Conflicts in informal urban land: a theoretical framework

Abstract

Our research focuses on the relationship between real estate markets and evictions of informal settlements in cities. We investigate how poor enforcement of land property rights combined to rising real estate value can contribute to the use of alternative violent solutions, such as fires, in land property rights disputes. Based on the literature on evictions and on anecdotal evidence on the use of violence and fire to evict squatters, we hypothesize that, as house prices increase around invaded lands or buildings, owners seek to claim them back via legal institutions. However, if the legal costs are too high - for instance, if courts are slow or tend to favor squatters -, violence may arise as a solution to weaken invaders and anticipate repossession. To ultimately test these hypotheses empirically, we first conceive a theoretical model to explain the mechanisms that lead to the use of violent actions to push for eviction. We devise such model drawing from the literature on optimal stopping decisions for real options, which essentially seeks to find the optimal timing to invest on a project. In our case, our model will be focused on the timing for exercising a violent option, which will depend on two main factors: first, the judicial uncertainty about both who will win the repossession suit and the duration of the legal process; second, the evolution of average real estate value around a slum, accounting for the opportunity costs of waiting for a court decision. Once we have theoretical implications, we will apply this model to the case of slum fires in São Paulo, often claimed as a strategy to precipitate evictions in high real estate value areas. To do this, we will use the data on fires, eviction lawsuits and house prices that we have been organizing as part of our FAPESP project in Brazil; and the focus of our empirical work will be to identify the mechanisms of our model using both structural estimation and sufficient statistics to infer the size and sign of our parameters of interest. By the end, we expect to shed light on the heterogeneities that explain when there is escalation of violence in urban land conflicts and how some exogenous public policies affecting court speed and zoning laws can affect the probability of conflict. We also expect this to draw more attention to urban land conflicts, which are still rather unexplored by both empirical and theoretical literatures in Economics. Finally, we wish to contribute to the land conflict literature by proposing a real options conceptual approach that allows us to better understand the dynamic aspect of escalating tension in disputes. (AU)