The Hidden Costs of Formalization: Affordability and Mobility in Brazil’s Minha Casa Minha Vida Program

• In Event: Housing Policy, Residential Mobility, and Inequality: New Perspectives on Residential Change

Abstract

Low-income homeownership programs have been widely adopted throughout the Global South and are often credited with improving credit access, strengthening tenure security, and fostering long-term economic development (De Soto, 2002; Gilbert, 2004; Payne et al., 2009). Across Latin America, these initiatives have aimed to formalize housing for the urban poor by transitioning families from informal settlements to regulated homeownership. Yet, while the benefits of formal housing have been the subject of extensive debate, far less attention has been given to the burdens such transitions may impose on low-income households.

In Brazil, the Minha Casa Minha Vida (MCMV) program represents the most ambitious effort to expand formal homeownership in the country’s history. Since 2009, MCMV has subsidized the construction of nearly eight million housing units, offering safer dwellings and improved infrastructure to millions of low-income families. However, despite its success in expanding housing supply and improving living conditions, the program may have inadvertently placed new financial pressures on beneficiaries, potentially exacerbating existing poverty and insecurity.

This research investigates the question: How does the transition from informal to formal homeownership affect housing affordability for low-income residents? Specifically, it examines whether the costs associated with formal housing—such as condominium fees, utility bills, and property taxes—create additional financial burdens that outweigh the material gains of improved infrastructure and tenure.

To answer this question, this study leverages a quasi-natural experiment stemming from the forced relocation of families from informal settlements into MCMV housing projects in São Paulo, triggered by public infrastructure works. This variation in timing and exposure to involuntary relocation is used to estimate the causal effect of formalization on household income relative to housing costs. The primary data source is Cadastro Único (CadÚnico), Brazil’s federal registry of social program beneficiaries, which provides longitudinal socioeconomic data on millions of low-income households dating back to 2011.

This paper shows that although the program improves housing quality, the transition to formal homeownership introduces new and often unanticipated costs that strain household budgets. These financial obligations—largely absent in informal housing—can lead to heightened economic vulnerability, especially when incomes remain unchanged. For some families, formal housing may paradoxically deepen poverty rather than alleviate it.

This study contributes to a more comprehensive understanding of residential mobility and housing policy in the Global South. By shifting the focus from housing access to housing affordability, it highlights the importance of designing low-income housing programs that account not only for project delivery but also for the long-term financial sustainability of formal homeownership. The findings call for greater attention to the hidden costs of formalization and offer relevant insights for housing policy in a context of extreme poverty and vulnerability.

Author

• Flavia Leite, University of California, Berkeley
  Presenting Author