Hernando de Soto's new bestseller, The Mystery of Capital, attributes the failure of capitalism in the Third World to the lack of property titles. Many governments around the world are following this advice and are busy distributing legal titles to self-help families. Using data gathered in the now legalised self-help settlements of Bogota , the paper questions a number of the alleged benefits of legalisation. It shows how sales are more common when people lack legal title, how informal finance is available at the commencement of an illegal settlement and how little formal finance is forthcoming after legalisation. Most importantly, it shows that there is little sign of a secondary housing market. And, if there is little possibility of selling a house, home ownership in the self-help suburbs can offer little in the way of capital accumulation. It is hard to make money from a house that cannot be sold. Perhaps, de Soto's argument is less a panacea than a populist dream.

https://www.ucl.ac.uk/dpu-projects/drivers_urb_change/urb_infrastructure/pdf_land%20tenure/ESFN_AERUS_Gilbert_mystery_capital.pdf

On the mystery of capital and the myths of Hernando de Soto: What difference does legal title make?

http://www.ielrc.org/activities/conference_0901/content/Bakker%20Jakarta.pdf

Governance Failure: Rethinking the Institutional Dimensions of Urban Water Supply to Poor Households

The World Bank's slum upgrading approach, used for the first generation of its urban development projects during the 1970s and 1980s, was considerably influenced by the writing of John F. C. Turner. Turner minimised the role of government, limiting it to providing essential environmental improvements and public services, thereby allowing squatters and/or slum-dwellers to improve gradually their living conditions. While early evaluations of slum upgrading projects in Calcutta, Jakarta and Manila indicated the success of this approach, later evaluations raise doubts about it. The 'minimal state' advocated by Turner is clearly unable to deal with the problems typically emerging from slum upgrading efforts. For these efforts to be sustainable and replicable, more attention must be paid to providing land tenure, requiring a combination of authoritarian and humanistic administration.

The Slum Upgrading Myth

New town development in Jakarta Metropolitan Region: a perspective of spatial segregation

Rural to urban land conversion in Indonesia during boom and bust periods

This ambitious study of the urban housing market in Indonesia differs from previous analyses by addressing the urban housing market as a whole, describing the processes of shelter supply as well as the stock and demand for housing, and including an evaluation of the government-sponsored subsidized housing lending program.

The market for shelter in Indonesian cities

Rental housing in urban Indonesia

Until recently, urban land and housing markets in Indonesia seemed to function well. Informal-sector development provided low-income housing affordably. Through government programs, formal-sector developers could build housing for all but the poor. Since 1989, however, daily conversation pictures land speculation as rampant and formal-sector housing as rising beyond the means of the middle class. Newspapers carry stories of conflicts between small landowners and large developers with government officials in between. This article investigates this situation by addressing two related questions: are urban land prices rising “too fast?”; how do land regulations and development practices affect costs, and who pays these costs? The article includes quantitative estimates of urban land prices, changes in urban land supply, movement of land through the permitting process, and the effect of development regulations on costs. Data come from a literature survey and interviews of some of the largest formal-sector developers in Indonesia. A principal finding concerns a development regulation called a “location permit” and the “social function” of land in Indonesian law. Although helpful as a means of assembling land in Indonesia's highly fragmented land markets, location permits allow formal-sector developers to hold land off the market and pay low prices to small landowners. Ultimately, the “social function” of land under Indonesian law holds down the price formal-sector developers pay for land, but not at the price at which they sell their product. The article concludes by proposing reforms to the regulatory process.

Michael L. Hoffman

Papers

The market for shelter in Indonesian cities

Rental housing in urban Indonesia

Land markets and the effect of regulation on formal‐sector development in urban indonesia

Housing policy reform in Bulgaria