What Is Informal Housing? Where a Quarter of the World's City Dwellers Live
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Around a billion people live in housing built outside the formal system, without planning permission, building approval or secure legal title. That is not a marginal category but the normal way cities grow in much of the world, and treating it as a failure to be cleared has repeatedly produced worse outcomes than treating it as a starting point to be improved.
What the term covers
Informality is a matter of legal status rather than of construction quality or poverty, and it takes several distinct forms that are frequently conflated. Land may be occupied without title, either through organised invasion or gradual encroachment. Land may be held legally while the building lacks approval, which is extremely common where obtaining permission is slow or expensive. Buildings may be structurally sound and well maintained while being illegal, and others may be genuinely hazardous. Tenure arrangements may be entirely informal, with rent paid to a landlord who has no documented ownership. The result is that a settlement can contain multi-storey concrete buildings with electricity and internet alongside temporary shelters, all sharing the same legal vulnerability. The vocabulary varies by region, including favela, barrio, katchi abadi, gecekondu and bustee, and the international term slum is contested because it conflates legal informality with squalor and is used to justify demolition.
Why cities grow this way
Informal settlement is a rational response to a set of conditions rather than a failure of individuals:
- •Formal housing supply is far below demand where cities are growing fast, and what exists is priced beyond most incomes
- •Planning and building approval processes are slow, expensive and frequently require documents that applicants cannot obtain
- •Land markets are constrained by unclear ownership records, speculation and land held vacant for appreciation
- •Employment is concentrated in central areas while affordable land is peripheral, so people trade legality for location and the commute
- •Incremental building suits limited incomes, since a household can add a room or a floor when money allows, which no mortgage-financed formal system accommodates
- •Once a settlement exists and is large enough, its political weight makes eviction difficult, which is itself a form of security
What the residents lack
The consequences of informality are concrete. Insecure tenure discourages investment, since improvements can be lost to eviction, which is why security of tenure is repeatedly found to be the strongest predictor of households upgrading their own homes. Utilities are difficult to obtain formally, so residents pay far more per litre of water bought from vendors than formal households pay from a tap, which is one of the clearest examples of poverty being expensive. Sanitation is the most serious gap, with health consequences that are measurable in child mortality. Addresses are unrecognised, which obstructs deliveries, banking, voter registration and emergency response. Building without approval means without inspection, which matters most in seismic zones and on unstable slopes, where the great majority of deaths in a disaster occur in informal construction. Residents also face harassment and exclusion from services as a matter of policy in some cities.
What has worked and what has not
Clearance and relocation to public housing on the periphery has been tried repeatedly and has a poor record, because it destroys the location advantage and the social networks that made the original settlement viable, and people frequently sell or abandon the new units and return. In situ upgrading, providing water, sanitation, drainage, paving, street lighting and electricity to the settlement where it stands, has a substantially better record, and programmes in Brazil, Thailand and elsewhere have demonstrated it at scale. Titling programmes, promoted heavily following the work of Hernando de Soto on the idea that formal title unlocks credit, have produced more mixed results than the theory promised, with security and investment improving while access to credit frequently did not, since banks decline to lend against property they cannot realistically repossess. Community savings groups and federations negotiating collectively with authorities have proved effective in several countries. The clearest lesson is that residents build most of the housing in these cities, and policy works better when it supports that than when it attempts to replace it.
The takeaway
Informal housing is defined by legal status rather than construction quality, covering occupation without title, building without approval and undocumented tenancy, and around a billion people live in it. It arises because formal supply is inadequate, approval is unaffordable and incremental building suits limited incomes. Residents pay far more for water, lack recognised addresses and build without inspection. Clearance and peripheral relocation has repeatedly failed, while upgrading settlements where they stand has worked.