Urbanization rates in the Latin American and Caribbean (LAC) region have continued to grow more rapidly than the capacity of the state apparatus and the market to respond to the demand for urban services, infrastructure, urban land, and housing. This rapid growth has given rise to an increasing urban deficit that has divided citizens between those living in the formal city with access to adequate housing and quality services and those living in crowded slums or informal areas without access.

The governments in the region have used different approaches to tackle the problem. The Latin American and Caribbean region is the world’s most urbanized region with almost 80 percent of its population living in cities. The urban population in the region is greater than that of the most developed regions and is almost twice that of Asia and Africa. The inability of governments and the formal market to cope with this rate of urbanization has left the region with high levels of informality and the burgeoning of slums. The demand for serviced land has surpassed the capacity to supply it (Gilbert, 2000), and governments have not been able to develop mechanisms to provide financing for affordable housing or serviced land to lower-income groups.