International Issues

Brazil's Government-Created Slums

Two major, flawed government policies are responsible for Brazil's favelas, or slums, according to on-the-scene observers.

  • Rent control -- the subject of 43 different laws since 1921 -- discourages investment in rental housing.

  • State housing regulation, which dictates requirements for dwelling sizes, windows and doors, has pushed the cost of even the smallest units out of the reach of most Brazilians.

Of course, there have been other problems of a broader nature, analysts say. They cite past hyperinflation and rigid labor laws.

The effect of these regulations and conditions has been to devastate the rental housing market in Brazil.

  • Thirty years ago, more than two-thirds of housing construction was for rental units.

  • Today, only about 3 percent of total housing units are built for rental purposes.

  • Although rent-control laws were improved in 1991 by allowing adjustments for inflation, investors fear the government will change the law yet again. Consequently, they shy away from putting money into rental construction.

Since low-income housing is not available, the favela is the only remaining alternative for Brazil's poor.

Source: Donald Stewart Jr. (Brazilian property-development specialist), "Brazil's Favelas: Clinton Just Didn't Get It," Wall Street Journal, December 5, 1997.

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