Real estate markets and poverty alleviation in Namibia's urban informal settlements : an institutional approach

Abstract

This research investigates, using the New Institutional Economics theories of property rights and transaction cost, two interrelated problems. Firstly, the question of whether real estate markets in the urban informal settlements of Namibia could be used to alleviate poverty or, to put it differently, create wealth. The second problem relates to the question of whether specific forms of property rights matter for engendering pro-poor outcomes in real estate markets and, if so, what form these are likely to take. Corresponding to these questions are two working hypotheses respectively. Firstly, it is hypothesised that real estate is a significant asset held by the urban poor in Namibia and that there is potential for capital accumulation by trading up in real estate markets. Secondly it is hypothesised that, by affecting the incentive structure of, and transaction costs in real estate markets, systems of property rights affect market outcomes, thus ultimately determining whether these markets may be efficacious for poverty alleviation. The study employs the comparative institutional methodological approach in a case study framework to examine effects of three types of property rights regimes on low income real estate markets in settlements located on Windhoek’s periphery. The main empirical data for the study were collected by means of a questionnaire survey of 440 households in two settlements called Goreangab and Okahandja Park respectively. This survey was supplemented by 14 unstructured interviews with selected respondents and by key-informant interviews with officials from the Windhoek City Council (WCC), the Namibian Housing Action Group (NHAG), and the Namibian Housing Enterprises (NHE). The study finds that real estate is indeed a major asset held by the respondents. The study finds that, while there are robust rental markets for rooms and backyard structures, there is very limited sale activity. The study also finds that in the absence of formal property rights, social networks and hierarchical organisations rather than impersonal markets provide the institutional structure to transaction activity. It is found that the degree of formality of property rights correlates to perception of security, that property rights affect investment in housing and that property rights (to some extent) affects the degree of market activity. The study therefore concludes that while not insignificant gains are to be had from rental markets, there is at present limited potential to derive benefits from sale markets in Namibia due to a lack of trading activity. The first hypothesis is thus only partially confirmed. It is also concluded that while social networks guarantee access to urban land for the poor, they tend to lock them in enclaves of ethnic and kinship relations, inhibiting the development of wider, impersonal markets argued to be necessary for capital accumulation. Further, it is concluded that formal property rights create incentives for investment and therefore matter for capital accumulation, but that they are not necessarily accessible to the poor. The second hypothesis, that property rights affect market outcomes, is substantially confirmed. Overall the study concludes that there is good potential for leveraging real estate markets in Namibia’s (and other developing countries’) informal settlements for capital accumulation but that these need to be primed first. This means deliberate interventions with the aim of bringing about increased trading activity. In this regard specific proposals have been made for policy intervention in three key areas, namely, the creation of appropriate property rights systems, together with supporting organisational infrastructure, the expansion of physical infrastructure and the building of shared understanding and trust in urban communities. The study makes a number of key contributions to knowledge about the relationship between real estate markets and poverty alleviation in the area of theory, methodology, policy and empirical data.