of three key elements that
urban governance will work to the benefit of the poor on a more sustainable basis. These
are 1) a more inclusive political process, 2) greater capacity of city government to
respond to the needs of the poor and 3) greater pressure from civil society. These factors
are included in the assessment of UN-Habitat (2010) on conditions necessary for creating
an inclusive city. More specifically at municipal level they note the importance of four
elements in terms of a) facilitating the use of new institutions and strengthening existing
ones, b) building new multi-level relations and alliances for reducing poverty, c)
demonstrating sustained vision to promote inclusiveness and d) ensure redistribution of
opportunities.
In the context of Sao Paulo the state government and municipalities have undertaken
major steps to improve the housing conditions of the slum dwellers in the past 30 years or
so and particularly since the beginning of 1990s. For example in 1986 the State level
housing development company CDHU was building houses in only 3% of the city’s
municipalities. However, by 2008 this had expanded to 96% of the state’s administrative
areas making it one of the largest housing development companies in the world with an
annual budget of US$750 million. Since its inception in 1949 CDHU has built over
440,000 housing units benefitting 2 million people in 617 municipalities in the State of
Sao Paulo (Ibid). Similarly the city municipal housing authority (SEHAB) has also
increased its activities particularly for slum upgrading since 2001. This has included
creating a specialist database for recording housing indicators in 1,635 favelas, 1,942
corticos and 1,120 illegal plot allotments which has proved an important tool for
prioritizing municipal level interventions (Ibid). Of particular importance has been
national level policies that have allowed for more secure occupation of land and provided
greater municipal capacity for increasing the social function of property and extracting
social value from land development. The two critical policies are the Usucapia Urbano
(adverse possession) and the City Statute. The former establishes title of ownership to
residents after five years continuous residence of informal or illegal land and the latter
has instituted participatory planning particularly in all housing policy processes and
enables more direct public regulation of the land market and urban development
including the innovative clause for giving option to municipalities for establishing Zones
of Special Social Interest (ZEIS). In addition there are also national level social housing
schemes such as Fundo Nacional de Habitacao de Interesse Social (FNHIS) that allows
subsidies to be allocated on a much larger scale and in a more consistent and long term
basis (Valenca, 2010).
However, it is not sufficient to have good laws. What is also important is the capacity and
mechanisms for their effective implementation. As such the role of public leadership with
the political will to both interoduce and implement innovative and pro-poor legislation
becomes critical. In Sao Paulo, for example, much is owed to the administration of
Mayor Marta Suplicy (2001-2004) that was committed to improving the housing situation
of the low income groups in both centre and the periphery (UN-Habitat, 2010). During
this four year period the administration instituted a raft of pro-poor policies including
increased decentralization of decisions making through creation of 31 municipal
government subunits and maximising public participation on housing matters. Creating
the informal settlement integration programme (Bairro Legal) that has enabled the MSP
Secretariat for Housing to develop sub-programmes directly related to legalizing informal
housing and supporting people who live in them. In quantitative terms this led to 23,000
new low income housing units, 45,000 individual land titles in 160 favelas and upgrading
and regularising irregular settlements benefitting 42,000 families by the end of 2004
(Ibid). Other initiatives included legalizing the situation of public housing residents
through assistance for legally registering their apartments (which had been paid for) and
cancelling outstanding debts. In addition the administration used the provisions of the
Statute of the City to also define nearly1000 Zones of Special Social Interest in the
municipal master plan. This covered nearly 14,000 hectares within MSP. Eighty five
percent of these were corticos, favelas and popular irregular settlements in the periphery
but 11% were either empty/underused areas or corticos in the city centre, both of which
were aimed at promoting low income housing. Another 3% were environmentally
protected areas (Ibid).
While the pace of low income housing interventions have slackened since the change of
administration particularly in central areas the integration and upgrading programmes
have continued in the periphery. This, however, is seen by some critics as perpetuating
the danger of social spatial segregation with the centre being increasingly emptied of
lower income groups. In addition other critics have noted that while the participatory
approach is a significant social tool, its universal application, for example, in the
implementation of ZEIS process means that representatives of the real estate lobby and
the higher income groups are in many cases able to outmaneuver the representatives of
the low income groups as the case of the Jardim edite favela illustrated earlier.
Therefore, we go back, to the previous debate on the effectiveness of implementation and
evaluation of laws and policies for maximizing their pro-poor impact. Otherwise in a
contested terrain the political and financial power of the old elite and vested (real estate)
interest groups means that they will have the capacity to dominate and/or divert the
implementation process to their own benefits. In the words of UN-Habitat (2010) “an
inclusive city needs to do more than simply adhere to constitutional or national laws
asserting rights, responsibilities and freedoms – it must create the necessary conditions to
transform all these rights in to practice.” This however, is a highly contentious, complex
and politically difficult process. Requiring multilevel stakeholder interventions,
collaborations and compromises that are ultimately manifested in the form and processes
of urban governance.
There are, however, different discourses on governance in relation to urban development.
A succinct and useful summary is given by Brownil (2010) in the context of London
Docklands. Here she notes differences between those viewing governance as an extension
of the neo-liberal agenda for strengthening market-led urbanization and driving urban
competitiveness as part of broader city global integration (Swyngedouw et al, 2002; and
Moulaert et al, 2003 cited in Brownil 2010) to those who adopt a more relational view
which sees possibilities for building alternative responses to the processes of
globalization and redefining the relationship between the local and the global (Massey,
2007; Amin, 2000 both cited in Brownil 2010). The former, therefore, may be said to be
incapable of ‘squaring the circle’ between competitiveness and equity, the latter on the
other hand takes a more pragmatic view based on institutional context, and agency
dynamics and power relations. In quoting Newman (2001) she distinguishes different
forms of governance (hierarchical, networked and participatory forms) all of which can
co-exist at the same time producing a dynamic where shifts in balance between different
discourses can provide the possibility for new and varied forms of governance emerging
which are able to be more responsive and flexible in the face of current global challenges.
The debate on governance links directly to developing an institutional perspective to the
study of land markets that brings together both economic and social drivers of property
development. An important consideration here is the framework offered by the New
Institutional Economics (NIE) that was developed by Coase (1937, 1960) and
subsequently by North (1981, 1990), Williamson(1994) and others (all cited in Nee 2003
and Mooya and Cloete, 2007). There are different variations of NIE but in essence and in
contrast to neo-classical economics it explicitly recognizes the impact of transaction costs
and institutional constraints on economic activity and market development. The former
refers to the cost of negotiating, securing and completing transactions in a market
economy. A critically important issue here relates to information problems and can
include costs of searching for information (e.g., price, quality, rights and ownership,
identifying buyers and sellers); making, monitoring and enforcing contracts; and
protecting property rights (Eggertsson, 1990 cited in Mooya and Cloete, 2007). The
latter, on the other hand, are not just formal and informal rules, regulations and customs
that determine the incentives, define the rules and reduce uncertainties and friction (i.e.,
transaction costs) for economic activity, but can be defined as “social structures which
provide a conduit for collective action by facilitating and organizing the interests of
actors and enforcing principal agent relationships“(Nee, 2003, p23). These can evolve
spontaneously as a result of individual or group action or by design through regulation.
However, while accepting their general impact for facilitating economic activity, they
also reflect influence and power of interest groups and reduce transaction costs for those
groups and not others (Keogh and D’arcy, 1999 cited in Mooya and Cloete, 2007). This
means that “institutional change involves not simply remaking the formal rules [or for
that matter cultural shifts] but fundamentally it requires the realignment of interests,
norms and power“(Nee, 2003 p23).
This political economy view of institutions takes us back to the issue of governance and
connects with more sociological perspectives that have emphasized the importance of
structure and agency relationships to better explain the behaviour of the property market
and spatial development. An early but highly influential model was offered by Healey
and Barret (1990) and Healey (1991) whereby the key to understanding the processes
involved in land and property development is identified as the relationship between the
interests, strategies and actions of agents involved in land development and the socioeconomic and political framework including rights and values regarding land, property,
buildings and the environment which governs or structures their decisions. There is,
therefore, a need to understand the 'relation between structure, in terms of what drives the
development process and produces distinctive patterns in particular periods, and agency, in
terms of the way individual agents develop and pursue their strategies' (Healey and
Barret,1990, p90). The relationship between the structure and agency, however, cannot be
seen as static or one sided. Rather such a relationship must be regarded as dialectical and
dynamic. Whereby the agents are not just passive rule governed players within the structure
without any influence on its form and extent, instead they are actively and continuously
involved in reshaping the structure through individual and organised pressure and activity in
pursuit of their interests which is itself affected and shaped by the external pressures put
upon them by the structure. The production of space therefore “is captured best as the
complex articulation between structure and agency, which is always in motion” (Gottdeiner,
1994, cited in Guy and Henneberry, 2000). However what is important here is to focus on
the duality of the model without dichotomizing or prioritizing either side of the equation
“whereby one layer of agency can become, in another context, the next layer of structure
and so on” (Guy and Henneberry, 2000, p2413). Finally they emphasise the importance of
connecting property research with the wider debate on the social production of urban space
in order to better understand national patterns of investment and dynamics of local
development.
A related conceptual tool for assessing the impact of land markets on the urban poor is the
Capital Asset Framework. This framework sees a direct link between well being of the poor
households and their ability to access and consolidate capital assets and the external
conditions (including institutional context and market operation) which impact on their
accumulation and regulate their use (Rakodi, 1999; Mooya and Cloete, 2007). As such
poverty alleviation efforts are dependent on increasing the capabilities of low income
households to accumulate assets and remove obstacles to the productive use of it. Werna
(1997) for example notes that at least one in every ten houses in cities of developing
countries (both rented and owner occupied) incorporates home-based enterprises that
contribute on average 40% to household incomes. Clearly, therefore, any intervention
that can increase their security of tenure and better facilitate productive activities through
these enterprises will be beneficial to the low income households and aid poverty
alleviation objectives. Indeed Moser (1998) (cited in Mooya and Cloete, 2007) sees this
as possibly the most effective single intervention for poverty alleviation in constrained
economic and employment conditions that may be dominant for low income groups in
developing countries. We must, however, distinguish between security of tenure and
formal titling. Some authors have argued that formal titling is not necessarily the best
option for increasing security of land tenure and that it can in fact lead to displacement
of the low income groups either through sale (possibly distressed or by choice) or
eviction of renters as result of increased commercialization (Payne et al, 2009). This is a
similar process that has been observed in gentrification of some cities in Western Europe
and North America. Nevertheless, others disagree and suggest that the key to poverty
alleviation is not so much quantity of provision of land but ensuring legal right and
reducing transaction costs that predominantly arise as a result of unclear and informal
titles. In fact the key institutional consideration in NIE is that of property rights. This can
be seen in terms of the right to use the property, the right to earn income from the
property and the right to alienate and sell the property (Eggertsson, 1990 cited in Mooya
and Cloete, 2007). From this perspective, therefore, increased security of property rights
means better ability to use the property as a productive asset and to earn income from it
either directly or indirectly for example as collateral. The most influential proponent of
this line of thought is Hernando de Soto (2000) where he sees the informality of property
ownership and therefore its inability to provide a standard tradable commodity for
impersonal exchange as the real reason for not only ineffective low income housing
supply but lack of entrepreneurial capacity, the under development of the economy and
persistent poverty in developing countries in general. The key then is unlocking the latent
capital value in property through formal tradable titles that is considered as the basis of a
functioning property market. However, as Mooya and Cloete (2007) point out extending
this principle to an a priori assumption that lack of titles negatively impacts formal land
markets is not necessarily true by noting research that show in Vietnam and Bogota land
markets function very well with incomplete or lack of land titles. In fact in Bogota the
high cost of titling seems to have reduced land market activity (Gilbert, 2002 cited in
Mooya and Cloete, 2007). In Ghana, on the other hand, informal transactions were the
most optimal solution in light of high transaction costs and a highly bureaucratic formal
market system.
A major concern therefore is the cost and complexities involved in providing legal titles
that inevitably increase transaction costs. This means that from an NIE and institutional
perspective informal secure rights to land may in fact be preferable to formal but costly
titles that impede rather than facilitate market activity. In informal markets, therefore, the
issue is not so much legal titles per se but the degree to which they are transferable that
can increase liquidity and enable low income groups to capitalize on the value of their
assets (Mooya and Cloete, 2007). This brings to the fore the role of informal institutions
that allow informal property market transactions that includes measures for regulating
market behaviour of buyers and sellers and in the case of Tanzania for example included
authenticating ownership, transfer and sale and controlling fraudulent transactions (ibid).
The question therefore is under what set of governance, market and institutional
arrangements can we maximize the benefits to the low income groups?
Concluding remarks
In order to answer the question posed above Mooya and Cloete (2007) suggest that we
must examine the informal property market process in terms of the link between property
rights, transaction costs, market turnover and capital accumulation for the urban poor. We
would, however, also highlight the link between the formal and informal sides of the
urban development process particularly in the context of rapid and globally induced
economic growth and restructuring, urban development and spatial transformation. In
addition we must recognise that for many low income families housing (whether titled or
not) is a social rather than market asset (Payne et al, 2009; Varley, 2002). As such they
may not be readily prepared to engage in market transaction however secure their rights
and low their transaction costs may be. There is, therefore, a need for better
understanding not only informal housing processes but also the broader governance
processes and formal market dynamics that frame the informal market processes and also
have a direct impact of their own.
Key areas, therefore, that need to be addressed as part of any future research agenda
include the following:
a) urban governance forms and processes on land use and property development (who
decides, what are the bases for these decisions and how are different stakeholders
involved in the decision making process, what does this mean for increasing inclusion
and urban equity, etc),
b) the institutional context of the property market (main global/local actors, main laws
and regulations on ownership, use and exchange; ownership patterns, etc) particularly
their impact on transactions costs and property rights and the way the market interacts
with the broader social and economic developments to determine the spatial
geography/development of the cities concerned,
c) informal market processes particularly institutions on, and linkages between, property
rights, transaction costs and market turnover,
d) interface of the formal and informal markets (how is the formal market impacting on
informal and low income areas and communities) and,
e) the scope for low income asset consolidation and capital accumulation particularly in
terms of extending low income rights (to own, use and exchange) over land and property
whether formal or informal.
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