1 UN Program Habitat study -The state of the Slum quarters in the world 2006-2007.

UN Program Habitat study -The state of the Slum quarters in the world 2006-2007. 2 Fundação João Pinheiro, Ministério das Cidades, Secretaria Nacional de Habitação – Déficit Habitac (...) 1The United Nations estimates that a billion people live in slums in the world and this figure is projected to reach 1.4 billion by 2020. The process of world-wide urbanization has taken a large contingent of poor populations to the cities looking for better opportunities, generating disordered, informal growth of irregularly occupied areas. In many developing countries, the formal production of low-income housing did not meet the extraordinary demand causing people to occupy public and private areas without formalizing ownership titles. In Brazil, approximately 1.8 million urban households were occupied in this way. The problems associated with areas where property rights are not formally recognized are familiar. It results in slums which are filled with precariously constructed housing often without basic infrastructure, such as sanitation and sewer systems, clean water or electricity, posing serious health concerns and environmental issues.

2It also has adverse economic repercussions. It is estimated that there are US$ 9.3 trillion “dead assets” concentrated in the poor population of the world. (Hernando de Soto, “The Mystery of Capital”). He refers to the hidden and dormant value of assets that are not legally recognized, monetized, protected or standardized. According to his studies, the poor do have significant assets. However, these assets are held informally and in ways that dramatically limit their full economic potential. Any policy or instrument that formalizes these assets serves as an important catalyst for economic growth. This reality can be seen in the concrete examples of Terra Nova’s work where entire communities are transformed economically, socially and environmentally by formalizing property rights.

Table 1. Brazilian households with irregularly occupied land – evolution in urban areas. Zoom Original (jpeg, 80k)

3In Brazil, the occupation of privately held land caused significant conflict between proprietor and occupant that has often existed for decades. Land owners have all but considered this land a “dead asset.” These disputed areas can cause challenges for the government to implement infrastructure or collect taxes from the communities, resulting in the urban slums that plague the developing world. Currently, the primary solution to these problems in Brazil rests with government initiatives and, in the case of privately held land, is resolved by expropriation, whereby the government buys the land from the proprietor and gives it to the residents. This is costly to the taxpayer, inefficient and creates an incentive for further squatting.

4Andre Albuquerque, a Brazilian lawyer, saw firsthand some of these challenges while presiding over the housing agency, Companhia de Habitação de Pinhais, in the state of Parana. It was at this time that he began his work in mediating conflicts between land owners and occupants who were being threatened with forced removal. Shortly thereafter, a change in administration resulted in the termination of the housing agency by the new mayor. This is when he decided to create his own company, to provide a sustainable, private-sector alternative to existing government solutions.

5In 2001, he created Terra Nova, a for-profit social enterprise to formalize urban slums by peacefully resolving the land disputes and managing the regularization process. Additionally, he wanted to create the conditions whereby residents could take responsibility for their actions and shape their future in a dignified and empowering way. As such, Terra Nova resolves conflict between land owner and occupant by mediating an agreement whereby community residents purchase the land they occupy. With this agreement secured, the government can implement the necessary infrastructure such as running water, sewer systems, sanitation, electricity and paved roads. The methodology provides an attractive alternative to solving the problems of urban slums at a substantially lower cost to public coffers than the government expropriation.

6Terra Nova’s land regularization model is an important tool for transforming "dead assets" into capital, benefitting all parties involved. Landowners are compensated for their property. The government increases revenues from property taxes and reduces costs associated with the complex problem of land rights. Community residents receive so much more than legal acquisition of an asset: their neighborhoods are transformed into healthy, thriving communities. Property values appreciate substantially from titling and infrastructure. They gain access to credit, new employment opportunities and are integrated into the formal economy.

Figure 1. Triple bottom line Benefits – Social, Economic & Environmental.

7Today, Terra Nova manages every step of the regularization process – from conflict resolution to urban planning, capacity building, legal administration and financing community residents. The land regularization process is typically initiated by one or more of the different stakeholders involved – the proprietor, who wants to be indemnified for their property; the resident, who wants to secure legal title to the occupied land; or the government who needs to collect taxes and solve the various problems associated with urban slums, but lacks the resources to do so.

8The process begins with a viability study - an evaluation of the legal, environmental and urban circumstances of the areas in question. It defines the parameters for negotiation with the proprietor. Included in this study are: 1) verification of ownership, liens and fiscal obligations of the occupied area 2) identification of community association and its leadership 3) determining whether the land is suitable for permanent settlement; whether it is located in areas that are environmentally sensitive or at risk and whether it is necessary to relocate families. It also includes executing the Regularization Contract between proprietor and Terra Nova granting it exclusivity for the regularization process.

9This phase includes mapping the land and performing an assessment of each household to understand their socio-economic status (e.g., income, employment, education and number of family members). Critical to Terra Nova’s work is capacity building such as the training of the community’s leaders so that they may actively engage in the regularization process. It also includes “community sensibilization” to educate its members about the benefits of formalizing property rights. The intention is to create agents of change who continue to be active in shaping their community’s future well after Terra Nova’s work is done. This is also critical to securing the support and enrollment of families in the regularization process.

10It is during this phase that Terra Nova prepares the urban, legal and social evaluation which defines the community's needs and is used in the negotiation with its leaders and the municipality. Terra Nova forges an agreement between proprietor and residents and establishes a value for the land, securing the government commitment to implement certain public works.

11A Multi-Stakeholder Council is set up which includes the government officials at the local and state level, proprietor(s) and the community’s leadership. The purpose is to facilitate the negotiations and ensure representation of all parties. It sets priorities for urban projects, allocation of monies from the Community Fund (see Project Approval & Management) and resolving issues such as family relocation, and assisting the poorest families.

12The Judicial Agreement, ratified in the courts, is the product of the conflict resolution among the stakeholders and defines the rights and obligations of each party including the right to seize property in the event of non-payment. At this time, Terra Nova begins securing the indemnification contracts from the residents.

13Once the Judicial Agreement is signed, Terra Nova opens up a service post inside the community to facilitate the process of enrolling residents and formalizing agreements with each household. Terra Nova manages its contracts, receiving payments from each family. These occur in small monthly installments over a period of approximately 8-10 years. Terra Nova keeps its service fee, passes on the proprietor’s indemnification and sets aside a percentage for the Community Fund. This fund is for the benefit of the residents and will be used for projects that are outside the scope of the government’s work, such as community, for example. The percentage varies by area and depends on the community’s needs. The government on the local and state levels approves urban and environmental projects.

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Figure 2. Vila Marinho community, Paranaguá, Paraná, Brazil - before and after settlement Zoom Original (jpeg, 228k)

15Terra Nova has tested its conflict resolution and land regularization methodology in seven cities in various regions throughout Brazil and plans to scale to the major metropolitan areas throughout the country and in other developing nations. However, Terra Nova needs to secure long term financing to match the term of its receivables. Most of Terra Nova’s work (and costs) are upfront yet its revenues are realized over 8 to 10 years. It is negotiating with local financial institutions and development organizations to address this need.

16Terra Nova's land regularization methodology delivers triple bottom line solutions (social, economic and environmental) to the problems of urban slums. Land owners are compensated for the occupied land. The government resolves a costly and politically sensitive problem, increases tax revenues and transitions entire communities to the formal economy. Community residents living in squalid conditions are now able to obtain legal title to a significant asset through their own efforts, obtain access to credit and dramatically improve the quality of life for their families.

17Terra Nova’s work has been recognized both nationally and internationally by Ashoka, the Schwab Foundation, the Omidyar Network and the World Habitat Building and Social Housing Foundation, among others.