Factors affecting the location of formal and informal housing

Factors affecting the location of formal and informal housing

• Land-use planning (e.g., restrictive land use, zoning)

• Developers (i.e., government and private developers)

• Land price (i.e., cost of land for formal housing)

• Housing financial support (i.e., finance schemes for the poor, improved access to finance for developers)

1. Land-use planning

Planning authorities typically practice zoning as a control tool for ensuring that the built environment is well developed.

Zoning restricts the type of activities and land-use permitted on specific sites. This is done to shape the layout of cities and enable various types of developments.

Outcome

Formal housing thus occupies zones and areas that are designated for housing development.  Informal housing, on the other hand, are not part of the land-use planning and therefore can occur regardless of land use planning guidelines.

2. Developers (eg. government and private developers)

Private developers aim for profit and thus would pick sites that are most commercially viable.  The government, on the other hand, tend to consider people’s needs more than profit alone when building public housing.

Outcome

Informal housing tend to occupy locations near large housing or industrial developments to benefit from existing infrastructure such as piped water, electricity or roads.

3. Land prices in cites

Formal housing in cities are expensive due to high land prices in cites. 

Outcome

Informal housing tend to spring up to accommodate the rural-urban migrants or the local urban poor who cannot afford the expensive formal housing. To enable more to be able to afford formal housing in cites, governments in some countries regulate land prices to limit the growth of informal housing settlements in the cities.

4. Availability of housing financial support for developers

Improved access to financial support for developers can lower building costs.  This will enable developers to sell houses at affordable prices.

Outcome

The financial support to developers may encourage developers to build more affordable formal housing and prevent housing shortage.

Cities lacking such financial support for developers often have more informal housing settlements as formal housing are out of reach for many.

Mumbai is a city with limited land space. A high demand for space is likely to lead to high land prices. When land prices are high, houses that are built on the land would have to be sold at higher prices as well, which means that these houses remain unaffordable to the majority of the population living in Mumbai. This has resulted in people building their own houses.