An informal settlement is a residential area in which housing and occupation have developed outside some or all of the formal systems governing land tenure, planning, building standards, infrastructure provision or legal recognition. Informality is therefore a legal, institutional and spatial condition rather than simply a synonym for poverty. Informal settlements can range from very small groups of self built dwellings to extremely large urban districts containing homes, shops, workshops and complex social networks.
Some have existed for decades and become partially formalised over time. Residents may have insecure tenure, incomplete documentation or no recognised ownership, while buildings may lack compliance with formal planning or construction standards. The precise definition varies between countries because laws governing land, housing and planning differ.
Informal settlements commonly emerge when formal housing supply cannot meet demand at prices accessible to lower income households. Rapid urban population growth can increase demand for accommodation faster than governments and markets can provide serviced housing. High land prices may push households towards marginal land, vacant land, hazardous areas or locations where formal development is prohibited.
Informal occupation can therefore be a response to exclusion from formal land and housing markets rather than simply a failure of individual households to comply with regulations. UN Habitat identifies speculative land markets, weak governance, inadequate planning and insufficient long term investment in housing and infrastructure among the factors associated with slum formation and informal urban development.
Informality can involve several distinct dimensions. Land tenure may be informal because occupants lack legally recognised ownership or secure rental rights. Construction may be informal because buildings have been erected without planning permission or compliance with building regulations. Services may be informal because water, electricity, sanitation or waste collection are provided through unofficial arrangements or are absent altogether. Economic activity can also be informal, including street trading, home based enterprises and unregistered businesses. These dimensions do not always occur together. A settlement can have formally recognised land rights but informal buildings, or legally constructed housing can exist on insecure tenure. Understanding these distinctions is important because different problems require different interventions.
Informal settlements are often located in areas that formal developers have avoided because of cost, legal restrictions or environmental risk. Examples can include steep slopes, floodplains, riverbanks, former industrial land, peripheral agricultural areas and land beneath infrastructure corridors. Such locations can expose residents to flooding, landslides, pollution, extreme heat and other hazards. Nevertheless, residents often choose these locations because they provide proximity to employment, transport or social networks. Peripheral relocation can reduce exposure to some hazards but may also increase travel costs and separate households from livelihoods. Location therefore needs to be considered alongside tenure, services, employment and environmental conditions rather than treated as an isolated characteristic.
Informal settlements can possess substantial internal organisation and economic activity. Residents may construct houses incrementally, establish local businesses, organise community associations and develop informal systems for water, electricity, waste collection and transport. Social networks can provide employment information, childcare, credit and mutual assistance. Informality therefore does not mean that settlements lack structure or social institutions. The problem is often that these institutions operate outside formal systems and that residents lack equal access to infrastructure, legal protection and public investment. UN Habitat has argued that informal settlements should be recognised as integral parts of city systems rather than treated only as isolated problems to be removed.
Policy responses vary from eviction and clearance to in situ upgrading, tenure regularisation, infrastructure provision and incremental improvement. Forced removal can disrupt livelihoods, education, social networks and access to employment, particularly when households are relocated far from established economic opportunities. In situ upgrading can provide roads, drainage, water, sanitation, electricity, public spaces and improved housing while allowing communities to remain. Tenure regularisation can strengthen security, although formalisation must be designed carefully because newly valuable land can become vulnerable to market displacement. UN Habitat promotes participatory approaches and citywide upgrading strategies that connect informal settlements to wider urban infrastructure and services.
Informal settlement should not automatically be equated with slum. The terms overlap substantially but have different analytical meanings. Informality focuses on the relationship between settlement, law, planning, tenure and formal institutions. Slum is generally used to describe inadequate housing conditions involving deficiencies such as overcrowding, poor services, insecure tenure and inadequate structures. An informal settlement may contain relatively good quality buildings while lacking formal tenure, and a formally planned neighbourhood can contain severely inadequate housing. International organisations therefore distinguish between the concepts when analysing urban poverty and housing conditions.
Informal settlements are significant because they demonstrate the gap between formal urban systems and the actual demand for housing. UN Habitat's 2026 World Cities Report states that more than one billion people live in informal settlements and slums under conditions that can include insecure tenure, overcrowding, environmental hazards and limited access to basic services. Effective policy therefore requires more than simply enforcing planning regulations.
It requires expanding affordable housing supply, improving infrastructure, recognising legitimate residential needs, reducing hazardous exposure, strengthening tenure security and integrating underserved neighbourhoods into the wider city. The long term objective is not necessarily to eliminate every form of informality immediately but to ensure safe, secure, serviced and affordable housing while reducing the structural conditions that continually generate new informal settlements.
