Housing Policies and Urban Development

Access and opportunity are tied in many different ways to location. One’s neighborhood and neighbors can have dramatic effects on health and political, socioeconomic, and education opportunities and outcomes. The Tiebout model of residential sorting proposes that mobile households choose between various neighborhoods to find the “package” of public services and taxes that is most appealing to them. Families with children may opt for higher property taxes to fund better schools, while single professionals may choose a better public transport system in lieu of excellent schools. A resident’s ability to pay for a desired package of services—a system often regulated through land-based policies—is key to this model. For example, zoning rules can require minimum lot sizes, thereby establishing a minimum property tax level for residents of a certain area and effectively setting a minimum price for public services there. Thus, the question of who can afford, to live where and with whom is an important issue to address when determining land and housing policies.

Across Latin America, where traditional arrangements between private real estate developers and government-sponsored mortgage banks fail to provide adequate affordable housing, households report to a variety of informal housing markets. Eduardo Rojas summarizes a selection of housing policies and outcomes across Latin America, assessing various government interventions focused on demand-side interventions and supply-side subsidies targeted to households. In addition to increasing the supply of affordable housing units, a particular challenge Latin American policy makers face is the need to upgrade or “formalize” the growing number of existing informal housing units. Upgrading informal housing, which can account for a significant portion of a city’s housing stock, also requires a big investment in order to deliver necessary infrastructure and public services to informal—and therefore unplanned—neighborhoods. Policies to improve quality of life in Latin America’s growing cities face the challenge of looking beyond bricks and mortar to the full array of services required by households—services that are provided by the house itself, the neighborhood, and the city.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2014 and is Chapter 10 of the book Land and the City.