Clandestine development in Colombia

This study analyzes the pirate submarket in Medellin, Colombia from an economic, legal, and institutional perspective through the use of case studies (El Diamante and La Cascada) and other documents. Comparison is made with the pirate submarket in Bogota, and with legal alternatives, particularly the government-sponsored minimum standards housing submarket. It is suggested that strong housing demand and Medellin"s rigid urban housing perimeter policy and high technical standards for land classification, subdivision, and provision of services have fostered pirate settlements. Although limited land supply and criminal sanctions have reduced the rate of illegal subdivision, smaller pirate settlements continue in semi-rural areas. The appeal of these settlements to low-income buyers is based on the inability of legal markets to provide the opportunity to build or expand houses incrementally, along with installment purchase and sale arrangments suitable to low-income buyers. Pirate subdividing could potentially satisfy public policy concerns -- especially in infrastructure costs -- if an adjustment can be made to the legal-institutional framework governing the land subdivision process to provide low-income families access to land and housing. Proposed modifications include credit programs, protection for the land buyer should the subdivider fail to provide clear title or services, eliminating or simplifying the reporting requirements for minimal standards subdivisions, and a more streamlined approval process. A recent credit program established by the Central Guarantee Foundation provides institutional help and guaranteed loans to low-income families who form community associations. Severance fund (cesantias) mortgages could provide another source of credit to low-income workers. Five appendices, including a brief description of the pirate subdivision in Castilla Vieja, and a 22-item bibliography in English and Spanish (1964-78) complete the study.