Securing Land Tenure through Private Intervention

CIVIC LIBRARY
Bob Graham Center for Public Service
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Securing Land Tenure through Private Intervention:
A New Way to Deal with an Old Problem
A Place to Live
The residents of Vila Nova began building their homes in 1995. There were only a few people in
the beginning, but 15 years later there are more than 900 families living in the area; 200 have
been there for over 10 years. By any real estate standard, this could have been a successful
development; however, these families built their houses on land that did not belong to them. The
legal owners of the property, who inherited the land, were not interested in building on the
property, though it would have been a good opportunity for urban infill. The area illegally
occupied by almost 4,000 people today totals about 100 acres.
Figure 1: Vila Nova Area Growth from 1990 to 2001
This case was written and the accompanying information was compiled by Joseli Macedo, Department of Urban and Regional Planning at
the University of Florida, with funding from the Library of Congress. The case is intended for classroom discussion and is not intended to
suggest either effective or ineffective handling of the situation.
The Civic Library is managed by the University of Florida’s Bob Graham Center for Public Service. The Center does not advocate on
behalf of any individual or organization. The information presented in the case is based on research conducted solely by the author. This
material may not be altered or copied without written permission from the Bob Graham Center.
Vila Nova is located in Matinhos, a coastal county in southern Brazil, located 110 km from the
state capital, Curitiba (hyperlink to map). Matinhos comprises 36 coastal communities in an area
of 45 square miles (117 km2) with over 10 miles (17 km) of sandy beaches. The permanent
population of Matinhos is under 25,000; however, during the summer, the population grows.
Almost 85% of the housing units in the city are for seasonal use.
Figures 2 & 3: Aerial Images of Matinhos.
Because this is a coastal community, most employment is seasonal; during the summer there are
plenty of jobs, but most people are unemployed off-season. An estimated 22% of the permanent
population lives at or below the poverty line, but the county has the lowest poverty rate and the
highest Human Development Index (HDI) in the coastal region. Even so, their socio-economic
condition is not one of privilege. Three-quarters of the families make less than four minimum
monthly wages, an amount roughly equivalent to $1,000 US dollars per month per family.
Almost 6% of the population 15 years of age or older is illiterate. Only 13% have a high school
diploma and 42% never reached middle school even though there are 31 K through 12 schools,
private and public, and two institutions of higher education. The families living in Vila Nova
have access to health clinics and daycare centers, all about half a mile away. There is also a
recreational area and a police station less than a mile from the community.
Occupant families have made improvements to their homes in the time they have lived there;
most of the homes that were started with wood remnants and other temporary materials are now
masonry. Individual lots average 2,200 square feet and there is little infrastructure. Power is
supplied to the area but several homes tap street posts for electricity. Water is also available, but
most homes get their water from streams. There is no sanitation infrastructure; all sewage goes
into septic tanks or directly into rivers and creeks. Streets are not paved and there is no
stormwater infrastructure.
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Figure 4: Homes made from wood and masonry.
According to Brazilian legislation, the area’s private owners had the right to reclaim possession
of their land when it was initially occupied, which they did. On this first attempt, landowners
used the legal system to try to win back their land. They did not resort to violence to force
squatters off the land as some landowners have been known to do. But by 2004 the lawsuit was
still moving through the sluggish Brazilian justice system and the owners began to give up,
thinking that they would be better off trying to find a political solution. A political solution was
never found and the heirs of the estate then decided to reinitiate the legal process to reclaim their
land. In 2005, a more creative solution was proposed to them.
Vila Nova is just one example of the hundreds of thousands of informal settlements that exist in
Brazilian cities. Land tenure security has been, for a long time, an unsolved issue not only in
Brazil, but in most developing countries. Since the inception of the first informal settlements in
rapidly growing urban areas, governments and more recently non-governmental organizations
have been trying to devise a system to prevent, mitigate or put an end to this daunting urban
problem. Different countries have dealt with it in different ways, depending on their private
property rights legislation or communal property customs. For the most part, initiatives to solve
the informal settlement problem in Brazil were public sector initiatives. The Brazilian
Constitution establishes the right to property and since 1946 all revisions of the Constitution
have mentioned the need for properties to have a social function. Nonetheless, most government
initiatives to provide adequate housing for all have failed.
In 2001, a group of socially-minded entrepreneurs thought they could do better. They created
Terra Nova Regularização Fundiária, Ltda., a private, for-profit firm with the mission to
“Promote peace, in a sustainable way, through conflict resolution, joining forces and improving
quality of life” and the vision to “be a multiplier of sustainable actions, promoting social and
environmental transformation in the whole world.” The inspiration for Terra Nova came to the
founding principal when he was working for the environmental division of a county in the
metropolitan area of Paraná’s state capital called Pinhais. In the 1990s, this was the fastest
growing county in the metropolitan area. The county government developed a plan to deal with
the informal settlements that were springing up due to the intense and fast growth of the area.
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Most invaded properties were private, so this young attorney started negotiating with the owners
on behalf of the county government. The negotiations were successful and the first
regularization process approved through mediation in the region was implemented.
Figure 5: Municipality of Pinhais.
This created a demand for more regularization and, as a result, the county housing company was
created; the attorney/mediator became the director. The mayor, at the time these innovations
started taking place, was not re-elected and his successor dissolved the housing company and
decided to discontinue the regularization process. At the time, there was a real estate agent who
had been representing the owner of the first regularized area throughout the mediation process.
She and the young attorney joined forces and created Terra Nova, believing that applying a
private sector strategy to informal settlements would allow them to provide affordable housing
for families that were living in substandard conditions. In addition, they saw an opportunity to
make a business out of a seemingly unsolvable conundrum. It was a challenge, but it was also a
chance to make a profit in a business no one had regarded as a business before.
This group, dedicated to land tenure regularization, started working to secure land tenure for
families living in informal settlements. Terra Nova is the first organization of its kind in Brazil.
Their strategy is to mediate negotiations between property owners and illegal occupants so that
these occupants can achieve not only security of tenure, but legal rights to land they have been
illegally occupying in both urban and rural areas. First, they establish a partnership between the
occupants and the rightful land owner(s); they then negotiate with land owners and mediate
agreements between them and the families who are illegally occupying their property. In
addition, they invite government agencies, utility companies, other private firms, and anyone else
who may have a stake in the negotiation to join the partnership. The ultimate goal is to draw up
an agreement that is acceptable to all parties and that benefits each party as much as possible.
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Security of tenure in Brazil has always been a public problem. Even though it is the
responsibility of governments to provide housing for the poor, in 50 years, the number of
informal settlements and the number of families living in them has only increased. Governments
have not had the resources to expropriate private areas and transfer the title to families occupying
them, which was thought to be the only way to transfer property rights. Other schemes have
been somewhat successful, some of them modeled after land trusts, but the scale of the problem
is such that these only provide a solution for a small number of settlements.
Terra Nova’s mediation process in Vila Nova began in 2005. The first necessary step was to
prompt the local government to change their land use and zoning code and designate the area as
a Special Zone of Social Interest (Zona Especial de Interesse Social—ZEIS) in 2006. ZEIS is a
zoning designation that allows areas developed as informal settlements to take advantage of
special land use and zoning provisions that facilitate their regularization. Unfortunately, not
every resident was willing to participate in the negotiation to obtain legal property rights; about
25 percent of residents did not agree to have the area regularized. With land ownership comes
responsibility, so even though they would—by virtue of having their lots regularized—have all
the ownership rights and equity afforded to land owners, some are still reluctant as ownership
would also mean paying a mortgage, paying for infrastructure services and utilities, and paying
property taxes.
Figure 6: Special for Social Interest – ZEIS.
Source: Coastal Council, 2006.
While negotiations go forward, additional partnerships and agreements with other stakeholders
are being drawn up. Landowners have supported the agreements throughout the negotiations
since this seems to be the only way to resolve the issue. Given the environmental sensitivity of
the site, it has already been established that 64 of the 900 families occupying Vila Nova today
will have to be relocated. Their homes are within the boundaries of areas designated as
Permanently Preserved Areas, thus they cannot remain in their lot. If possible, they will be
relocated to lots within Vila Nova so that their social networks will remain intact, but there is no
guarantee. The agreement is being negotiated and once the regularization process starts,
infrastructure projects can also start. The sewage network is already being extended to the
settlement. Next, the streets will need to be repaired and a storm water system will be
implemented along the new street grid. Before the regularization process is finished, residents of
Vila Nova will have addresses and will be able to not only receive mail, but also apply for jobs
and fill out other types of forms that require an address.
Terra Nova’s approach is to look at informal settlements as opportunities, not nuisances. Once
they identify a tract of land that has been illegally occupied by—sometimes—hundreds of
families and that fits the profile of areas that can be regularized, they contact the legal owner and
propose a way to recuperate some of the revenue that the property could have yielded if it had
been negotiated in the open real estate market. They then work with the occupant families and
devise a payment schedule that each family can afford so that they can start paying for the land
on which their dwelling is built. Although the same 30-percent-of-income “rule of thumb” used
in the US is used by housing financing banks in Brazil, Terra Nova establishes a payment
schedule with a floor of R$150 (about $85 US dollars). If families find themselves in a position
to spend more of their income on housing, they may adjust the monthly payments. This decision
was made based on the fact that families need time to adjust to all the new expenses once the
land is regularized; namely, property taxes and utilities.
Figure 7: Informal settlements become an opportunity for the “Terra Nova Regularização
Fundiária Ltda” program.
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Conflict resolution and mediation are important aspects of this process. Terra Nova serves as the
intermediary in negotiations between the land owner and the irregular occupants and draws up
legally binding documents that will ensure the transfer of ownership once the family has paid the
agreed price for the land.
The four stated goals of Terra Nova are:
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“To guarantee transparency through the effective participation of the affected population in
every step of the process;
To respect the right to property and the right to housing of families living in informal
settlements;
To create an environmental conscience in residents, helping them understand the importance
of urban planning and the environment for sustainable development;
To foster communication between affected communities and the public sector through
partnerships.”
Figure 8: Environmental conscience should encourage residents to take care of their own
land.
Another reason that Terra Nova’s strategy is feasible today is the updated version of the
Brazilian Civil Code. Brazil is a Roman Law country and has a Civil Code in addition to its
Constitution. The Brazilian Civil Code was updated in 2002 and a new provision concerning
property rights has made it possible for Terra Nova to argue for adverse possession on behalf of
informal communities. One of the articles in the 2002 Civil Code makes it easier to argue in
court for the property rights of those who have occupied land that belongs to someone else for a
certain period of time in the name of social interest. Thus a process of adverse possession can be
initiated on the grounds that it is in the social interest of a group of people to remain in an area
that they have occupied for five years or longer and where they have made improvements, such
as building homes and infrastructure.
The prospect of regularizing most of these informal settlements has prompted local and state
governments as well as utility companies to join the partnerships established between the legal
property owners and the occupants, and mediated by Terra Nova. There is an advantage to both
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local governments and utility companies to have these families become part of the formal city
and share not only the benefits but also the responsibilities of being a property owner. Terra
Nova works with the local government and utility companies to draw up cooperative agreements
to ensure the provision of infrastructure and services. This mediation is what makes the entire
deal possible and the agreements provide the assurance to families that they will not be evicted
once they start paying, albeit slowly, for the property they occupy.
The regularization process takes five to ten years, depending on the market value of the real
estate in question. During this time, dwellers pay monthly installments, calculated based on
family income, while protected from eviction. Once they pay off the agreed price for the land,
they receive a title deed. Terra Nova’s innovative model treats the poor as part of the market, not
as a group that needs charity. And by being incorporated into the market and becoming property
owners, they are transforming property into real capital. Land that was what Hernando de Soto
calls “dead assets” becomes equity. For the public sector, the advantage is in not having to
provide land nor cover the cost of land. Through partnerships, local and state governments and
housing authorities are still part of the process, but they are able to allocate their limited
resources to implementation of infrastructure, construction of community facilities,
environmental restoration, and sometimes construction of housing units, since occupants pay for
the land and the costs to regularize the property.
Figure 9: A snack bar is an example of what could be done by the residents to transform
their own properties into real capital.
Terra Nova’s strategy is not without controversy. Their initiative has been criticized, particularly
by government officials, for the mechanisms it employs. The agreements drawn up between the
property owners and the occupants have been deemed coercive. There are several people who
still believe that providing housing for the poor is a public duty, that property rights is a public
matter and private companies should not meddle in government business. Another criticism is
that the percentage of the deal retained by Terra Nova is excessive. Terra Nova keeps 40 percent
of the total price of the land negotiated, the rightful land owner keeps another 40 percent and 20
percent goes into a fund managed by the community to be used in improvement projects.
According to Terra Nova’s principal, they are a socially-minded business, but a for-profit firm
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nonetheless; thus, they cannot work pro bono—they retain the funds necessary to keep their
business in operation.
Terra Nova has also faced some difficulties in areas where residents have been taken advantage
of in the past by politicians, lawyers and realtors. The regularization process is complicated,
onerous and time consuming, not only because the Brazilian justice system has no regard for due
process, but also because the legislation requires several steps be taken. For example, most of
these areas owe back taxes so before any legal process can be initiated, taxes need to be paid.
Some groups have tried creative ways to negotiate debts with local governments using
mechanisms such as transfer of development rights, but again, these negotiations take time,
patience, and may become costly.
So far Terra Nova’s model has proven to be better than the former model administered by the
public sector. As many as 80% of families using affordable public housing programs have
defaulted on their payments. So far, the agreements mediated by Terra Nova have a 20 percent
rate of payment default. In addition to the advantages of property ownership, the community
reaps other benefits from making families responsible for their homes. Once families own their
plots, instead of polluting the environment, they preserve it. Environmental NGOs are also
joining these partnerships and providing environmental education to communities, teaching them
to collect and recycle garbage, recover riparian areas and other environmentally sensitive areas
that may have been spoiled by the informal settlement, and to take care of their environment.
Terra Nova started in one city in southern Brazil and today it has regularization projects
throughout the country, serving almost 30,000 families. It has promoted agreements in five
states—Paraná, São Paulo, Rio de Janeiro, Mato Grosso, Rondônia, and the nation’s capital, the
Federal District. This represents a small percentage of the number of families living in illegal
areas in Brazil, but it is a start. In the metropolitan region of Curitiba, the city where Terra Nova
first started its operations, there are more than 130,000 families living in 800 informal
settlements. Terra Nova is also mediating agreements between stakeholders for reasons other
than illegal occupation; for example, in Rondônia’s capital, Porto Velho, they are working with
families that had to be relocated because of the Santo Antônio hydroelectric power plant in the
Madeira River.
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Figure 10: The Madeira River in Porto Velho
The potential to use this approach not only throughout Brazil, but also in other developing
countries, is enormous. The UN estimates that 55 million people will be living in informal
settlements in Brazil by the year 2020. Estimates that two billion people in the world’s urban
areas will be in this same situation by 2030 suggest that immediate action needs to be taken at a
large scale. Terra Nova’s idea will obviously not solve the entire problem since their strategy
was developed for the specific legislation of Brazil and can only be used in the case of privately
owned land. Yet, the mechanisms devised by a private company to deal with privately owned
land can serve as an inspiration for the next creative group to conceive of a way to deal with
other types of land holdings.
Although Terra Nova has been operating in the field of regularizations for less than 10 years,
they have already received national and international recognition for their work. In 2005, the
partnership between Terra Nova and the State of Paraná received the René Frank Habitat Award,
given in recognition of projects that improve housing for the poor. In 2008, Terra Nova was
among the top ten finalists to receive the UN’s World Habitat Award and one of its principals
received the Social Entrepreneur Award from the Schwab Foundation and the São Paulo
newspaper Folha de São Paulo. In a country where 12.6 million people live in areas with no
services or utilities and 3.1 million live in substandard settlements, Terra Nova’s work brings
hope.
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