Also referred to as informal settlementsslums in cities are highly populated urban residential areas consisting mostly of closely packed, decrepit housing units in a situation of deteriorated or incomplete infrastructure, inhabited primarily by impoverished persons. 

Slums are usually illegal settlements and make up the most population in a lot of cities. In different parts of the world, slums grow for different reasons and some of them are rural to urban migration, informal economy, poor planning, natural disasters, high unemployment, and natural disasters. Slums are often categorized by overcrowding, poor infrastructure, poor sanitation, inadequate supply of clean water and electricity, and high crime rates.

The economic impact of slums in cities - Sheet1

Slums have many economic and social-economic impacts on cities and these are both negative and positive. An example of a negative impact that slums are in most countries is that slums aren’t included in the property tax brackets. In Mumbai for instance, unauthorized units make up at least 60% of Mumbai’s total structures while government mandates that 85% properties are supposed to pay tax. 

As most slums having poor housing and units often built from paper, plastic, mud, and metals, they don’t provide secure structures that are endangering to people’s lives. In countries were weather conditions aren’t favorable and earthquakes among other disasters are prone to happen, a lot of people lose their homes and lives, or may be injured. In such situations, the local governments have to spend a large sum of money to provide medical attention. Infectious diseases also spread much faster due to the shared use of small spaces by large numbers of people. Clean water and sanitation are also very scarce and these too are contributing factors. The extra attention given to medical care during an outbreak can also have a negative effect on the economy of cities with large slums. 

The economic impact of slums in cities - Sheet2
Keep India Beautiful

Pollution, which is also a common factor, is slums’ another negative impact. Air pollution and land pollution have negative impacts on health and in cities whose economy largely depends on agriculture; land pollution can have a negative impact on the economy. As access to health facilities and education cannot be easily accessible to every slum dweller; a large number of children do not get any education and in the long run, are likely to be less productive to the urban economy. Most slums aren’t secure and every year more than half of the young girls are sexually abused. These cases often result in pregnancy and a rise in population. 

Although the negative impacts of slums are much more evident, there are some positive impacts of slums too. Slum-dwellers make up a large number of the service sector in urban areas. A lot of natural produce and local production of goods and services are provided in the slums, and these in turn affect the economy. Most factories seek labor from slum dwellers as the labor is usually cheaper and the more locals are employed, the better their living conditions can be. As most slum dwellers can’t afford to buy goods from urban areas because of the high prices, dwellers buy from other locals and this in turn empowers the community. In Dhaka Bangladesh for instance, slums contribute to 8 percent of the GDP. In New Delhi India, people living in slums contribute over 7 percent of the country’s GDP.

The economic impact of slums in cities - Sheet3
Global Early Adolescent Study

A lot of developing countries have started the process of slum upgrading. Slum upgrading is a process through which informal areas are gradually improved and formalized by extending land and services in slums to improve the standard of living. Slum upgrading provides locals with the economic and social community services available to dwellers in the urban settlement. 

An example of this is increasing medical and education facilities in slums and improving infrastructure. Slum upgrading is a good solution for most countries with large slums to improve economically as it provides good and practical solutions with very few negative sides. One of the advantages of slum upgrading is that it blurs the lines between urban dwellers and slum dwellers. In some urban areas, there is a lot of prejudice against people from slum areas and this causes social-economic problems in cities. 

As more schools are built in slums, children will have more access to quality education and can be more productive to the economy. Better maintenance and access to clean water and proper sanitation will bring a decrease to the rate at which diseases spread and will also improve the standards of living for locals. Rates of air and land pollution also see a decrease and this will improve the environment and standard of living for locals through healthy natural produce and clean air. 

The economic impact of slums in cities - Sheet4

Slum upgrading has many positive impacts but can also have negative impacts if the aspects of its impact on locals aren’t thoroughly addressed. In Ethiopia, for example, a project to upgrade for more than 50 percent of slums was in place and a conducted study showed that most dwellers were more satisfied in the slums. In as much as more than 50 percent of residents preferred the better housing conditions, most complained about how financially unfavorable the living conditions were. Most residents had to pay for expensive electric bills and experienced inconveniences during load shedding because they could not use charcoal and traditional braziers like they would use in the slums. A large number also expressed how they returned to the slums for cheaper goods and services as well and security and sense of community they felt in the slums. 


Zyabo M'hango is an art enthusiast with a huge case of wanderlust. She believes that all forms of art intertwine as one and hence her pursuit of bringing Architecture and writing as one. When she's not working on her design projects, she's planning her next travel destination.