Chapter 3

Urban land use patterns, and role of local states in urban land
management
3.1 Determinants of the price of urban land
The price of urban land can be influenced by various factors. Here are some determinants that can
affect the price of urban land:

1. Location: The location of the urban land is a critical determinant of its price. Land in prime
locations, such as city centers or areas with high demand, tends to have higher prices. Factors such
as proximity to amenities, transportation, schools, hospitals, and employment centers can
significantly impact land prices.

2. Demand and Market Conditions: The overall demand and market conditions play a crucial role
in determining land prices. If there is high demand for urban land and limited supply, prices are
likely to be higher. Economic factors, population growth, urbanization trends, and market
dynamics can influence the demand and supply of land, thereby affecting its price.

3. Zoning and Land Use Regulations: Zoning regulations and land use policies imposed by local
authorities can affect land prices. Restrictions on land use, density, building heights, and
development potential can impact the value of urban land. For example, land designated for
commercial or residential use may have different price levels due to the potential for different
types of development.

4. Infrastructure and Amenities: The availability and quality of infrastructure and amenities in the
surrounding area can influence land prices. Access to well-developed transportation networks,
utilities (water, electricity, etc.), parks, recreational facilities, and other amenities can increase the
attractiveness and value of urban land.

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5. Future Development Potential: The anticipated future development potential of the land can
impact its price. If there are plans for infrastructure improvements, new developments, or zoning
changes that can enhance the land's value, it may command a higher price.

6. Market Comparable: Comparable sales in the area can provide a benchmark for land prices.
Market trends and recent transactions of similar urban land in the vicinity can influence pricing
decisions.

7. Environmental Factors: Environmental conditions, such as the presence of natural features,

environmental regulations, or contamination issues, can affect land prices. For instance, land with
attractive natural features or waterfront access may have higher prices, while contaminated or
environmentally sensitive land may have lower prices.

8. Investor Sentiment: Investor sentiment and market speculation can impact land prices. If there
is a perception of future price appreciation or investment potential, it can drive up land prices.

It's important to note that the relative importance and impact of these determinants can vary
depending on the specific location and local market conditions. Additionally, the interplay of these
factors is complex, and multiple factors often interact to determine the price of urban land.

3.2 Bid Rents and Location Gradient: the importance of relative location
Bid rents and location gradients are concepts used in urban economics to understand the
relationship between the value of land and its location within a city. Relative location, in this
context, refers to the position of a piece of land relative to other desirable locations within the city.

Bid Rents: Bid rent refers to the maximum amount of money that a firm or household is willing to
pay for a particular location. It represents the demand for land at different locations within the city.
Bid rents are influenced by factors such as accessibility, proximity to amenities, transportation
networks, and proximity to other firms or customers.

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In general, bid rents decrease as one moves away from the city center. This is because locations
closer to the city center tend to have higher accessibility, a wider range of amenities, and a larger
customer base. As a result, firms and households are willing to pay higher rents to secure locations
in these prime areas.

Location Gradient: The location gradient refers to the change in land values or bid rents as one
moves from the city center towards the outskirts of the city. It depicts the spatial distribution of
land values within the urban area.

The location gradient typically shows a decreasing trend as one moves away from the city center.
This is known as the urban land rent gradient. It reflects the trade-off between accessibility and
land costs. Land closer to the city center has higher accessibility and greater proximity to economic
activities, leading to higher land values and bid rents. As one moves further away from the city
center, the accessibility decreases, and land values and bid rents tend to decrease accordingly.

The importance of relative location: Relative location plays a crucial role in determining land
values and bid rents. The value of a piece of land is not only determined by its individual
characteristics but also by its proximity to other desirable locations within the city. Nearby
amenities, transportation infrastructure, and economic activities can significantly influence the
value of a specific location.

Relative location affects the accessibility and connectivity of a piece of land to employment
centers, markets, and other amenities. It also affects the level of competition for that location
among firms and households. Desirable locations, closer to the city center or other attractive areas,
tend to command higher bid rents due to their relative advantages in terms of accessibility and
proximity to economic opportunities.

Understanding the importance of relative location and the dynamics of bid rents and location
gradients helps in urban planning, real estate development, and policy-making. It provides insights
into the spatial patterns of land values, helps identify areas of potential growth and investment,
and guides decisions regarding infrastructure development and land use planning within cities.

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3.3 Land markets, Speculation, and governments in the urban economy
Land markets, speculation, and governments play significant roles in the functioning of the urban
economy. Here are some key aspects related to these topics:

Land Markets: Land markets refer to the buying, selling, and leasing of land within an urban area.
Land is a crucial economic resource, and land markets facilitate its allocation and use. These
markets involve various participants, including developers, investors, homeowners, and
businesses, who engage in transactions to acquire or transfer land rights.
Efficient land markets promote economic development by enabling the allocation of land to its
highest and best use. Well-functioning land markets allow for the efficient transfer of land from
lower-value to higher-value uses, fostering urban growth and investment.

Speculation: Speculation in the land market refers to the practice of purchasing land with the
expectation of future price appreciation. Speculators buy land with the intention of selling it at a
higher price in the future, often driven by anticipated changes in market conditions, infrastructure
development, or zoning changes that may increase its value.
Speculation can have both positive and negative effects on the urban economy. On one hand, it
can bring liquidity to the land market and incentivize investments in urban development.
Speculators may identify opportunities for redevelopment or revitalization in undervalued areas,
leading to urban regeneration and economic growth.

On the other hand, excessive speculation can contribute to land price volatility, inflate land values,
and create affordability challenges. It may also lead to land hoarding, where speculators withhold
land from development, waiting for further price appreciation. This can hinder the efficient use of
land and impede urban growth.

Governments: Governments play a crucial role in shaping land markets and managing urban
development. They establish policies, regulations, and planning frameworks that influence land
use, zoning, infrastructure development, and the functioning of the land market.
Governments are responsible for land use planning, determining zoning regulations, and setting
development guidelines to ensure orderly urban development and meet social, economic, and

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environmental objectives. They may also acquire land for public purposes, such as infrastructure
projects or public amenities.

Government interventions in the land market aim to address market failures, promote equitable
access to land, and manage urban growth. These interventions can include measures such as land
taxation, land use regulations, affordable housing policies, urban growth boundaries, and
development impact fees. The effectiveness of government policies in achieving desired outcomes
depends on their design, implementation, and enforcement.

Government actions can also influence land speculation. Measures such as land value taxation,
speculation taxes, or regulations on landholding and land use can be implemented to discourage
speculative behavior and promote productive land use.

Overall, the interplay between land markets, speculation, and government policies is complex and
can significantly impact the urban economy. Balancing the interests of different stakeholders,
promoting efficient land use, and ensuring equitable access to land are essential considerations for
governments in managing urban land markets.
3.5 Coping mechanisms of the poor; informal land markets
Coping mechanisms of the poor and informal land markets are interconnected aspects that often
arise in the context of urban areas. Let's explore each of them:

Coping Mechanisms of the Poor: The poor in urban areas often face challenges related to housing,
access to land, and economic opportunities. To cope with these challenges, they develop various
strategies, including:
a. Informal Settlements: The poor may establish informal settlements, also known as slums or
shantytowns, on land that is typically not legally recognized for housing purposes. These
settlements often lack basic infrastructure and services but provide affordable shelter and
proximity to employment opportunities.

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b. Substandard Housing: Poor households may live in substandard or overcrowded housing units
due to financial constraints. They may share living spaces with multiple families or rent rooms in
informal dwellings.

c. Informal Economy: Many poor individuals engage in the informal economy, which includes
activities such as street vending, informal labor, or small-scale entrepreneurship. The informal
economy provides a source of income for the poor when formal employment opportunities are
limited.

d. Informal Social Networks: The poor rely on informal social networks, such as extended family
and community support systems, for mutual assistance, sharing resources, and accessing social
services.

e. Housing Informality: Poor households may occupy or squat on land without clear legal tenure.
They may lack formal ownership or tenancy rights, making them vulnerable to eviction or
displacement.

Informal Land Markets: Informal land markets refer to transactions and arrangements around land
that operate outside formal legal frameworks. These markets emerge in response to the limited
availability of affordable land, inadequate formal land allocation processes, and the inability of the
poor to access formal land markets. Informal land markets have several characteristics:
a. Non-Regulated Transactions: Informal land markets involve informal agreements, often lacking
legal documentation and oversight. Land transactions may be based on customary practices or
informal understandings between buyers and sellers.

b. Lack of Formal Ownership: Land in informal markets may lack clear legal ownership or formal
title. Buyers may acquire land through informal means, such as through community leaders or
local power structures.

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c. Informal Subdivisions: Informal land markets often lead to the subdivision of land into smaller
plots without proper planning or infrastructure provisions. These subdivisions may lack basic
services like water, sanitation, and electricity.

d. Vulnerability to Exploitation: Participants in informal land markets, particularly the poor, are
vulnerable to exploitation, fraud, and forced evictions. Lack of legal protection and tenure security
can leave them at risk of losing their homes or investments.

e. Parallel Systems: Informal land markets exist alongside formal land markets, often as a response
to gaps and limitations in formal systems. They can be seen as a coping mechanism for the poor
to access land and shelter when formal options are limited or unaffordable.

Informal land markets pose challenges to urban governance and planning. However, they also
fulfill a critical role in meeting the shelter needs of the poor and accommodating urban growth in
the absence of formal alternatives.

Efforts to address the challenges associated with informal land markets often involve a
combination of regularization programs, upgrading of informal settlements, and providing secure
tenure for the poor. These interventions aim to improve living conditions, ensure tenure security,
and integrate informal settlements into the formal urban fabric.
3.6 Bringing the poor into the formal land market
Bringing the poor into the formal land market is a crucial aspect of urban development and poverty
alleviation efforts. It involves creating pathways for the poor to access secure and affordable land
through formal channels. Here are some strategies and approaches to achieve this:

Secure Tenure: Providing secure land tenure is essential to bringing the poor into the formal land
market. Formalizing land rights through legal mechanisms, such as land titling or registration
systems, can help protect the rights of the poor and provide them with the security necessary to
invest in and develop their properties.

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Affordable Housing Programs: Implementing affordable housing programs can make formal
housing options accessible to the poor. This can include initiatives such as subsidized housing
schemes, social housing projects, or housing microfinance programs that offer affordable financing
options for low-income households.

Land Regularization: Regularizing informal settlements involves legalizing and upgrading these
settlements by providing basic infrastructure, services, and secure tenure to residents.
Regularization programs can help integrate informal settlements into the formal urban fabric,
improving living conditions and enabling access to formal land markets.

Participatory Planning: Engaging the poor and marginalized communities in participatory planning
processes is crucial for inclusive urban development. Including their perspectives, needs, and
aspirations in urban planning can help ensure that the formal land market addresses their specific
requirements and provides equitable opportunities.

Financial Inclusion: Enhancing financial inclusion for the poor can facilitate their participation in
the formal land market. This can involve initiatives such as microfinance programs, housing
savings schemes, or access to affordable credit, enabling them to invest in land or housing.

Supportive Policies and Regulations: Governments need to adopt policies and regulations that
facilitate the inclusion of the poor in the formal land market. This can include measures such as
simplified land registration procedures, exemptions or reductions in transfer taxes for low-income
buyers, or preferential land allocation for affordable housing projects.

Capacity Building and Awareness: Building the capacity of the poor to navigate the formal land
market is crucial. Providing training, information, and support on topics such as land rights,
property registration, and financial literacy can empower the poor to engage effectively in formal
land transactions.

Public-Private Partnerships: Collaborations between governments, private sector entities, and non-
profit organizations can play a significant role in bringing the poor into the formal land market.

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Public-private partnerships can leverage resources, expertise, and innovative approaches to
develop affordable housing projects, improve infrastructure in informal settlements, and facilitate
access to formal land markets for the poor.

By implementing these strategies and approaches, governments and stakeholders can work
towards creating an inclusive and equitable formal land market that provides opportunities for the
poor to access secure and affordable land, ultimately contributing to poverty reduction and
sustainable urban development.

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 Chapter 4
Urban Poverty and public policy
4.1 Some basic concepts of urban poverty
Urban poverty refers to the condition of individuals or households living in urban areas who
experience inadequate access to resources, services, and opportunities, leading to low living
standards and limited socio-economic mobility. Here are some basic concepts related to urban
poverty:

Absolute Poverty: Absolute poverty refers to a severe deprivation of basic human needs, including
access to food, shelter, clean water, healthcare, and education. In an urban context, absolute
poverty manifests when individuals or households lack these essential resources and live below
the poverty line, often struggling to meet their basic needs.

Relative Poverty: Relative poverty refers to a condition where individuals or households have
significantly lower living standards compared to the average population within their society. In
urban areas, relative poverty is determined by comparing the income or consumption levels of
urban residents with the general urban population.

Income Poverty: Income poverty is a measure of poverty based on the level of income or earnings
of individuals or households. It assesses the extent to which their income falls below a defined
poverty line. In urban areas, income poverty is often measured using indicators such as the
percentage of the population living below the urban poverty line or earning less than a certain
threshold.

Multidimensional Poverty: Multidimensional poverty recognizes that poverty is not solely about
income or consumption levels but also encompasses various dimensions of deprivation. It
considers factors such as access to education, healthcare, housing, sanitation, social protection,
and employment opportunities. Multidimensional poverty measures provide a more
comprehensive understanding of poverty in urban areas.

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Informal Sector: The informal sector refers to economic activities and employment that are not
regulated or protected by formal labor laws and social security provisions. Informal sector workers
often lack job security, social benefits, and legal protection. Many urban poor individuals work in
the informal sector, engaging in activities such as street vending, small-scale trade, or informal
labor.

Spatial Concentration of Poverty: Urban poverty is often spatially concentrated in specific

neighborhoods or areas within a city. These areas, commonly known as slums, squatter
settlements, or informal settlements, tend to have inadequate infrastructure, limited access to
services, and poor living conditions. The spatial concentration of poverty can perpetuate social and
economic inequalities within urban areas.

Social Exclusion: Social exclusion refers to the marginalization and isolation of certain groups
from the benefits and opportunities available to the broader society. Urban poverty is often
accompanied by social exclusion, where the poor face discrimination, limited social networks, and
reduced access to public services, education, healthcare, and employment opportunities.

Understanding these basic concepts of urban poverty is essential for formulating effective policies
and interventions to address the challenges faced by the urban poor. By adopting a
multidimensional approach and addressing the underlying causes of poverty, urban areas can work
towards reducing and eventually eliminating urban poverty, promoting inclusive and sustainable
urban development.
4.2 Causes of urban poverty
Urban poverty is a complex issue influenced by a variety of interconnected factors. Understanding
the causes of urban poverty is crucial for designing effective strategies to address it. Here are some
key causes:
Economic Factors:
a. Lack of Employment Opportunities: Urban poverty often stems from inadequate access to
formal employment opportunities. The urban poor may face challenges such as limited job
availability, low wages, and high unemployment rates.

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b. Informal Economy: Many urban poor individuals work in the informal sector, which lacks legal
protection and offers low-income earning potential.
c. Economic Inequality: Income disparities and unequal distribution of wealth contribute to urban
poverty. The concentration of wealth in certain sectors or among a specific group can exacerbate
poverty levels.

Rapid Urbanization:
a. Rural-Urban Migration: Rural individuals migrate to urban areas in search of better economic
prospects. However, the lack of preparedness to accommodate the influx of migrants often leads
to overcrowded cities, strained resources, and increased urban poverty.
b. Housing Shortages: Rapid urbanization can result in a shortage of affordable housing, leading
to the proliferation of informal settlements and slums where the urban poor reside.

Social Factors:
a. Discrimination and Social Exclusion: Discrimination based on factors such as ethnicity, gender,
or caste can contribute to the marginalization and social exclusion of certain groups, leading to
their higher representation among the urban poor.
b. Lack of Social Safety Nets: Insufficient social protection programs, including healthcare,
education, and social assistance, can perpetuate urban poverty by hindering individuals' ability to
access essential services.

Limited Access to Basic Services:

a. Inadequate Infrastructure: Poor neighborhoods often lack basic infrastructure such as water
supply, sanitation, and electricity, adversely affecting the quality of life for residents.
b. Limited Access to Education and Healthcare: The urban poor may face barriers in accessing
quality education and healthcare services due to financial constraints, distance, or discriminatory
practices.

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Land and Housing Issues:
a. Informal Land Markets: Limited access to formal land markets and high land prices push the
urban poor towards informal land markets, resulting in insecure land tenure and inadequate
housing conditions.
b. Forced Evictions: Poor households in informal settlements are vulnerable to forced evictions
due to land development, lack of tenure security, or conflicts with authorities.

Governance and Policy Factors:

a. Weak Urban Governance: Inefficient governance systems, corruption, and inadequate urban
planning can hinder the implementation of effective poverty reduction policies and programs.
b. Lack of Pro-Poor Policies: Absence of policies and interventions specifically targeted towards
addressing urban poverty can contribute to its persistence.
4.3 The three major aspects of poverty
Poverty is a multidimensional concept that encompasses various aspects of deprivation and lack
of well-being. While there are several dimensions to poverty, three major aspects commonly
considered are:

Income Poverty: Income poverty refers to a lack of sufficient income or resources to meet basic
needs and participate fully in society. It is often measured by comparing an individual or
household's income or consumption level with a defined poverty line or threshold. Income poverty
focuses on the economic aspect of poverty and assesses the extent to which individuals or
households lack the financial means to access adequate food, shelter, healthcare, education, and
other essential goods and services.

Human Development Poverty: Human development poverty emphasizes the lack of capabilities
and opportunities that individuals have to lead a fulfilling life. It takes into account factors such as
education, health, and standard of living beyond just income. Human development poverty
measures consider indicators like access to education, healthcare, nutrition, clean water, sanitation,
and other essential services. It recognizes that poverty is not only about material deprivation but
also about the ability to live a life with dignity and achieve one's full potential.

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Social Exclusion: Social exclusion refers to the marginalization and isolation of individuals or
groups from participating fully in social, economic, and political life. It encompasses the lack of
access to social networks, opportunities, and resources that can lead to the exclusion of individuals
from mainstream society. Social exclusion can be driven by factors such as discrimination, unequal
power relations, and limited access to education, employment, healthcare, housing, and
participation in decision-making processes. It highlights the social and relational aspects of poverty
and the importance of addressing social barriers and inequalities.

These three major aspects of poverty income poverty, human development poverty, and social
exclusion provide a broader understanding of poverty beyond mere income or material deprivation.
They highlight the importance of addressing economic, social, and structural factors that contribute
to poverty and the need for comprehensive approaches to poverty reduction that encompass a range
of interventions, policies, and investments.
4.4 General policy issues toward urban poverty
Addressing urban poverty requires comprehensive policies that tackle the underlying causes and
empower individuals and communities to overcome poverty. Here are some general policy issues
to consider when formulating strategies for urban poverty reduction:

1. Integrated Urban Planning: Adopt an integrated approach to urban planning that takes into
account the needs and aspirations of the urban poor. Develop inclusive urban development plans
that prioritize access to affordable housing, basic services, and employment opportunities. Ensure
that urban infrastructure investments are directed towards underserved areas and informal
settlements.

2. Affordable Housing: Implement policies and programs to increase the availability of affordable
housing options for the urban poor. This can include initiatives such as subsidized housing
schemes, social housing projects, and partnerships with the private sector to develop affordable
housing units. Provide secure tenure and access to basic services in informal settlements through
land regularization programs.

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3. Livelihood Promotion: Create economic opportunities and promote livelihood development for
the urban poor. This can involve supporting entrepreneurship, skills training, and vocational
education programs tailored to the needs of the local labor market. Facilitate access to credit and
microfinance to enable the poor to start or expand their businesses.

4. Social Protection: Establish social protection programs that provide a safety net for the urban
poor. This can include cash transfer programs, social insurance schemes, and targeted assistance
for vulnerable groups such as children, the elderly, and people with disabilities. Ensure that social
protection measures are accessible, well-targeted, and responsive to the specific needs of urban
populations.

5. Access to Basic Services: Improve access to quality education, healthcare, water supply,
sanitation, and other essential services for the urban poor. Invest in the development of education
and healthcare infrastructure in underserved areas. Enhance the provision of safe drinking water
and sanitation facilities in informal settlements.

6. Empowerment and Participation: Empower the urban poor by promoting their participation in
decision-making processes that affect their lives. Encourage community participation, involve
local organizations, and create platforms for dialogue and engagement. Support community-driven
initiatives that enable the urban poor to actively contribute to the development of their
neighborhoods.

7. Governance and Institutional Strengthening: Strengthen urban governance systems to ensure

effective implementation of poverty reduction policies. Enhance transparency, accountability, and
efficiency in the delivery of public services. Build the capacity of local authorities and institutions
to plan and manage urban development in a participatory and inclusive manner.

8. Data and Monitoring: Develop robust data collection systems and monitoring mechanisms to
track progress in poverty reduction and inform evidence-based policymaking. Regularly collect
and analyze data on urban poverty, including disaggregated information on different dimensions
of poverty, to identify trends, gaps, and areas that require targeted interventions.

15
It is important to adapt these policy issues to the specific context and challenges of each urban
area. Tailoring policies to address the unique needs and circumstances of the urban poor will
contribute to more effective and sustainable poverty reduction efforts.

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