Land and Poverty Conference 2017: Responsible Land Governance—Towards an Evidence-Based Approach March 20-24, 2017 Washington, DC   Searching for Engel in Buenos Aires: An Inquiry into Land Use Regulations and Informal Housing Eric J. Heikkila, Professor & Director, Office of Global Engagement Price School of Public Policy University of Southern California Robin M. Rajack, Lead Specialist for Housing and Urban Development Inter-American Development Bank Julia G. Harten, PhD Student Price School of Public Policy University of Southern California

Content I. Background & Motivation II. Model Specifications: Unadorned Engle Curve Base Model with Land Use Zoning Multiple Land Use Jurisdictions Monocentric Model III. Discussion Q&A

Background & Motivation

The Issue Global trend: urbanization = migration Urbanization/ migration in less developed countries  informal settlements + a dual urban housing sector Informal settlements: outside regulatory framework Land use regulation: (1) type of use + (2) intensity of use Absorptive capacity < population  informal settlements Photo: Sao Paolo, Brazil https://ciudadevolutiva.com/2010/10/22/contemporary-photography-for-the-informal-city/

Land Use Regulation Potential Benefits: Open space preservation Rationalization of public goods provision Infrastructure Public safety … Drawbacks: De facto land supply restrictions Relationship between location <-> access <-> land value scarcity of attractive land, spatial segregation …

Implications: Sustainable Development Substandard physical conditions Crowding, incomplete property rights Public goods provision Transportation, utilities, water & sanitation Education, public safety Natural hazards Access to economic opportunity

Policy Debates Recognition of reality & nuisance of informal settlements  policy debate, but little evidence Inquiries into mechanisms involved Market explanations Policy explanations Importantly: policy focus on (visible) outcomes, rather than causes of informal settlements

Aim of this Paper Fill a gap in the literature Develop a model that incorporates both (i) the formal and (ii) the informal housing sector into a single framework of analysis Extension of Heikkila & Lin (2014) Part of IADB commissioned project Implementation with data from cities in Brazil (Campinas) & Argentina (Buenos Aires)

Model Specifications: Unadorned Engle Curve

Unadorned Engle Curve Grounded in consumer choice theory Change in consumption profile in relation to changes in income

Model Specifications: Base Model with Land Use Zoning

Base Model with Land Use Zoning Introduction of uniform LUR Suboptimal housing consumption for the poor: Overconsumption in the formal sector Consumption in the informal sector

Base Model with Land Use Zoning Calculating welfare effects of LUR: Difference between (i) observable housing consumption spending and income and (ii) estimated ICC/ Engle curve  estimate of LUR induced welfare loss Different outcomes depending on institutional setting: Developed economies: LUR  increase in housing price  low income earners move away Developing economies: LUR + weak institutions (+ job concentration in few urban centers)  non-compliances  low income earners are pushed into informal settlements

Model Specifications: Multiple Land Use Jurisdictions

Multiple Land Use Jurisdictions Introduction of dual zoning regimes 2 main types of adjustment: Some over-consumers: consume less formal housing through sorting Some consumers of informal housing: consume formal housing

Multiple Land Use Jurisdictions Introduction of many zoning regimes Limiting case (= a rich variety of jurisdictions)  uncover a classic Tieboutian setting

Multiple Land Use Jurisdictions Introducing multiple land use regulations regimes some households ‘get back on the Engle curve’ these households consume housing formally through sorting in the jurisdiction that matches their preferred expenditure profiles Insight: If multiple LUR ‘service’ all income levels, multiple LUR minimize welfare loss

Model Specifications: Monocentric Model

Monocentric Model Classic model of urban economics Agents trade-off: access <-> space consumed Model of urban form: concentric rings around a central business district Distance vs. Compliance

Monocentric Model Introduction of uniform LUR Taking into account location uniform LUR plays out differently by location

Monocentric Model vs. Multiple LUR Both (1) the monocentric model and (2) the model with multiple land use regulations induce sorting  Monocentric model: explicit spatial sorting  Multiple LUR: sorting into jurisdictions Combining the two models   future research agenda

Discussion

Discussion: Complicating Factors Housing has 3 peculiar characteristics: (1) complexity, (2) fixity, i.e. housing directly relates to urban land and location, (3) durability, i.e. a commodity market exists in conjunction with a stock market hedonic price model Government action Strategic (1) supply, or (2) withholding of public services Alters the relationship between LUR <-> informal settlements Rural-urban Migration Sudden increase in population pressure alters the relationship between LUR <-> informal settlements Future Research Agenda

Q&A

Thank you for your attention! Land and Poverty Conference 2017: Responsible Land Governance— Towards an Evidence-Based Approach March 20-24, 2017 Washington, DC   Thank you for your attention! Eric J. Heikkila, Professor & Director, Office of Global Engagement Price School of Public Policy University of Southern California Robin M. Rajack, Lead Specialist for Housing and Urban Development Inter-American Development Bank Julia G. Harten, PhD Student Price School of Public Policy University of Southern California