As many of the world’s major cities wrestle with the problem of expanding populations, they must decide on the best approach to improve the living conditions and prospects of those who find themselves on the bottom rungs of the ladder.

So, in the field of urban policy, there is considerable debate about slums and informal settlements. Much of the discussion centres on whether these areas should be “formalised”, with the responsible authorities exerting closer control and supervision. Or, instead, should they be left to evolve in their own haphazard way outside the system, which might be seen as an unfortunate but inevitable consequence of today’s economic inequalities.

To shed new light on the complexities of such issues and bring them to a wider audience, Lingnan University is organising the Cities and Governance Webinar Series 2022/23.

The mid-December event featured Professor Peter Ho of Zhejiang University’s School of Public Affairs. Regarded as a national expert in China, he has a special interest in planning and development theories – and how to improve them – which has led him to put forward a “Credibility Thesis” and the concept of “embedded activism”.

Ho’s talk looked at the realities of extra-legal housing, key perceptual divergences, and their implications for urban governance.

He noted that the broader urban policy debate is driven by two factors: the demands for efficient markets versus considerations for social welfare. However, a core problem is the lack of policy tools to assess the conditions under which an institutional intervention would be welcome and effective. And this leads to what he terms the conundrum of credible informality.   

“A big question all around the globe is what to do with these informal settlements,” said Ho, who is also a professorial fellow at the London School of Economics and Political Sciences. “Governments are oftentimes inclined to ‘clean them up’ with the idea of slum redevelopment or rural reconstruction. But from a theoretical point of view, there is a certain relation between the form of the property rights and their performance.”

In essence, according to neo-classical thinking, if property rights are formal, private and secure, that leads to better performance by the institutions concerned. In such cases, performance can be taken to include not just better buildings, planning and land use. It also extends to achieving in due course higher prices, investment and growth, while reducing crime, health and social problems.

“This argument is quite persistent through time,” Ho said. “But the problem with this premise is that if we want to test and validate the relation between institutional form and performance, a lot of empirical studies cannot determine this relation.” 

Indeed, in much of the current orthodox literature on institutions and development, there seems to be an inability to distinguish between the forms and functions of institutions.

This realisation prompted Ho to devise a “Credibility Thesis” in order to shift the paradigm and arrive at a better way of developing practical tools for use in urban planning and other policy areas. 

Its underlying premise is that institutional function presides over form, and the former can be expressed by its credibility, which is the perceived social support at a given time and space. 

Clearly, though, it is important to have ways of measuring the credibility of public policy initiatives and property rights arrangements in order to gauge when and how to intervene or where to instigate change.

For this, Ho explained, three tools have been developed over the last 10 or so years. One is the conflict analysis model (CAM) to aggregate perceptions of actors on conflict. The second is agent-based modelling (ABM), which measures the relative speed of institutional change. And the third, known as the Formal, Actual and Targeted (FAT) Institutional Framework, can be used to measure perceptual differences of actors on institutions. 

Since its development, the latter has been field-tested for different sectors and countries. Illustrating its potential as a policy tool for dealing with extra-legal settlements, it has already been applied in cases involving informal housing in China, also called Small Property Rights Housing (SPRH).

One key finding there is that SPRH now enjoys significant credibility, which is evident from analysis of related investment, access to credit, perceptions about ownership, and security of tenure.

In the wider context, that could have major ramifications for the advancement of empirically-based approaches to property rights and the role of informality in urban policy planning and governance.

“But if the perceptions [of residents] between formal, actual and targeted start to diverge, then the policy becomes less credible and more difficult to implement,” Ho said.