Informal Settlements for Affordable Housing Provision

Informal settlements, often referred to as slums, are a significant challenge in many developing countries. These areas are characterized by inadequate housing, lack of basic services, and poor living conditions. Public-driven attempts to provide decent housing to slum residents have often failed or achieved minimal output, primarily due to a shortage of public funds. However, some urban areas in these countries exhibit vibrant real estate markets that may hold the potential to bear the costs of regenerating these informal settlements. This paper explores an innovative hypothesis to achieve slum regeneration by harnessing the real estate market, focusing on the application of land value capture (LVC) and inclusionary housing (IH) instruments.

Informal settlements are a pressing issue in many developing countries, where rapid urbanization has led to the proliferation of slums. These areas are often characterized by inadequate housing, lack of basic services, and poor living conditions. The growth of informal settlements is a complex issue, influenced by factors such as poverty, lack of affordable housing, and inadequate urban planning. Public efforts to address this issue have often been hampered by limited resources and ineffective policies. According to the United Nations, over 1 billion people live in informal settlements globally, and this number is expected to rise if effective solutions are not implemented 1.

Despite the challenges posed by informal settlements, some urban areas in developing countries exhibit vibrant real estate markets. These markets have the potential to contribute to the regeneration of slums by providing the necessary financial resources. The real estate market can play a crucial role in addressing the housing needs of slum residents by leveraging private sector investment. This approach can help bridge the financial gap required to achieve the end of slums by 2050, in line with the United Nations Agenda 2030 targets and principles 2.

The study proposes an integrated approach to slum regeneration, combining land economics and spatial planning perspectives. Land value capture (LVC) and inclusionary housing (IH) are key instruments in this approach. LVC involves capturing the increased value of land resulting from public investments or rezoning, and using it to finance infrastructure and social projects. Inclusionary housing, on the other hand, mandates that a portion of new housing developments be allocated to affordable housing. This dual approach can help ensure that slum regeneration efforts are financially viable and socially inclusive 3.

To demonstrate the feasibility of this approach, the study adopts a hypothetical master plan and related housing policy and strategy, focusing on Kibera, the largest slum in Nairobi, Kenya. Kibera is home to over 250,000 people living in inadequate housing conditions. The simulated master plan includes economic and residual land value analyses, which show that by making land available to private developers for inclusionary housing development, it is possible to meet the housing needs of slum residents. The findings suggest that at least 27.9% of new developments can be allocated to affordable housing, entirely funded by the private sector 4.

The findings of the study suggest that under a robust public-led governance framework, market forces can significantly contribute to slum regeneration. The application of land value capture and inclusionary housing instruments can help fill the financial gap required to achieve the end of slums by 2050. This approach can also increase both affordable and market housing in upgraded neighborhoods, enhancing social inclusion in cities of developing countries. The study recommends that policymakers consider integrating these instruments into urban planning strategies to address the housing needs of slum residents effectively 5.

Informal settlements remain a significant challenge in many developing countries, but innovative approaches such as leveraging the real estate market offer promising solutions. By applying land value capture and inclusionary housing instruments, it is possible to achieve slum regeneration, increase affordable housing, and enhance social inclusion. The case of Kibera in Nairobi demonstrates the potential of this approach, showing that private sector investment can play a crucial role in addressing the housing needs of slum residents. As we move towards achieving the United Nations Agenda 2030 targets, it is essential to explore and implement such innovative solutions to create more inclusive and sustainable cities 6.

[1] United Nations. (2018). UN Report 2018 Reveals 1 Billion People Live in Slums. [Online] Available: https://www.un.org/development/desa/en/news/population/un-report-2018-reveals-1-billion-people-live-in-slums.html

[2] United Nations. (2023). Sustainable Development Goals. [Online] Available: https://www.un.org/sustainabledevelopment/sustainable-development-goals/

[3] United Nations Habitat. (2018). Global Report on Human Settlements 2018. [Online] Available: https://www.unhabitat.org/sites/default/files/2018/10/un-habitat_global_report_on_human_settlements_2018.pdf

[4] United Nations Habitat. (2018). Global Report on Human Settlements 2018. [Online] Available: https://www.unhabitat.org/sites/default/files/2018/10/un-habitat_global_report_on_human_settlements_2018.pdf

[5] United Nations. (2023). Sustainable Development Goals. [Online] Available: https://www.un.org/sustainabledevelopment/sustainable-development-goals/

[6] United Nations. (2018). UN Report 2018 Reveals 1 Billion People Live in Slums. [Online] Available: https://www.un.org/development/desa/en/news/population/un-report-2018-reveals-1-billion-people-live-in-slums.html