Homeownership, Renting and Market Failures: Evidence from Indian Slums

Abstract

Housing rents are a major part of a slum household’s expenditure. I exploit a large scale ’big-push’ national urban renewal policy reform in India between 2005 and 2012 to empirically evaluate the multi-dimensional effect of rental reforms and housing provisions on home ownership, rental expenditures and quality of dwelling for slum households. One of the main benefits accruing to the affordable housing policy was to provide the entitlement of the land to the female head of the households as a measure of women empowerment.1 Combining a novel pooled cross-sectional household survey data for year 2002, 2008, 2012 and nighttime lights activity data at district level, I find the reform significantly increases the real rents by 18.2% and the probability to transition to homeownership by 16.7 percentage points. Females are 2.4 percentage points more likely to be the head of the household. The findings highlight the role of market failure.

Keywords: Slums, Developing Economies, Urban Economics, Housing, Government Policy

JEL Classification: J11, J68, R12, R28, R58, O18