Economics of property development, urban planning and public finance in sub-Saharan Africa

Tanner Regan has recently joined the Wheeler Institute as a Research Fellow. His research lies at the intersection of urban and development economics, with his PhD – completed at the London School of Economics (LSE) – studying the economics of cities in sub-Saharan Africa. He spoke to the Wheeler Institute about his work, and the challenges and opportunities he sees for development in the region.

Tanner’s interest urban and development economics and sub-Saharan Africa dates back to his undergraduate years at the University of Toronto. “I worked on a project collecting data based on satellites in the United States, to study how land use has changed over the past three decades or so. That was learning how to code, gather large data sets based on satellite imaging,” he says.

After completing a Master’s degree in Economics, Tanner took up a role at LSE funded by the World Bank – applying what he had learned working with American satellite data to sub-Saharan Africa.

However, this was not without its challenges. “In the United States, there are a lot of other institutions that have also been putting data together – and you can take the data they’ve already processed. But in sub-Saharan Africa you have more bare bones data to work with. So I spent two years working with related data, satellites… it was tough, but we managed to put together some interesting research projects and that’s what led me to the PhD.”

Tanner, who had not visited Africa before the role, speaks of his trips to the region with excitement. “The first year I was working I went to Nairobi and Dar es Salaam, and for the next couple of years I did recurring trips. During my PhD I did fieldwork and so I lived in Dar es Salaam for three months.

“Working with all this satellite data… all we can see is what we see from the sky. [But] actually seeing what some of these places looked like in person – I realised how much heterogeneity there is on the ground.”

Tanner’s latest paper, Planning ahead for better neighbourhoods, which has been accepted for publication by the Journal of Political Economy, studies the effects of the “Sites and Services” projects that were implemented by the World Bank during the 1970s and 1980s. Aimed at addressing the issue of growing slums, the projects fell into two categories: 1) laying out basic infrastructure in previously unpopulated areas on the fringes of cities (“de novo” development); and 2) upgrading pre-existing squatter settlements.

Tanner’s paper compares the long-run consequences of de novo development, with those of unregulated development – often the default policy option. “[The] paper gathers historical data… and we compare what happened in those [de novo] areas to other nearby empty areas that weren’t planned,” he says.

The findings showed that 40 years on, de novo neighbourhoods reported significantly higher levels of private investment than the greenfield areas nearby. The explanation, Tanner says, is individuals investing in their own neighbourhood. “If the government can signal it will provide minimal infrastructure, then citizens will be more willing to buy in by sinking their own investments into these neighbourhoods [than] if the government was more laissez faire, [and] people are meant to make investments without certainty.

“You’re not going to put a garage in your house if the roads aren’t built in your neighbourhood; “you’re not going to build plumbing into your house in there are no piped water or sewer system”, Tanner points out.

“Some of these durable investments – when you don’t invest in them in the beginning, then it will be difficult to upgrade them in the future. Let’s say, 20 years later, the government says – there’s lots of people living here now, we’ll try to… put in electricity. But if your house wasn’t built with electrical wiring, you’re not going to tear down your building [to fully benefit from the public infrastructure].

“Even though right now the big issue is trying to improve the housing quality for people already living in slums… in the next two decades we’ll expect so many more people to live in cities – we can do a lot of good by planning the yet-to-be-settled land.”

Tanner believes some planning of land before settlement is a high pay-off policy. “This kind of planning [of] minimal infrastructure and just serving land can have big gains but is quite cheap […] compared to big public housing projects.

Tanner raises the agglomeration effects of the high levels of in-migration expected in sub-Saharan African cities. “With population density, there are returns both in terms of productivity and quality of life. [But] theoretically, along with these agglomeration economies are also diseconomies: crowding, traffic, pollution – as you get more and more people, these things get worse and worse as well. So there’s this balance of the benefits and costs of density, [and] I think planning housing is one of the better ways to mitigate against one of the costs.”

Tanner acknowledges the policy is not without its risks. “There is a difficulty in – how do you pick winners, how do you pick which cities should get how much planned land? Inevitably you’re going to end up with places [where] you don’t accommodate for enough growth, some places where you accommodate for too much growth.”

Some of the risks are specific to the policy’s application in sub-Saharan Africa, with Tanner citing land tenure conflicts as one particular complexity affecting the region. “There are a lot of competing claims for the same piece of land [and] lots of the land is owned under what’s like a neo-customary land tenure, where a local chief or local elder has responsibility for determining property rights. That might work in a rural setting [but] it almost for sure doesn’t work in an urban setting, where there’s so many people [and] the informal tenure system is based on personal connections – the chiefs knowing who has legacy rights to the land.

“Increasingly landholders want to sink more and more capital into their land. If you’re in the city centre, you want to be building high rises not just single-storey buildings. But you’re not going to do that if the only guarantee to your ownership of that land is through some informal verbal contract.”

According to Tanner, the rapid rates at which sub-Saharan African cities are growing requires a re-think of the urban models of the developed world.

Nonetheless, Tanner views sub-Saharan Africa as a geographic area of significant future opportunity. “That’s what’s drawn me to focus on this kind of research – there are problems to solve, but that means there’s lots of opportunity. They’re growing very quickly, these cities… even Dar es Salaam, which I first visited six years ago, every time I go there’s new high rises on the skyline, in the city centre… there are new overpasses being built, a highway – the growth is just outstanding.”

One of the first projects Tanner will undertake as part of his new role at the Wheeler Institute is the study of colonial concessions in Africa, working alongside Elias Papaioannou, Professor of Economics at London Business School and Co-Academic Director of the Wheeler Institute. “We’re basically, for the first time, combining historical records of the way the separate colonial govts gave away concessionary rights in different regions in sub-Saharan Africa over the past 150 years. No one has ever brought all of this data into one place before, standardised it and evaluated it all at once.”

Tanner plans to continue his work on different strands of research on sub-Saharan cities and says he hopes the work with the Wheeler Institute will lead to projects for his career in the longer term: “There’s a lot of work to be done.”

Tanner Regan is a Research Fellow in Economics at the Wheeler Institute for Business and Development at LBS, focusing on urban development, spatial analysis, applied econometrics, and public finance. His research uses a combination of big data, controlled experiments, and primary surveys to study the economics of property development, urban planning, and public finance in developing country cities. This research has been published in leading journals, appearing in Science, the Review of Economic Studies, and the Oxford Review of Economic Policy. To read more about Tanner’s research projects you can visit his website or follow him on twitter.

Seonah Choi (MBA 2021) worked as a political adviser to a number of government ministers in New Zealand, including the Prime Minister, prior to studying at LBS. She experienced first-hand how cross-sector collaboration can drive positive, large-scale change. Seonah is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.

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