Squatters, Pirates, and Entrepreneurs: Is Informality the Solution to the Urban Housing Crisis?

Giving the poor legal title to the lands they occupy extra-legally (informally) has been widely promoted by the World Bank and by best-selling author Hernando de Soto as a means of addressing both poverty and the scarcity of affordable housing in the urban centers of the global South. Using Bogota, Colombia, as a case study, this article interrogates de Soto\u27s claims about the causes of informality and the benefits of formal title. The article concludes that de Soto\u27s analysis is problematic in three distinct respects. First, de Soto exaggerates the benefits of formal title and fails to consider its risks. Second, de Soto constructs informality as a uniquely Third World phenomenon, and neglects to address the growth of poverty, inequality, and informality in both the global North and the global South as a consequence of deregulation, privatization, and other neoliberal economic reforms that de Soto advocates. Third, de Soto\u27s attribution of informality to the failure of law in the global South reinforces the narrative of Latin American inferiority, thereby justifying the imposition of disadvantageous market-oriented legal reforms on Latin American nations and discrediting Latin America legal innovations that might better alleviate poverty and address the shortage of affordable housing. Contrary to de Soto\u27s policy prescriptions, the advantages and disadvantages of formality and informality will vary from location to location, and must be evaluated on a case by case basis. De Soto\u27s ideas are dangerous to the extent that they persuade policy-makers that the free market will solve the problem of poverty and housing scarcity if the urban poor are simply given legal title to the lands they currently occupy informally