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Squatter settlements are basically a Third World phenomenon; they are part of the urban landscape of many Latin American, Asian, Middle Eastern, and African countries. Billions of people live in them. For example, in 2003, 55.5% of the urban population in India, 44.1% in the Philippines, 42.6% in Turkey, 37% in South Korea, 36.6% in Brazil, and 33.1% in Argentina lived in squatter settlements.

Squatter settlements are defined as residential areas built on vacant land, either private or public, in an unauthorized fashion. A typical squatter settlement is located on the fringe of a large city; the land is occupied illegally without legal title to it; the houses fail to conform to building codes and regulations; and the settlement lacks or has very limited infrastructure and services such as running water, electricity, sanitation, paved roads, and educational and medical facilities. There are other terms that are used interchangeably, such as shanty towns or informal, spontaneous, irregular, unregulated, unauthorized, unplanned, or self-help settlements, although each term has its own political implications. Sometimes it is their illegality, sometimes their unplanned nature, and sometimes their substandard qualities that are stressed by the terms used. Countries have their local terms for squatter settlements: favelas in Brazil (Portuguese), barrios in some other Latin American countries (many Latin American countries have their own terms, e.g., barriadas in Peru and villas misaria in Argentina), bustee/bastee in India, bidonvilles in Francophone West Africa, kampong in Southeast Asia, and gecekondu in Turkey.

Usually, a negative view prevails in society about both the place and its people because of the illegal development of squatter settlements: Squatter dwellers are regarded as invaders of land and offenders against private property. They may also be seen as overtaxing public services and causing harm to the city—both to its image as a modern place and to its environment if the houses are built in reservoirs and forests. Furthermore, with their traditional values and way of life, they may be blamed for ruralizing the city. On the other hand, seeing squatter housing as a response of the urban poor to their housing problem may bring some sympathy. The term squatter housing implies temporariness, although in fact it has been a continuing presence since its first appearance in the late 1940s and early 1950s.

In most countries, early squatter settlements emerged after World War II in the restructuring of the world economy, although Latin America started capitalist production earlier. In the process of the integration of Third World countries into the capitalist world system, modernization in agriculture disturbed the traditional balance in rural areas, and many peasants, in their search for livelihood, left their villages for the cities. In the face of inadequate housing in the cities, they started building their own houses on land that did not belong to them. The first houses were shanty-like structures; they were built in undesirable locations, such as steep hillsides and river-banks, close to industrial areas, mostly in old city centers, so that their dwellers could find work and save transportation costs. As these locations disappeared under the migration waves from rural areas, squatter settlements started developing on the peripheries of cities. They were built in faraway areas where no infrastructure and services were available. They were expected to disappear as rural migrants became established in the city and found permanent jobs that would enable them to pay for their housing. However, this expectation proved to be wrong. The level of industrialization in Third World countries lagged behind their level of urbanization, and as a result, there were not enough jobs in the formal sector to absorb newcomers to the city. Furthermore, the cities lacked affordable housing; Third World states had industrialization as their priority, ignoring other sectors, including housing. Thus, the people themselves had to transform the unoccupied peripheral land into livable environments. They used their meager resources, along with their social networks (mostly kin and fellow villagers) to construct houses and to satisfy basic needs so as to survive in the middle of nowhere. In contrast to the view that squatter settlements destroy nature, they planted trees, as in the case of Turkey, in their endeavor to create environments like the ones back in the villages. Over the years, some squatter settlements developed into established neighborhoods, and their initially shanty-like structures changed into sturdy buildings, while others retained their initial features.

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