There's More Than One Way to Get a House: Housing Strategies in Panama

Throughout Latin America the politics of housing clearly assigns renting an inferior status despite the fact that little is known about household preferences regarding housing tenure or about the strategies households use to get access to ownership. While the literature on self help housing has long emphasized the importance of low income owners in Latin America’s cities, the econometric literature that has quantified important aspects of housing demand has not fully incorporated this strategy of progressive construction into the analysis of tenure choice. This paper uses household data from two cities in Panama to evaluate the determinants of the tenure decision in the context of two models. In the first model, households choose between renting and owning; while in the second model, households choose between renting, buying with savings and credit, or obtaining a site and progressively building their home over time. The study shows that the key factors explaining the decision to rent or own are those associated with the family’s lifecycle while the choice between buying a complete house and progressive building is affected primarily by income and assets. The results suggest that in countries like Panama that have relatively unfettered land markets, low income households are readily able to become owners because of the alternative strategy of progressive building and this has a positive impact for accommodating growth. © 1999 Inter-American Development Bank 1300 New York Avenue, N.W. Washington, D.C. 20577 *The authors are employed by the Inter-American Development Bank as Urban Development Specialist, Social Program Division 2 and Senior Research Economist, Office of the Chief Economist, respectively. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. We would like to acknowledge the contributions of Naoru Koizumi and Fabio Mendez who provided energetic research assistance for this paper. The data was obtained in the course of preparing an Inter-American Development Bank loan to Panama to support that country’s reform of its public housing policies. We would also like to acknowledge the contribution of the Urban Institute, which conducted the survey and initial analysis of the data.