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Hernando de Soto’s important work [2] reveals the power residing in secure, transferable property rights. But to secure these rights, to make them sufficiently transferable, and to make them assignable so that they can serve as security for loans requires more than a mere formal legislative declaration that henceforth property will be titled and secure.
My wife’s, Karol [3]‘s, research in sub-Saharan Africa brings this point home. Here’s her latest [4]; it’s a study of land-titling in South Africa’s Langa Township. These passages from the executive summary are central:
To better understand the effects of land titling and property reform
the researchers—Eustace Davie, Temba Nolutshungu, Jasson Urbach of FMF
and Karol Boudreaux and Susan Anderson of the Mercatus Center
interviewed homeowners, business owners, and public officials to learn
first hand whether or not homeownership is promoting economic growth in
the community.
The team found that having a secure title to
property does create incentives to improve property and build
communities. Secure titles also provide home owners with space for
business activities—renting shacks in backyards, opening restaurants,
or starting other home-based businesses. However, the study suggests
that is unrealistic to assume that homeowners in the developing world
will take that next crucial step and use their titles as collateral for
commercial loans that are the key to promoting economic growth.
Home
and business owners pointed to the difficulty of repaying loans, the
expense and complexity of formal transfers of property, and regulatory
burdens that make it costly to grow and expand small businesses as
primary reasons why they viewed using home titles as collateral too
risky.