Property rights and market behavior in the low‐income housing sector: Evidence from Chile

Abstract

Recent decades have seen a strong commitment in development theory and practice toward the idea of promoting homeownership among low-income families, partly based on the idea that property formalization constitutes an important vehicle for social mobility and economic development. However, the empirical evidence on this theory is not conclusive. This paper aims to explore this idea using evidence from Chile, a country that has shown high success in moving low-income families from the informal to the formal housing sector. The data for the analysis comes from a comprehensive survey conducted in 2008 with a representative sample of two groups of low-income households in Santiago: The first group living in an irregular settlement and the second living in subsidized formal housing. Through the use of statistical methods that allow comparison of these samples (matching strategies), we find that market behavior among both groups are not considerably different. The analysis shows that there are no statistically significant differences between the two groups with respect to savings and investments in their homes. The only relevant difference we find is that individuals living in formal housing have more access to loans from commercial stores relative to informal dwellers. We argue that the type of geographical relocation to formal housing may affect the market behavior of low-income owners more than tenure security, in a direction that does not necessary benefit their socioeconomic situation.