Rio’s Favelas – A New Frontier?

Taylor Barnes | Aug 02, 2011 | Comments 1

RIO DE JANEIRO — A gray-haired and skeptical student raises his hand to interrupt the Brazilian bar association course on slum property rights: “I hear there are gringos living in favelas!”
His classmate chimes in: “I saw a report that [favela residents] have barely bought a house and they sell it again!”
Professor Alex Magalhães smiles. “Favela residents are as capitalist as anyone else,” he says.
It’s not just a debate for curious law students. As Rio’s famous hillside shantytowns benefit from a much-touted policing program that has reduced crime and tentative infrastructure gains, such as cable cars to transport residents up steep inclines, many in Rio de Janeiro are asking: Are favelas the next frontier of the city’s skyrocketing real estate market?
In the past five years, the average price of a four-bedroom home has shot up 200 percent to 380 percent in coveted South Zone (Zona Sul) neighborhoods such as Ipanema, Leblon and Botafogo.
Most of the nearby favelas are considered squatter settlements whose legal status is fuzzy, the plain fact that keeps most outside investors on the sidelines, says Ruban Selvanayagam, a British developer who specializes in Rio de Janeiro’s low-income market. The Brazilian constitution protects a squatter’s right to stay on a parcel of land after occupying it for more than five years, but the state also can demolish an unregulated structure with only 24 hours’ notice.
A handful of Rio de Janeiro favelas have gone through the legalization processes over the past 10 years, but they are the exception, not the rule.
“The absence of this title hasn’t impeded the buying and selling of homes,” says Magalhães, who cites scattered cases of “mega-landlords” who buy homes in favelas such as Vidigal and Parque Royal, where drug traffickers are very much present. “In either case, you see a very strong housing market.”
Developer Selvanayagam counters that Brazil’s housing market “just doesn’t work.” His business partnership with Brazilian real estate developer Manoel Pinto is pursuing large-scale, low-cost projects that are fully sanctioned and designed for the lower-income market, where the demand is greatest.
Rio de Janeiro’s two-year-old policing program, which places high concentrations of community patrols in certain favelas, also has raised questions of whether prized locations, such as the favela Cantagalo, immediately behind Ipanema, will attract greater interest and command higher prices.
Leonardo Schneider, vice president of housing syndicate SECOVI-Rio, estimates that communities near newly “pacified” favelas already have experienced a 40 percent increase in property values.
“It attracts people to live in favelas when you formalize a market that was informal,” Schneider says of outsiders moving into these districts.
Urban expert Theresa Williamson, whose non-governmental organization Catalytic Communities works to integrate low-income neighborhoods into Rio society, takes a dimmer view. She foresees gentrification in the currently affordable areas of the South Zone.
“You’re just going to end up creating [a situation] where the whole coast of Rio from Recreio [in the far south] to downtown is elite,” Williamson says.