Land tenure impacts investment, credit availability, poverty rates, land values, and agricultural productivity, which are all linked to economic performance. When land tenure and property rights are secure, individuals can make investments, secure credit, sell land, and make longer term decisions about agricultural practices. On the other hand, in developing countries that have a large informal sector, and in which land tenure is insecure, people lack opportunities to invest in or profit from land, and their transactions are not protected by the state. In order to increase GDP, governments should formalize property rights to encourage more of these transactions.
Formalization does not mean that everyone holds a legal title to their land or home. USAID endorses the principle of “secure enough” tenure, in which there is a continuum of rights that can be strengthened through a variety of affordable and sustainable approaches. These approaches may include public recognition of customary or indigenous rights to an area, certificates that secure the rights to use or manage resources, a community-managed titling process, or more formal strategies such as land titling or creating public land registries.
When governments seek to stimulate economic growth through outside investment in large land areas, the lack of secure tenure presents a problem for the existing individuals or community holders who occupy that land but are not recognized as rightful holders of property. These people are at risk of displacement and being denied fair, prompt and adequate compensation for resources and livelihoods lost. For this reason, USAID supports the United Nations-negotiated Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security and forthcoming Principles for Responsible Agricultural Investment. When applied correctly, these guidelines will improve the security of property rights for all, facilitate the development of more economic opportunities for small, medium and large-scale producers, and contribute to food security and economic growth.
In rural areas, secure land tenure may lead to economic growth by: allowing farmers to invest in better seeds or tools, see returns on those investments, and pass land to their heirs; making it easier to gain credit to finance investments in agriculture or other entrepreneurial activity; freeing farmers to choose whether they want to use their land for agriculture or lease it to someone else and pursue an alternate livelihood; and attracting external investment necessary for broad-based economic growth.
In urban areas, municipalities need to invest in infrastructure and public services in order to meet the needs of rapidly growing populations. However, the rate of urbanization in cities around the world is too fast to meet the demand for housing or basic services, and public spending is curtailed by weak city and municipal tax bases. One way to increase both the tax base and land tenure security is by recognizing informal settlements and incorporating them into urban plans. This approach has been used successfully in a pilot project in Afghanistan, for example, and USAID continues to work there to build capacity in land use planning and land registration systems.
Learn more about how economic growth and land tenure are connected in the new Land Tenure, Property Rights, and Economic Growth Issue Brief.