Investigating the impact of land titling on housing investment in Addis

A recent study by Haili and Rooks (2016) published in the Property Management journal, evaluates the impact of a land formalization project on household investment in Addis Ababa, Ethiopia. This article adds to an already extensive and controversial body of literature on the impacts of property rights in the reduction of poverty.

There is limited research on changes in land rights in a urban context, and more so from an African perspective. Besides, despite a large number of land titling policies in global south cities, “there is no agreement about the effects of secure property rights “(p:2).

The authors argue that one reason for disagreement lies in the difficulty of testing the impact of titling on investment behaviour. More specifically, the identification of impacts is made difficult by the fact that formal property rights are endogenous. Their allocation is rarely random but based on pre-existing differences, such as wealth, previous investment levels, and plot location, between the groups who access property rights and the groups that do not.

The value of that study is therefore to propose a model that responds to the selection problem analysed, using a natural experiment. The data was collected from a land formalization project in Addis Ababa and compared with an equivalent control group.

The authors discuss the validity of property rights theories. A theory popularised by De Soto argues that secure land rights enable better access to credit, thereby leading to capital accumulation. The authors however delineate the validity of this theory, and make a clear distinction between informal tenure and perceived threat to security of tenure, the latter which is according to them the genuine impediment to investment.

The results of the study show that compared to untitled households, titled ones are more likely to put up new structures. Yet, it was not observed that this happened through increased credit access from banks or microfinance institutions, as 96% of the investments were financed “out of pocket”(p:9). The results resonates with similar observations made in other global south countries, on the fact that titling and more generally housing ownership is not a sufficient condition to qualify for formal credit.

 Hence, beyond financial investments there is a crucial need to understand the “slow channels of increased physical and human capital investment that play a role in poverty reduction through formal titling” (Galiani and Schargrodsky, 2010). In an innovative approach, Galiani and Schargrodsky (2010) for instance demonstrated how land titling can help to reduce fertility and household size, and indirectly impact children’s access to education and long term wage differentials.  

The authors conclude by highlighting the weaknesses of Ethiopia’s formalization projects, which do not have any basis in federal legislation and are often reduced to sporadic initiatives. The Addis Ababa Land and Building Formalisation Project, analysed in the paper, was actually started in 2004 in order to title more than 100,000 occupants in the city in less than two years. Most of the project’s major goals have however not been achieved.

Article available from Property Management,Vol. 34 Iss: 4, pp.345 – 357, Sept 2016 [sub required] 

 Photo credit: PicturesFromWords

 

Details

Publication Type Journal Article
Publisher Property Management
Year 2016
Author(s) Ziade Hailu & Gerrit Rooks
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