real estate markets and poverty alleviation in namibia's urban informal settlements

281 Pages·2009·1.9 MB·English

by  Manya Mooya

REAL ESTATE MARKETS AND POVERTY ALLEVIATION IN NAMIBIA’S
URBAN INFORMAL SETTLEMENTS: AN INSTITUTIONAL APPROACH

BY

MANYA MAINZA MOOYA

Submitted in fulfilment of a part of the requirement for the degree

PHILOSOPHIAE DOCTOR
(REAL ESTATE)

in the Faculty of Engineering, Built Environment and Information Technology,
University of Pretoria

January 2009

©© UUnniivveerrssiittyy ooff PPrreettoorriiaa
SUMMARY

REAL ESTATE MARKETS AND POVERTY ALLEVIATION IN NAMIBIA’S URBAN
INFORMAL SETTLEMENTS: AN INSTITUTIONAL APPROACH

by

MANYA MAINZA MOOYA

SUPERVISOR: PROF. CHRIS E. CLOETE
DEPARTMENT: CONSTRUCTION ECONOMICS
DEGREE: PHILOSOPHIAE DOCTOR (REAL ESTATE)

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
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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.

Key words: Property rights, transaction costs, poverty alleviation, real estate markets,
informal settlements, urban, capital accumulation, Windhoek, policy, institutions
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ACKNOWLEDGEMENTS

This thesis is a culmination of almost half a decade of arduous work. I wish to
acknowledge the contribution of the following without whose input it would not have
been possible to complete it. Firstly, my supervisor Prof. C. E Cloete for the overall
guidance, and for giving me wide latitude to explore ideas for which this thesis is the
outcome. Secondly, to the University of Cape Town for giving me the platform, leave
and substantial funding for the research. I wish in particular to record my gratitude to
Dr. Sabie Surtee the UCT ‘point man’ for the Carnegie Foundation for all the carrots
and sticks, and to Dr. Lyn Holness of the Emerging Researcher Programme for the
strategic vision.

Finally but by no means the least my profound gratitude goes to my wife Brenda, and
the kids Musinse and Mumisho for their forbearance during my many hours of virtual
absence. This thesis is dedicated to them.

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TABLE OF CONTENTS

SUMMARY....................................................................................................................i
ACKNOWLEDGEMENTS.........................................................................................iii
TABLE OF CONTENTS..............................................................................................iv
LIST OF TABLES.....................................................................................................viii
LIST OF FIGURES.......................................................................................................x
LIST OF ACRONYMS.............................................................................................xiii

CHAPTER ONE: INTRODUCTION............................................................................1
1.1 Background..............................................................................................................1
1.2 Research Problem....................................................................................................2
1.3 Conceptual/Analytical Framework..........................................................................6
1.3.1 Transaction Costs.................................................................................................6
1.3.2 Property Rights.....................................................................................................7
1.3.3 Institutions.............................................................................................................7
1.4. Aim, Objectives and Hypotheses............................................................................8
1.5 Preliminary Literature Review.................................................................................9
1.6 Originality and Contribution of Research..............................................................11
1.7 Methodology..........................................................................................................12
1.8 Terminology...........................................................................................................12
1.9 Scope and Limitation.............................................................................................13
1.10 Structure of Thesis...............................................................................................13
CHAPTER TWO: REAL ESTATE MARKETS AND POVERTY ALLEVIATION -
CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW............................14
2.1 Introduction………………………………………………………………………14
2.2 Key Concepts in the New Institutional Economics...............................................14
2.2.1 Institutions...........................................................................................................15
2.2.2 Transaction Costs...............................................................................................17
2.2.3 Property Rights...................................................................................................19
2.3 Institutional Analysis and Real Estate Markets.....................................................23
2.3.1 Nature of Real Estate Markets............................................................................24
2.3.2 Application of NIE to Analysis of Real Estate Markets......................................26
2.4 Real Estate Markets and Poverty: A Conceptual Framework for Research..........29
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2.5 Hernando de Soto and ‘The Mystery of Capital’...................................................35
2.6 Real Estate and Poverty Alleviation: Theory and Evidence..................................38
2.7 Knowledge Gaps....................................................................................................47
2.8 Research Agenda...................................................................................................48
2.9 Concluding Summary............................................................................................51
CHAPTER 3 URBANISATION, INFORMAL SETTLEMENTS AND POVERTY
ALLEVIATION - CONCEPTS AND POLICIES.......................................................52
3.1 Introduction............................................................................................................52
3.2 Urbanisation and Growth of Informal Settlements................................................52
3.3 Dealing with Urban Informal Settlements: Evolution of Policy............................58
3.3.1 Public Housing – 1950s and 1960s....................................................................58
3.3.2 Sites and Services – 1970s..................................................................................60
3.3.3. Upgrading – 1980s............................................................................................60
3.3.4 Emergent ‘Paradigms’ – 1990s to present.........................................................61
3.3.5 Recent Initiatives.................................................................................................62
3.3.6 Concluding Comments........................................................................................66
3.4 Dealing with Urban Poverty: Concepts and Policy...............................................68
3.4.1 The Meaning of Poverty......................................................................................68
3.4.2 The Incidence of Urban Poverty.........................................................................70
3.4.3 Causes of Urban Poverty....................................................................................71
3.4.4 The Capital Asset Framework............................................................................73
3.4.5 Dealing with Urban Poverty: Concluding Summary..........................................77
3.5 Informal Real Estate Markets and Poverty Alleviation: Review of Policy
Framework...................................................................................................................78
3.6 Conclusions............................................................................................................84
CHAPTER 4: METHODOLOGY...............................................................................86
4.1 Introduction............................................................................................................86
4.2 Methodological Challenges in Informal Real Estate Market Research.................86
4.3 Methodology in Economics: Contrasting Orthodox and Heterodox Approaches.89
4.4 Methodology in NIE Research...............................................................................93
4.4.1 Challenges of Doing Institutional Analysis........................................................94
4.4.2 The Institutional Analysis and Development (IAD) Framework........................95
4.4.3 Empirical Work in NIE Research.......................................................................99
4.5 Study Research Methodology..............................................................................101
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4.5.1 Dealing with Conceptual and Practical Challenges........................................101
4.5.2 Methodological Approach................................................................................102
4.5.3 Case Study Research.........................................................................................105
4.6 Research Design...................................................................................................106
4.7 Research Execution..............................................................................................109
4.8 Concluding Summary..........................................................................................117
CHAPTER 5: NAMIBIA, WINDHOEK AND KATUTURA: A SOCIO-ECONOMIC
PROFILE...................................................................................................................118
5.1 Introduction..........................................................................................................118
5.2 Namibia: Geographical, Historical and Economic Context.................................118
5.3 Urbanisation in Namibia......................................................................................119
5.4 Poverty in Namibia..............................................................................................127
5.4.1 Profile of Poverty..............................................................................................127
5.4.2 Causes of Poverty.............................................................................................129
5.5 The City of Windhoek.........................................................................................131
5.5.1 General History................................................................................................131
5.5.2 Settlement History.............................................................................................131
5.5.3 Urbanisation and the Growth of Informal Settlements.....................................136
5.6 Katutura................................................................................................................142
5.7 Concluding comments.........................................................................................146
CHAPTER 6: PRESENTATION OF DATA............................................................148
6.1 Introduction..........................................................................................................148
6.2 Statistical Tests....................................................................................................148
6.3 Characteristics of Sample…………….……………………………… ………...149
6.4 General Characteristics of Market Activity.........................................................154
6.5 Property Rights....................................................................................................172
6.6 Market Information and Outcomes......................................................................175
6.7 Incidence of Property Disputes............................................................................188
6.8 Rental Markets.....................................................................................................189
CHAPTER 7: ANALYSIS AND DISCUSSION......................................................196
7.1 Introduction..........................................................................................................196
7.2 Aims, Objectives, Hypotheses and Conceptual Framework................................196
7.3 General Nature of Real Estate Markets...............................................................199
7.4 The Market Process..............................................................................................208
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7.5 The Effects of Property rights..............................................................................213
7.6 Rental Markets.....................................................................................................218
7.7 Evaluation of Hypotheses....................................................................................220
7.8 Informal Real Estate Markets and Poverty Alleviation: Synthesis and Discussion
....................................................................................................................................221
CHAPTER 8: SUMMARY, CONTRIBUTION AND FURTHER RESEARCH.....234
8.1 Summary of Thesis..............................................................................................234
8.2 Main Findings, Conclusions and Recommendations...........................................237
8.3 Contribution of Thesis to Knowledge..................................................................238
8.3.1 Contribution to Theory Development...............................................................239
8.3.2 Contribution to Methodology............................................................................240
8.3.3 Contribution to Policy Development................................................................240
8.3.4 Contribution to the Empirical Literature..........................................................241
8.5 Limitations of Study and Areas for Further Research.........................................242
REFERENCES..........................................................................................................244
APPENDIX A………………………………………………………………………259
APPENDIX B………………………………………………………………………264

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LIST OF TABLES

Table 1.1 Structure of thesis........................................................................................13
Table 2.1 The institutional hierarchy of real estate markets........................................27
Table 3.1 Priority issues in land management under the NUMP.................................64
Table 3.2 Income poverty by region (absolute figures), selected years 1987-98........71
Table 3.4 Income poverty by region (proportional figures), selected years 1987-98..71
Table 4.1 Numbers of households interviewed, by property rights type and settlement.
....................................................................................................................................110
Table 4.2 Households and population by age group…………………...……...……112
Table 4.3 Households and population by main source of income.............................113
Table 4.4 Households and population by type of housing unit..................................114
Table 5.1 Population distribution by area..................................................................121
Table 5.2 Life-time migration....................................................................................122
Table 5.3 Urban population by urban center.............................................................124
Table 5.4 Distribution of households by tenure type.................................................125
Table 5.5 Distribution of households by type of dwelling.........................................126
Table 5.6 Annual household consumption and income.............................................129
Table 5.7: Population growth of Windhoek...............................................................137
Table 5.8: Demography of Windhoek.......................................................................138
Table 5.9: Socio-economic profile of Windhoek.......................................................138
Table 5.10: Growth of population in informal settlements........................................140
Table 6.1 Sex of respondents.....................................................................................150
Table 6.2 Age of respondents....................................................................................151
Table 6.3 Education level of respondents .................................................................152
Table 6.4 Employment status.....................................................................................152
Table 6.5 Monthly incomes in N$.............................................................................153
Table 6.6 Type of tenure............................................................................................154
Table 6.7 Method of property Acquisition................................................................155
Table 6.8 Source of property Acquisition..................................................................157
Table 6.9 Prior residence...........................................................................................159
Table 6.10 Period of residence in Windhoek.............................................................160
Table 6.11 Period since acquisition of property........................................................161
Table 6.12 Knowledge of local sale activity..............................................................162
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Table 6.13 Knowledge of local rental activity...........................................................164
Table 6.14 Source of property information................................................................165
Table 6.15 Number of properties considered.............................................................167
Table 6.16 Key decision factors in property acquisition……………………………169
Table 6.17 Sources of finance....................................................................................170
Table 6.18 Additional costs.......................................................................................171
Table 6.19 Likely buyers if property is sold..............................................................171
Table 6.20 Perception of property rights...................................................................173
Table 6.21 Threats to property right..........................................................................174
Table 6.22 Methods of property rights protection.....................................................175
Table 6.23 Availability of documents........................................................................175
Table 6.24 Cost of plot in N$.....................................................................................176
Table 6.25 Cost of building in N$.............................................................................178
Table 6.26 Property purchase price in N$.................................................................180
Table 6.27 Estimated property sale price in N$.........................................................180
Table 6.28 Basis of sale price knowledge..................................................................181
Table 6.29 House size (in m2)....................................................................................182
Table 6.30 Main building material.............................................................................184
Table 6.31 Comparison with previous property........................................................186
Table 6.32 Future plans for property.........................................................................187
Table 6.33 Constraints to future plans.......................................................................187
Table 6.34 Likely spending of proceeds from property sale.....................................188
Table 6.35 Monthly rent paid in N$...........................................................................191
Table 6.36 Estimated rental price in N$....................................................................191

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