Cost and benefit analysis of legalization versus demolition of illegal buildings

The main topic of the M.Sc. thesis is illegal building. Illegal building constitutes building outside of commonly accepted norm – building and planning regulations, which represent societal and expert consensus of land use. \ud \ud The main theme of master thesis concerns illegal building of houses, which still represent a big part of illegal building in Slovenia. When such a building is discovered by a building inspector an enforcement notice is served to the investor. The main goal of the building inspector is to achieve legality of the site in question through demolition of the illegal building. However, the investor can also achieve legality through regularisation – a process, in which the investor obtains suitable building permit after the building is already built. Each of the two options encompasses different costs and different benefits, but above all yields different results. The first option – demolition of illegal building – yields as its result the return to previous state. The second option offers absolution by obtaining necessary permits after the building work is done. \ud Master thesis analyses costs and benefits of both options of achieving legality and calculates economic costs and benefits in two case studies. The results are analysed and compared to prove that regularisation of houses on land that was not previously meant to be developed causes a lot of costs to the local municipality, which dues, paid by the investor, fail to match. The results of the analysis show that this hypothesis is only partially true, because local municipality has every power to ensure that the costs of regularisation remain in the domain of the investor. \ud The analysis also confirmed that in urbanized areas, costs of demolition are higher than costs of regularisation, but also showed that, outside urban areas, the costs of demolition and regularisation are approximately on the same level.\u