| Policy makers in less developed countries have responded to the chronic shortage of low income housing by buying land, providing infrastructure, and reselling the land. Recently, this "sites and services" approach has been criticized by scholars who assert that the provision of infrastructure raises land values beyond the reach of low-income residents. For land to remain affordable, these scholars suggest, infrastructure must be provided at the end of the development process, after homeowners have settled on the land. Such a policy has two harmful side effects. First, sequencing infrastructure at the end of the development process takes infrastructure planning out of the development process. Second, sequencing infrastructure at the end of the development process fails to address the major causes of urban diseases in developing countries: lack of water, lack of sanitary systems, lack of garbage disposal, and pollution caused from wood burning stoves.;This thesis examines how much infrastructure effects land prices in a less developed country using a simple hedonic price model. Data for the model come from a survey of homeowners and land sellers in three barrios of Quito, Ecuador. With the results of the hedonic price model, the thesis examines the extent to which infrastructure renders housing unaffordable. The findings suggest that providing the full range of infrastructure services may indeed raise land values beyond the reach of low-income households but that one or two pieces of infrastructure might be affordable suggesting the following strategy for providing affordable land and infrastructure services: first, install one piece of infrastructure, then allow settlers to buy and move on the land, then install the last two pieces of infrastructure.;The above strategy for providing infrastructure has two problems: first, it leaves residents without some infrastructure services for a time and second, the value of the delayed infrastructure services may still be capitalized into land values rendering the land unaffordable. To overcome these limitations the following alternative pricing scheme is proposed: install all the infrastructure before settlement but amortize the installation costs over the life of the infrastructure. With this method, the value of infrastructure services equals its cost, land values are not affected, and low income residents are effectively "loaned" the services. |
