Investment foundations: Secure property rights

Virginia Cram-MartosDirector, Trade and Sustainable Land Management Division

31 May 2013

UNECE Committee on Housing and Land

Management

Work of the Committee

The structure of the Committee

Secure land tenure and property rights are fundamental to shelter and livelihoods, and a cornerstone for the realisation of human rights and for poverty reduction. UN-HABITAT

Housing issues unique to our region, including the:• Results of mass privatisation in the 1990s of now sub-standard

housing• Development of institutions and expertise to support

property rights where such rights did not exist 20 years ago• Regularization of informal settlements created due to

institutional voids and/or unmanageable bureaucracy• Retrofitting of large volumes of poorly insulated, temperate

climate housing

• People to invest in improved homes and livelihoods

• Good environmental management

• Improved food security

• The realisation of human rights, including the elimination of discrimination…

Secure Land Tenure & Property Rights

Enable:

1) Expropriation risk – causing lost investment & effort

2) Increased risk of costs incurred in order to defend “unsecure” property

3) Reduced investment because higher risks mean investers will require higher «minimum» returns

Summarized from “Reforming property rights “ by Tim Besley, Maitreesh Ghatak (the London School of Economics) 22 April 2009

How Inadequate Property Rights Can NegativelyAffect Economic Growth

4) A failure to facilitate trade (e.g., by preventing the development of efficient rental and sales markets)

5) The inability to use property to support other transactions (i.e. as collateral)

6) High enforcement costs and risks for lenders meaning that they may not be willing to lend an efficient amount or, in some cases, lend at all.

Summarized from “Reforming property rights “ by Tim Besley, Maitreesh Ghatak (the London School of Economics) 22 April 2009

How Inadequate Property Rights Can NegativelyAffect Economic Growth

Property Rights Provide the Underlying Economic Basis for Decent Housing

A study in Peru showed that the change in ownership status due to a nation-wide land titling program resulted in an increase of over two-thirds in housing renovations

A related study in Argentina showed that the transfer of land to a group of squatters occupying a wasteland on the outskirts of Buenos Aires, resulted in improved housing investment as well as other benefits.

Correlation: Expropriation Risk and Income per Capita

Prot

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Correlation: Property Registration and Income per Capita

Ease

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The Causes of Weak Property Rights?

1. Breakdown in law and order and 2. Predatory states

BUT JUST AS IMPORTANT – PERHAPS MORE SO

3. Many governments simply fail to invest sufficiently in basic legal institutions and property registration institutions

Going Forward

So a priority should be To invest more in ensuring secure property rights

This requires political will To develop political will we need to help

politicians, government officials and the public to better understand the economic benefits

A possible opportunity to increase political will: A Regional Framework Convention on Housing

Hernando de Soto

”No nation can have a strong market economy without adequate participation in an information framework that records ownership of property and other economic information”

Recommendations

Governments should

• Use nationally appropriate policy instruments to bring informal housing into the formal sector where it can be better regulated and better contribute to economic development

• Ensure that property rights and tenure are defined and protected in a clear and straightforward manner.

• Develop cadastres and registries which define property boundaries and ownership rights for as much of the country as possible

Thank you

Housing and Land Management Unitwww.unece.org/hlm/welcome.html