Do Urban Land Regulations Influence Slum Formation? Evidence from Brazilian Cities
The World Bank and Instituto de Pesquisa Econômica Aplicada (IPEA)
Download Document| Date Published | 2006 |
| Version | |
| Primary Author | Somik V. Lall |
| Other Authors | Hyoung Gun Wang and Daniel da Mata |
| Theme | Housing Supply |
| Country | Brazil |
Abstract
In this paper, we examine the effects of land use zoning and density regulations on formal housing supply and slum formation across Brazilian cities between 1980 and 2000. In particular we look at the performance of cities that have lowered land subdivision (minimum lot size) regulation from the federally mandated 125 m2. We develop a model of formal housing supply and slum formation where population growth is endogenous and household migration decisions are influenced by inter city variations in land regulations. We find that the elasticity of formal housing supply in Brazil is very low, and comparable to those found in Malaysia and South Korea, which have highly regulated housing markets. Our analysis of land regulations shows that (a) general purpose zoning and land use planning improves performance of the housing market and stimulates formal sector housing response, thereby reducing slum formation; (b) lowering minimum lot size regulations increases housing supply but is also accompanied by higher population growth. We find that population growth is faster than the formal housing supply response, leading to an increase in slum formation. This suggests that policies that aim to reduce barriers for access to land need to be accompanied by instruments that relax pre-existing distortions in the land market. In the absence of these measures, pro poor land regulations may in fact exacerbate the slum formation problem.