Worldwide, the more access to home loans, the LOWER the home ownership rate. Those countries with informal property rights and unenforced regulations have higher rates of tenure and more affordable housing. This is the how we solve the mortgage crisis while still pursuing the American dream of home ownership.
And of course, Taos Pueblo, an excellent example of Native American urbanism, probably has a 100% home ownership rate and likely had little to no regulations or zoning laws. Here is how you build affordable housing for our people; you don’t! You let them build it themselves, how they see fit. People have been doing this for tens of thousands of years.
In a previous post I mentioned the advocacy of economist Hernando de Soto for titling programs in the informal settlements (i.e. slums) of Latin American countries. De Soto claims that an informal arrangement of land ownership, which is to say an arrangement without the official sanction of a public body, impairs the extraction of capital from land and suppresses property values. In the 2011 International Property Rights Index, published earlier this year, the Property Rights Alliance attempts to rank property rights protection in over 100 countries using de Soto’s particular economic theories as the yardstick.
In addition to “registering property,” another of the listed criteria for the ranking is “access to loans,” which “is included in the IPRI because access to a bank loan without collateral serves as a proxy for the level of development of financial institutions in a country.” As recently as 2009, however, that year’s Index gave a different explanation for the use of this variable: “because accessibility to a bank loan represents the opportunity for an individual to subsequently obtain property. Consequently, the easier it is to become a property owner, the stronger society’s support for a strong formalized property rights system and the investment in property.”
At that point, someone may have informed the authors that the rate of homeownership in, say, Mexico, is over 80%, and that only 13% of Mexican homes are encumbered with mortgages. India, too, has a homeownership rate of over 80%, and it is 79% in Tegucigalpa, Honduras. Increasing access to loans actually appears to be correlated with a decrease in the rate of property ownership. How does Mexico achieve this remarkable result? Through two primary means:
- As the San Diego Union-Tribune notes: “Because Mexico’s building regulations are less stringent than those in the United States, it’s possible to build small, attached housing units on a massive scale to achieve large economies of scale.”
- Secondly, describing a situation in Honduras common to many Latin American countries: “[A] high rate of owner occupancy can be attributed to the fact that 46% of all residential properties in Tegucigalpa were obtained through illegal land invasion…”
Property obtained through “invasion” of private or public land, on the other hand, is the least regulated of all. Because the state does not formally recognize the occupants’ claim to the land, zoning and land use laws are not enforced, and individual property “rights” (defined as an individual’s right to use his land for his chosen purposes) are arguably at their fullest, subject only to the possibility of eviction by the state, yet, in the slums of Mexico, the odds that this will happen are remote (see p. 14). Yet, bizarrely, it is in this freest of all property rights environments that de Soto perceives protection of property rights most lacking.
Where vacant public or private land is valued highly for residential use, impoverished squatters essentially condemn the large land holdings of indifferent absentee landowners for the benefit of thousands – the exact inverse of the typical process of urban renewal in the property-rights protecting United States, where in the late 60s and early 70s alone over two million mostly low-income people were evicted from their titled homes to the benefit of the wealthy and influential interests, whether those of well-connected property developers or land-hungry private institutions.
The home-building squatters are in fact living out a Lockean version of property rights, a vision which appeals to natural rather than legal rights:
“Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.” John Locke, Second Treatise of Civil Government.
Interestingly, the Index appears to contain some of the seeds of self-doubt. A study of an informal settlement in Buenos Aires (p. 58) tells a story that is at odds with the dire portrait often painted:
Read the rest at Old Urbanist