One role of government in a market economy is to enforce property rights. Roughly 10 percent of

Question:

One role of government in a market economy is to enforce property rights. Roughly 10 percent of the world’s population lives in urban squatter settlements, with little security in housing. A household that occupies public land could be relocated at any time, and would lose all of its immobile possessions, including a dwelling the household built and maintained. The insecurity in tenure discourages investment in housing construction and maintenance.

One policy option is property titling, that is, granting ownership of a dwelling to its occupant. A person who owns a dwelling reaps all the benefits of regular repair and maintenance, including any increase in market value, so granting property rights increases the incentive for property maintenance. A study of a program in Peru that granted 1.2 million property titles to urban squatters on public land provides evidence that urban property titling increases investment in housing repair and maintenance. The substantial increase in housing renovation improved the housing conditions of the urban households.

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