The Formal Determinants Of Informal Settlements In Bogota, Colombia

Abstract

The central question in this dissertation is why formal mechanisms of housing production and land allocation have been unable to absorb the growing demand in the cities of the developing world. My general methodological approach is to analyze the historical process of urbanization of Bogota, Colombia a city known by the prevalence of informality and its rich experience in the implementation of different land and housing policies. My hypothesis is that informal settlements are structural to the formal process of production of the built environment because, within a context of inequality and natural property rights, this process tends to under-provide land with urban services. The dissertation is structured as three interrelated papers. In the first paper, I study the relationship between an institutional context dominated by the concept of property as a natural right and the pattern of under-provision of urban services arguing that informality is engendered in the same formal process of production and allocation of the built environment because the concept of property as a natural right produces a dynamic of privatization of benefits of city growth and socialization of its costs that results in under-provision of urban services. In the second paper, I study the causes of the pattern of under-provision using a political economy and a stakeholder approach. I explain the paradox of why urban services are underprovided when they can increase land values by more than their cost by describing how this pattern is compatible with the incentives of the stakeholders involved in the production and consumption of the urban space. In the third paper, I represent the articulation between the formal and informal mechanisms of housing production using a simulation model based on System Dynamics. Using the model I show how informality arises from the inadequacy of a system of infrastructure financing based on tariffs and cross-subsidization and from the unintended consequences of the traditional interventions to deal with the problem such as up-grading and public housing. I also propose and test a policy based on eliminating the interventions that are incentivizing informality and shifting the source of financing infrastructure from cross-subsidies to property taxation.