Property Rights and Property Markets: Key Ingredients of Inclusive Development

05.06.2020 | CIPE Insights | Eliza Pugh, Anna Kompanek

“Everyone has the right to own property alone as well as in association with others. No one shall be arbitrarily deprived of his property.”

– Article 17, Universal Declaration of Human Rights

 

The Universal Declaration of Human Rights lays out fundamental rights for all, including the right to own property. Yet today private property rights remain unprotected for billions of people around the world. These people may live in urban slums, public housing, refugee or internally displaced persons (IDPs) camps, or other informal settlements. Inhabitants who do not own or cannot legally rent the land they occupy can be subject to forced eviction and do not have the ability to inherit or transfer land. Lack of property rights is therefore linked to social, economic, and political exclusion. Oftentimes illegal settlements are relegated to unsafe areas that are hotbeds for black markets and informal economies.

Vulnerable groups are especially at risk of being excluded from land-ownership laws. Whether through de jure (written) or de facto (in practice) law, the land rights of many women, indigenous peoples, refugees, and IDPs do not exist or are not protected by governments. According to a report released by the United Nations Commission on Legal Empowerment of the Poor, women make up half of the world’s population but only own just a small portion of the world’s property. Indigenous peoples are frequently kept out of modern land ownership systems since customary tenure often conflicts with the written law in the land. In Nigeria, customary land law does not allow a widow to inherit her husband’s land. In Norway, the indigenous Sami are prevented from owning land by a law that requires knowledge of the Norwegian language in order to own property. In Uganda, the indigenous Pygmies were evicted by the government when it designated their land as a national park for gorilla conservation.

Property rights are one part of a country’s property market environment, which is intricately linked to the overall quality of governance and economic growth prospects. A legal property owner is protected in courts and institutions with his or her land title. Property protection ensures the owner the fair adjudication of disputes and the ability to secure collateral for a loan with land or real estate, which allows them to start a business, thereby contributing to the local economy. Such protection, and its multiplying effect on local economies, is only as strong as the existing laws and institutions that enforce them. There are many interdependent parts of property markets and pinpointing the areas of institutional weakness is a step towards developing improved laws and regulations, as well as their effective and inclusive enforcement.

About the International Property Markets Scorecard

The paucity of information regarding the strength of a country’s property markets makes it difficult for investors, educators, donors, and reformers alike to grasp the root causes of property insecurity in a country. The International Property Markets Scorecard, the result of a joint initiative by the Center for International Private Enterprise (CIPE) and IHC Global, is a tool that aims to fill that gap. The Scorecard provides an overview snapshot of markets and their institutional components. It categorizes property markets into six Core Elements – property rights, access to credit, effective governance, rational dispute resolution, financial transparency, and appropriate regulation – highlighting which elements are stronger and weaker in a given country.

When CIPE and IHC Global, with expert advice from the World Citizen Consulting Principal Bill Endsley, jointly developed the International Property Markets Scorecard nearly a decade ago, they created a free systems analysis tool for in-country reformers, policy advisors, educators, and donors, replicable in any country. The Scorecard methodology details how to conduct thorough, targeted research relating to each of the six Core Elements. It consists of desktop research based on international and local indicators from sources such as the World Bank and the World Economic Forum. Additionally, in-country assessments through qualitative interviews with local stakeholders are carried out by local partners on the ground to gather the information that may not be available in existing data sources. The recently completed Scorecards for Uganda, Ghana, Nigeria, and Benin are available on the newly redesigned International Property Markets Scorecard website.

Scorecard Description

The Scorecard’s Six Core Elements form the Scorecard’s inner circle, and three Lead Indicators form the outer ring of each Core Element. Three Sub-Indicators further support the Lead Indicators. The color gradient measures the strength of the Indicator and Sub-Indicators from the weakest to strongest. Lighter shades indicate a “weak” score and darker shades indicate a “strong” score. The methodology provides detailed guidance on how the scores should be assigned.

 

Above: The Uganda Property Markets Scorecard (left). Clicking on one of the six Core Elements leads to a further breakdown of its Lead Indicators (right).

The Scorecard also effectively illustrates cross-cutting relationships between the Core Elements by using the same color scale for related Elements and locating them across the circle from each other. For example, effective and functional property rights require rational dispute resolution mechanisms, access to credit requires financial transparency, and appropriate regulation needs effective governance institutions. The Scorecard makes it easy to navigate between the big-picture snapshot of the property market in a country and the detailed, in-depth components of each Core Element.

Uses of the Scorecard

After CIPE and IHC Global, with World Citizen Consulting, developed and implemented the Scorecard in 2011, CIPE partnered with stakeholders in Europe, Asia, and Africa to create country Scorecards that would reveal gaps between written laws and their implementation in practice. CIPE and local partners in Armenia, China, Kenya, and the Philippines drafted country Scorecards based on research and local consultations and produced country reports that summarized key property markets issues and offered corresponding policy recommendations. The Scorecard methodology allowed partners to prioritize local advocacy issues and to use country and regional comparisons of different stages of property markets’ maturity to better understand reform approaches and lessons learned.  In his capacity as the Secretary General of FIABCI-USA, the International Real Estate Federation’s US Chapter, Endsley also presented the Scorecard methodology at various global fora to encourage broader awareness and use, leveraging FIABCI’s special consultative status at the Economic and Social Council (ECOSOC) of the United Nations. According to Endsley, market participants in the field, especially real estate brokers, agents, and surveyors, “are only tangentially aware of the importance of other areas [such as] credit, the courts, taxes, etc., but the Scorecard visual helps them clearly see the whole system.” IHC Global has used the Scorecard in a variety of settings and supported training for the real estate industry in its use in eight countries in East and West Africa, as well as Eastern and Central Europe. IHC Global innovated the Scorecard’s application in Uganda by adapting it to have a gender lens and thus capture the participation of women in the market. The result was a policy paper with recommendations to Ugandan policymakers and stakeholders with various outcomes presented at the World Bank Land and Poverty Conferences in 2017, 2018, and 2019.

Recently, local organizations in Nigeria, Uganda, Benin, and Ghana expressed renewed interest in the Scorecard sparked by the IHC Global training interventions in three of these countries. This points to the longevity and sustainability of the Scorecard methodology as local partners, with advice and support from the Scorecard’s founding organizations and experts, continue to assess the state of their local property markets through its methodology.

In Nigeria, FIABCI-Nigeria, supported through training by IHC Global, provided the research for Nigeria’s country Scorecard, which it later presented at a conference in Fall 2019. At the conference, FIABCI-Nigeria President Adeniji Adele explained how the Scorecard fits within the needs of real estate professionals in his country: “As markets mature and these professionals are nurtured, they must be continuously developed as market risks become more complex and amplified by liberalization and expansion.” Nigeria has property ripe for building affordable housing and mixed-use developments for the middle class, but the lack of transparency regarding property transactions deters outside investors, as all property transactions are controlled by each State’s government. If real estate professionals are trained to comply with international standards, they may more successfully attract foreign direct investment.

Uganda’s Scorecard (pictured earlier) has also proven to be an effective research and advocacy tool. IHC Global carried out an in-depth report on Uganda’s property market through its innovative application of gender lens, helping to support women’s ability to claim their constitutionally guaranteed property rights. IHC Global together with its local partner, the Association of Real Estate Agents-Uganda (AREA), added contextually appropriate and gender-specific questions to the already existing methodology. Findings from the Scorecard with a gender lens revealed a discrepancy between statutory and customary land tenure laws. The 1995 Constitution and the 1998 Land Act codified equal access to property rights for men and women, but customary tenure laws still favor male ownership and provide women access to property rights through male relatives and husbands. Women are often unaware of the written laws and many women work in the informal sector, which means women do not in practice participate in property markets at the same rate as men. Out of owner-occupied houses in the country, an estimated 41% are jointly owned by male and female members of the household, 31% are owned by male household members, and 28% are owned by female household members. In urban areas, less than 30% of women own property and in rural areas, the number declines to less than 10%. Over the past decade, the Ugandan government has enacted laws and strengthened institutional oversight to provide equitable access to property and prevent fraud in the real estate sector. Yet the cultural norms that favor male ownership persist, indicating the need for increased effort to educate both men and women on women’s property rights, protect those rights, and increase market transparency.

The Scorecard has also expanded to the academic realm. Multiple courses at Georgetown University’s School of Continuing Education where Bill Endsley is an adjunct professor teach the Scorecard, including “Impact of Globalization on Real Estate” and “Emerging Markets.” At the conclusion of both courses, students use the Scorecard to complete capstone projects focused on emerging and frontier markets. Endsley has also presented the Scorecard at the World Bank’s Land and Poverty Conference for the past several years where he has emphasized that technical advances alone, such as the use of GPS in land surveying or blockchain in property transactions, cannot succeed where larger institutional supports for property markets remain weak.

Similarly, following a CIPE presentation on the Scorecard in Washington DC, University of Michigan Professor Peter Smirniotopoulos used the Scorecard in his real estate class in the Taubman College of Architecture and Urban Planning to highlight novel property ownership structures in Madrid, Spain. His research on innovations in real estate ownership and the “tokenization” of real estate ownership using blockchain technology has also made use of the Scorecard. For Smirniotopoulos, the Scorecard provides the criteria to assess and determine whether the blockchain-based solution meets all the indicia of a well-functioning real property market. He commented, “I think the methodology of the International Property Markets Scorecard is an excellent teaching tool regarding the legal, regulatory, and recordation infrastructure for what’s required to have efficient and effective real property markets; something we take for granted in the U.S.”

The Scorecard continues to be adopted by organizations around the world. The demonstrated value of the tool, according to Anna Kompanek, Director of Global Programs at CIPE, is that anyone can access and use the methodology to conduct the research and focus on a specific area – geographically or thematically – of interest to them. “The information provided in the Scorecard,” Kompanek says, “is useful to a variety of stakeholders who are interested in improving property markets in a country through concrete, actionable steps.” Beyond the countries already mentioned, the Scorecard has generated interest from partners in Rwanda, Tanzania, Romania, Georgia, and Moldova. Furthermore, IHC Global President and CEO Judith Hermanson has presented the accompanying report to the Uganda Scorecard called “Property Markets and Housing Rights through a Gender Equity Lens” at the United Nations High Level Panel Forum for Partnership Exchange. The program that followed from the Scorecard and report’s findings features the use of storytelling to help women and the larger community understand the importance of gender equity in property rights. Both CIPE and IHC Global plan to continue building off the success of the Scorecard work in other countries, and as this work progresses, new scorecards and updates can be found here: https://propertymarketsscorecard.com.

 

Eliza Pugh is a Program Officer for the Program Coordination Unit at CIPE.

 

Special thanks to the following experts who contributed to this article:

Bill Endsley, Principal at the World Citizen Consulting and the former Secretary General of the International Real Estate Federation’s US Chapter (FIABCI-USA)

Judith Hermanson, President & CEO of IHC Global (formerly the International Housing Coalition)

Peter E. Smirniotopoulos, Visiting Assistant Professor of Practice at University of Michigan Taubman College of Architecture and Urban Planning