Abstract and Keywords
Informal settlements exist with formal settlements and are structurally interdependent with them. Housing informality also emerges as a consequence of certain institutional and other constraints on the urban land market. This article elaborates on these complex interdependencies and sheds light on potential policy options to mitigate informality itself to provide a new framework for dialogue between urban planners and economists in Third World cities. It begins with a review of the multiple forms that informality takes and the problems it poses to individuals and society. It then describes how urban economic theory has dealt with the issue, highlighting the failure of conventional models. Following this, it describes the rational housing choices of low income households and how current policies intended to remedy the results of these decisions instead aggravate informality. Finally, the article offers some new ways to apply conventional land policy instruments to achieve this goal.
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