THE IMPACT OF HOUSE TITLING: Evidence from a natural experiment in Uruguay

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THE IMPACT OF HOUSE TITLING Evidence from a
natural experiment in Uruguay

• Néstor Gandelman
• Universidad ORT Uruguay
• First Discussion Seminar
• Titling in Latin America Effects and Channels
• March 30, 2007

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Problems

• This is a very preliminary draft.
• There are at least 3 issues were I need feedback
  from you
• . Which should the focus of the paper be?
• . Which are the better comparisons?
• . How far to go with the controls?

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The Natural Experiment

• In the mid-70s a public institution (INVE) built
  13 small neighborhoods (communities).
• In all cases purchase agreements were signed and
  implicit mortgage contracts were in place.
• The communities were built in land owned by
• INVE (9)
• Municipality (3)
• Unknown (1)

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The Natural Experiment

• In 1977 the INVE was eliminated by law and its
  goals and property were assigned to the
  state-owned mortgage bank, (BHU).
• Over the following decade various institutions
  were officially in charge of their management.
• Finally, on March 1987 the Municipality rejected
  the last agreement and informed the BHU that it
  should take care of the communities built in its
  land.

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The Natural Experiment

• In December 1987, the Executive branch of
  Government designed a task group to study the
  situation of the communities with representatives
  of
• the Ministry of Education,
• the Ministry of Labor and Social Security,
• the BHU and
• the Municipality of Montevideo.

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The Natural Experiment

• The conclusions of this task group were
• No institution was really taking care of the
  management of the communities.
• It would imply an excessive cost for the BHU to
  assume it.
• It was in the best interest of the BHU to sell
  the houses to the actual occupants in whatever
  price they were able to pay.

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The Natural Experiment

• The board of the BHU agreed and
• Set a nominal price of 10U.R. equivalent to
  approximately 100 for those occupants that could
  not prove to have made any previous payment.
• Those that made previous payments only had to pay
  for the titling costs (2U.R approximately 20).

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The Natural Experiment

• But the assignment of the formal property rights
  could be done only in 3 communities.
• Why?
• Because in the others there were no registered
  plans (area maps with the land division among
  houses) in the Municipality of Montevideo.

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18 de Julio- Independencia
Lavalleja
25 Agosto- Las Piedras
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The Treatment Communities

• 18 de Julio - 34 houses
• 25 de Agosto - 52 houses
• Lavalleja - 84 houses

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The Control Communities
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The survey

• Census of the 3 treatments
• 18 de Julio - (34)
• 25 de Agosto - (52)
• Lavalleja - (84)
• Total 170
• Census of 2 controls
• Independencia (98)
• Las Piedras (36)
• Total 134
• Total 469 houses to be surveyed

• Sample 1/3 of 5 controls
• 19 de Abril (98)
• Sarandí (130)
• Rincón (52)
• Guayabos (150)
• Grito de Ascencio (65)
• Total495 Sample165

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The survey

• Census of 3 treatments
• (done almost no rejection)
• Census of 2 control
• (done almost no rejection)
• Sample of 4 controls
• 1/3 of community size with no house replacement
  in case of rejection or not finding anybody.
• (80 done)

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Comparisons

• Exercise 1- Independencia vs 18 de Julio
• (contiguous, same owner, census data)
• Exercise 2 - Las Piedras vs 25 de Agosto
• (contiguous, different owner, census data)
• Exercise 3 All treatments vs 4 controls
• (non-contiguous, same owner, sample-census data)
• Exercise 4 All treatments vs All controls
• Exercise 5 Treatment and Controls vs Household
  survey data (city or neighborhood)

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The survey

• The survey covers
• basic socio-demographic data
• housing conditions
• entrepreneurship
• credit
• happiness
• external appearance
• health
• education
• work
• income

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Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure Table 5. Housing Tenure
  First exercise First exercise Second exercise Second exercise Third exercise Third exercise  
  Independencia 18Julio LasPied 25Agosto      
  Control Treatm Control Treatment Con Treatm Tot
Assigned by Public Institution 35 43 54 46 41 50 46
Inherited (from someone assigned) 7 9 5 41 7 15 11
Bought the house 41 34 13 2 33 25 29
With Notary participation 5 9 10 2 7 15 11
Without notary participation 36 26 0 0 28 10 18
Rent 0 3 0 2 0 3 1
Occupant with permission 16 9 28 7 20 7 13
Occupant without permission 0 3 0 0 0 1 0
Total 100 100 100 100 100 100 100
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Home investment
Houses with these problems Houses with these devices
Humidity in the roof Water heater
Leaks Instant water heater
Wall Fissures Refrigerator
Problems in doors or windows TV
Floor Fissures Cable TV
Problems with wall or roof plaster Video
Problems with the ceiling Washing machine
Lack natural light Dishwasher
Lack ventilation Microwave Oven
Floods when rains PC
Risk of collapse Motorcycle
Humidity in the foundation Automobile

• The type of effects we are looking are
  investments which may suffer a hold up problem vs
  investments that can be taken if they have to
  move.

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Entrepreneurship and Credit

• Households in the treatment communities have more
  access to formal credit than the control
  communities.
• But ownership documents were not a relevant
  requisite to access to credit.
• Thus, the channel does not seem to be through the
  transformation of houses into colletaralized
  capital.

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Entrepreneurship and Credit

• We find that there are more productive activities
  in the control communities.
• And there is no participation of the formal
  credit system in the funding of any of them
  (control treatment).
• Moreover the larger access to formal credit from
  the treatment communities does not pass through
  to productive activities.

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Health
Diseases related to housing conditions  
Asthma  
Tuberculosis  
Sinusitis  
Rheumatism  
Intestine parasites  
Allergies  
Skin infections  
Diseases not or less related to housing conditions Diseases not or less related to housing conditions
High blood pressure  
Diabetes (insulin-dependent)  
Diabetes (insulin-dependent)  
Psychic disorders  
Sexual transmission illnesses  
Discapacities  
Other illnesses  

• Is there a channel from housing living conditions
  (home investment) to health outcomes?

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Others

• Education
• Labor market and Income
• Values and happiness
• Nothing clear yet

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THANK YOU