How effective are informal property rights in cities? Reexamining the relationship between informality and housing quality in Dar es Salaam

Improving access to adequate housing is a global development priority. Formalisation of property rights occupies a central role in this agenda, based on long-held ideas about the weaknesses of informal arrangements in cities. In practice, however, we know remarkably little about how informal property markets in urban areas work. Drawing on both quantitative and qualitative data, this paper demonstrates that informal institutional arrangements in Dar es Salaam are surprisingly effective in securing ownership and addressing transaction costs – in other words, in the key dimensions of property rights targeted by formalisation projects. It also reveals, however, that the system is ineffective at upholding the third yet often-overlooked component of property rights: land use rights. This results in a social dilemma that traps housing in a low-quality equilibrium. The findings have direct implications for policy in Dar es Salaam and across the world and open new avenues for comparative research.