The Value of Squatter Dwellings in Developing Countries.

A great proportion of urban dwellers in developing countries live in illegal squatter communities. Recent studies estimate that some 20%-30% of the population of the largest Asian cities inhabit so-called uncontrolled settlements. Similar figures obtain for African and Latin American cities, although over a wider range. Despite the fact that they are frequently made of makeshift and dilapidated materials, do not have access to basic services, and are under constant threat of being razed by the government authorities, squatter dwellings, like those in the established legal (or formal) sector, are economic goods and can be characterized by a market value. Thus, given the relative size of the population that they shelter, any analysis of urban housing markets in developing countries which relied solely on statistics on the formal sector would most likely be misleading. Social scientists have begun to dispel the traditional notion that squatter housing units are more than temporary, valueless structures which are shoddily built on vacant land. However, figures have not been documented and relatively little is known about this "informal" market. How much are these squatter homes worth? What determines the value of these dwellings? Does this market differ significantly from that found in the formal sector? These questions have important implications for policy measures, such as urban development projects, which are intended to improve the lot of the low-income urban population. This paper is intended as a first step in filling this gap in the literature. Aside from presenting estimates on the value of squatter dwellings for a sample in the Philippines, we will also derive the statistical relationship between value and housing characteristics (such as the availability of certain services). The resulting coefficients can be interpreted as the marginal prices of these characteristics. This exercise has some direct policy implications. In particular, the valuations of... [ABSTRACT FROM AUTHOR]