National Report on Slum Conditions and Shelter Policy: Iran 2012

Ministry of Roads and Urban Development
Islamic Republic of Iran
National Report on Slum Conditions and Shelter
Policy: Iran 2012
First Meeting of the Asia-Pacific Slum Upgrading Working
Group
Tehran, 2-4 July 2012
Ministry of Roads and
Urban Development
Urban Development and
Revitalization Organization

ii
In the name of God the compassionate the merciful

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Contributors:
Pooya Alaedini, Abbas Mokhber, Mohammad Saeid Izadi, Majid Rousta, Afshin
Mirzababaei, Mohamad Aeeni, Babak Pirouz
TABLE OF CONTENTS
PART ONE: COUNTRY OVERVIEW
1.1 Introduction
Brief history
Recent events as related to urbanization and social programs
1.2 Economic and Social Development
Level of development
Poverty and inequality
Main features of economy
1.3 Geography, Population, and Urbanization
Area, topography and climate
Demographic characteristics
Recent urban development and housing trends
PART TWO: GOVERNANCE AND PLANNING STRUCTURE
2.1 Governance Structure
Form and structure of government
National planning structure and shelter policy
2.2 Urban Planning
Urban plans, their scope and extent, and their relation to national plans
Influence of central government in relation to municipal/local structures
National development objectives and strategies in relation to urbanization…
PART THREE: SLUM CHARACTERISTICS AND REGULATORY ENVIRONMENT
3.1 Slum Typologies
3.2 Informal Tenure Arrangements Commonly Found in the Cities
3.3 Statistics on Slums
3.4 Characteristics of Slums in Selected Cities
3.5 Land Use Regulations, Property Ownership Laws, and Shelter Legislation
Land use
Legal aspects of formal tenure
Regulations concerning tenure security and eviction
Laws related to informal settlements
Shelter legislation
PART FOUR: SLUM UPGRADING IN PRACTICE AND FUNDING MECHANISMS
4.1 Evolution of Activities in Physically-Distressed Zones
4.2 Earlier Experience with Informal Settlement Upgrading
4.3 Funding for Slum Upgrading
Financing Revitalization of Physically-Distressed Zones
Financing Informal Settlement Upgrading
PART FIVE: RECENT PERFORMANCE AND POLICY PROSPECTS CONCERNING SLUM UPGRADING
AND SHELTER PROVISION
5.1 Current Policy
5.2 Current Activities Concerning Physically-Distressed Urban Fabric
5.3 Current Activities Concerning Informal Settlements
5.4 Low-Income Housing Provision

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PART ONE: COUNTRY OVERVIEW
1.1 Introduction
Brief history
The recorded history of Iran (previously known as Persia) may be traced back
several thousand years to the appearance of some of the oldest-known cities under
the Elamite and Jiroft civilizations. The establishment of the Persian Empire by Cyrus
the Great in 559 BCE marked the birth of a unified land with a thriving network of
urban centers controlled from Pasargadae and Persepolis. Following the invasion of
Alexander of Macedon and a transitional period of Seleucid rule, Parthians
reestablished Iranian sovereignty in the country. They were followed by Sassanids
who created a sophisticated centralized administration and urban culture in Iran and
gave Zoroastrianism the status of official state religion. Arab-Muslim forces invaded
Iran in 639 CE. Following this event, Iran became part of the Muslim Empire and the
majority of the population converted to Islam. A series of independent Persian or
Persianate kingdoms controlling Silk Road’s bustling towns in the ninth through the
twelfth centuries strengthened the Iranian identity and made the New (or Dari)
Persian language a regional lingua franca and literary language. Iranian urban
centers of this period had large populations relative to medieval standards and
fostered significant economic activity as well as science and art. Between the
thirteenth and the fifteenth centuries, despite large-scale disruptions caused by
nomadic invasions from Central/Inner Asia as well as periodic dynastic shifts, Iran’s
Silk Road towns remained important commercial and productive centers.
The rebirth of the Iranian nation is generally traced back to the 16th
century
establishment of the Safavid House who declared Shia Islam the official state
denomination and gave considerable patronage to intercity commerce and urban
architecture. Possibly due to world-systemic shifts and the rise of European
commercial (and eventually industrial) powers, Iran underwent a gradual economic
decline starting in the eighteenth century with ramifications for its urban populations
and their productive activities. The country witnessed a modernist revolution in the
first decade of the 20th century which resulted in a constitutional form of monarchy.
This event together with the discovery of oil in Khuzestan set the stage for Iran’s

2
modern era characterized by centralization of administration, a petroleum-based
industrialization drive, and unprecedented urban development. Starting in the 1960s,
rapid urbanization due to rural out-migration, high birth rates, and improved life
expectancies outpaced the development of modern economic sector in the cities.
Slum enclaves began to appear across Iranian urban landscape, and their plight
arguably had a significant influence on the 1979 Revolution that toppled the
monarchy and established the Islamic Republic in its place.
Recent events as related to urbanization and social programs
Since the Islamic Revolution, the Iranian government has placed special emphasis
on human development, social protection, and “social justice.” Significant
investments have been made in the social sector over the last three decades with
virtually full coverage of the elementary and higher level education, extensive health
coverage, and an active distributive strategy through direct transfers and indirect
subsidies. A number of government and non-governmental organizations (including
State Welfare Organization and para-governmental Imam Khomeini Relief
Foundation) have been active in providing social security through cash transfers,
training, insurance, and other programs. The Ministry of Welfare was established to
coordinate all welfare-related activities in the country. While this process is still in the
making, the recently-established entity itself has been integrated with two others to
form the Ministry of Labor, Cooperation and Social Welfare. Other than explicit
subsidies and transfers, Iran has maintained a very large implicit subsidy system that
is untargeted. Sighting this as a major problem, the government has recently
replaced a major part of the untargeted subsidies with direct cash transfers to every
Iranian household.
A major characteristic of Iran’s economy since the 1960s has been its strong
dependence on oil revenues. While oil revenues provide the hard cash needed for
accelerated economic growth, they also result in a number of structural problems
that hinder development. The availability of significant oil revenues has promoted
capital intensive production and import-based commercial activities that preclude
adequate employment generation on the one hand and land and housing speculation
on the other. This structure is manifested in urban areas by perpetual housing and
land shortages and the growth of slums. To alleviate these urban problems, the

3
government initially allocated land to housing cooperatives whose members by
default had been those working for either government/public sector agencies or
medium to large size private enterprises. Yet considering the significant size of
employment in the private-sector micro and small enterprises, the bulk of the low-
income population did not benefit from such programs. In recent years, the main
government policy initiatives have included a housing program called “Mehr” and a
set of urban upgrading activities that are discussed in this report.
1.4Economic and Social Development
Level of development
Based on World Bank figures,1
Iran’s gross domestic product (GDP) stood at $331
billion in 2009 having grown at an average annual rate of 3.1 percent during the last
decade of the 20th
century and at an average annual rate of 5.4 percent in the first
decade of the 21st
century. However the latter respectable growth has slowed down
in recent years and it was recorded at 1.8 percent in 2009. According to figures
available from the United Nations Development Programme (UNDP) database,2
Iran’s GDP per capita stood at 10,496 dollars in PPP terms in 2011. Furthermore,
Iran has a medium level of human development. Its Human Development Index
(HDI) improved from 0.437 in 1980 to 0.707 in 2011. In the latter year, its education
index reached a value of 0.64, its literacy rate for both sexes stood at 85 percent, its
combined gross enrolment for both sexes was 69.9 percent, and its public
expenditure on education comprised 4.7 percent of its GDP. While the mean number
of schooling for both sexes was recorded at 7.3 years and the ratio of female to male
populations with at least secondary education was estimated as 0.682 in the same
year, there has been a steady expansion of tertiary level education and female
students have outnumbered male students at colleges and universities by a large
margin in recent years. UNDP figures for 2011 on health index, life expectancy at
birth, and public expenditure on health in Iran are 0.836, 73 years, and 3 percent of
GDP respectively.
1
“Iran, Islamic Rep. at a Glance,” accessed from www.worldbank.org on May 24, 2012.
2
Data accessed from www.undp.org on May 20, 2012.

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Poverty and inequality
Based on UNDP figures for 2011,3
1.5 percent of the Iranian population lives on less
than 1.25 dollars per day. For the same year, inequality adjusted life expectancy is
0.71, gender inequality index is 0.485, and income Gini coefficient is 38.8. Using
2006 census data from the Statistical Center of Iran (SCI),4
the Gini coefficient for
2007-2008 may be calculated as 0.405. Furthermore, based on SCI figures, the
average income of urban households in the lowest three deciles is less than half of
the average for all urban household while the average income of the highest decile is
15.2 times that of the lowest income decile.5
Main features of economy
Iran is the second largest producer among the member states of the Organization of
Petroleum Exporting Countries (OPEC) and its economy is thus characterized by a
large oil sector. Its GDP composition for 2010-2011 is provided in Table 1.1.
Table 1.1: Composition of GDP, 2010-2011 (Iranian Calendar Year 1389)
Sector Petroleum Agriculture
Industry &
Mine
Construction Services
Percent 22.7 10.2 12.6 5.7 51.1
Source: Central Bank of Iran
There is limited information on Iran’s informal economy. By some estimates it may
comprise between one fourth and one third of all economic activities. While some
efforts have been made toward privatization, the government remains the largest
actor in Iran’s economy, controlling the petroleum industry, having major stakes
across all sectors, and employing a bulk of service sector employees. Due to
fluctuations in oil prices, Iran’s economy experiences a great deal of volatility. All
sectors of the economy are affected by the oil receipts. High levels of oil receipts
usually usher in a period of intense activity across all other sectors but may also lead
to undesirable changes in the economic structure and possibly to Dutch Disease
(sharp increases in the price of non-tradables with detrimental impacts on the
production of tradables) accompanied by high rates of inflation or stagflation.
Another aspect of the oil-based economy is the distribution of oil revenues. Oil
3
Ibid.
4
SCI, “Household Income and Expenditure” data, 2007-2008.
5
Pajuheshkadeye Towse’ye Karbordi, “Pishnevise sanade rahbordie behsazi va tajdide hayate
bafthaye farsudeye shahri,” report prepared for UDRO, 2011.

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revenues wholly received by the government are circulated in the domestic economy
by government/public sector’s direct spending and investment, payment of salaries
and wages, and provision of subsidies to either consumption or production. A highly
uneven distribution may result in practice. The government has attempted to remedy
this through the provision of untargeted subsidies in the past and direct transfer
payments to every household in recent times (attempts are now being made to
restrict transfer payments to low-income households only). Yet, large transfer
payments in an environment of high inflation and low absorption capacity may
themselves be problematic. Indeed Iran has experienced two-digit inflation rates
throughout the last decade and its rate of inflation for 2010-2011 (1389 compared to
1388 according to the Iranian calendar) was officially reported as 12.4 percent.6
Land
and housing prices have increased more drastically over the past decade and a half.
Measures to address inflation by rushing in imports in an unmanaged manner may
have in turn hurt domestic production (and are not possible for the case of land and
housing).
As mentioned, while the annual growth of GDP picked up in the mid 2000s (due to
increased oil prices), it has slowed down in the last 2-3 years. Furthermore, due to
an array of economic difficulties including a devastating eight year war in the
eighties, economic and planning volatility, high rates of population growth in the past,
and trade and financial sanctions in more recent times, per capita incomes have
remained stagnant in real terms over the past three decades. Related to this are
problems associated with double digit unemployment rates (officially reported as
13.5 percent7
for 2010-2011). Thus, uneven distribution of income and wealth
notwithstanding, Iranian households have been experiencing stagnant incomes, high
rates of inflation (which is especially significant for the case of land and housing),
and high rates of unemployment.
1.5Geography, Population, and Urbanization
Area, topography and climate
Iran covers a land area of 1.6 million square kilometers and borders Turkmenistan,
Azerbaijan, and Armenia in the north; Afghanistan and Pakistan in the east; Iraq and
6
Central Bank of Iran, “Economic Indicators, No. 63,” 2010-11 (in Persian).
7
Ibid.

6
Turkey in the west, while there is access to the Oman Sea and the Persian Gulf in
the South and the Caspian Sea in the north. It enjoys a diverse climate, although a
large part of the country is semi-arid or arid. Two significant mountain ranges cross
the country, making up the Iranian plateau. The Caspian region in the north receives
significantly higher precipitation than the rest of the country. The diverse climatic
conditions mean that a wide range of agricultural produce can be farmed in Iran.
Demographic characteristics
Iran’s total population was estimated as 74.7 million in 2010 (53.6 million or 71.75
percent urban and 21.1 million or 28.25 percent rural) resulting in a population
density of 45.3 persons per square kilometer. Population densities and urbanization
(size and number of urban centers) are much lower in the south and east as
compared to north and west due to the differences in the precipitation rates between
the two halves of the country. Iran has experienced a rapid pace of urbanization in
the past three decades. Based on Census figures,8
its total population grew at an
average annual rate of 2.4 percent from 33.7 million to 70.5 million persons from
1976 to 2006 (see Table 1.2). The urban population of Iran grew at an average rate
of 3.7 percent from 15.8 million to 48.2 million persons (68.4 percent of total) in this
thirty year period. The highest growth rates were registered in the first decade of the
period (due to the post-revolutionary baby boom affecting the whole population as
well as the war which accelerated rural-urban migration) whereas this growth rate
decreased to an average of 1.6 percent per annum in 1996-2006. Furthermore, as a
result of rural-urban migration and reclassification of expanding villages as towns,
the growth rate of the rural population has been negative. The number of cities and
towns grew from 614 to 1014 between 1996 and 2006. While over half of these
cities/towns have populations of 50,000 persons or fewer, 80 Iranian cities have
populations over 100,000 persons, accounting for 17 percent of the total population
of the country. Furthermore, around 53 percent of Iran’s urban residents live in cities
with populations of 250,000 persons or more and another 17 percent are found in
100,000-250,000 person towns. The volume of rural-urban migration in the period
1996-2006 has been estimated as 4.2 million persons, a great potion of which has
been absorbed by cities of over 100,000 persons (Statistical Center of Iran, 2008).
8
SCI, Statistical Yearbook of Iran, 2008.

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Table 1.2: Urban and Rural Population Growth Rates, 1976-2006
Period
Overall Growth
Rate
Urban Growth Rate Rural Growth Rate
1976-1986 3.8% 5.3% 2.3%
1986-1991 2.4% 3.4% 1.3%
1991-1996 1.4% 2.9% 1.1%
1996-2006 1.6% 2.7% -0.4%
1976-2006 2.4% 3.7% 0.7%
Source: Based on figures from SCI, Statistical Yearbook of Iran, 2008.
While the earlier rapid population growth has subsided and life expediencies have
increased significantly in recent years, the Iranian population remains very young.
Table 1.3 provides information on the changes in the average age of the population
in urban and rural areas for both sexes in a period of one decade. Figure 1.1
compares Iran’s population pyramids in 1996 and 2006.
Table 1.3: Average Age of Population
Year
Total Urban Rural
M & F M F M & F M F M & F M F
1996-7 24.03 24.15 23.9 24.52 24.66 24.38 23.25 23.34 23.17
2006-7 27.99 28 27.98 28.33 28.4 28.27 27.24 27.36 25.16
Source: SCI, data accessed from www.amar.org.ir on May 23, 2012.
Figure 1.1: Population Pyramids in 1996 (gray) and 2006 (white)
Source: Based on Census data from Statistical Center of Iran
As indicated in Table 1.4, literacy levels have been steadily rising in the last few
decades. Notwithstanding gender disparities, literacy rates have improved in both
rural and urban areas and this rise has been quite steep over the last 20 years.

8
Against the background of a very young population, the steep rise in literacy levels
has been achieved through the steady improvement in the percentage of children
attending school. In a sense, the relatively young age of the population has served to
enhance the country’s overall literacy rate. Furthermore, normative literacy has
increased faster among girls and women in both urban and rural areas and the
overall gender literacy gap has narrowed. Interestingly, tertiary level education has
expanded more rapidly for women as compared to men, so that in the academic year
2006-2007 there were 1,346,274 male and 1,482,237 female college and university
students in the country.9
Table 1.4: Literacy Rates
Year
Total Urban Rural
M & F M F M & F M F M & F M F
1976-7 47.5 85.9 35.5 65.5 74.4 55.6 30.5 43.6 17.3
1986-7 61.8 71 52.1 73.1 80.4 65.4 48 59.9 36
1996-7 79.5 84.7 74.2 85.7 89.6 81.7 69.3 76.5 62.1
2006-7 84.6 88.7 80.3 88.9 92.9 85.6 75.1 81.1 68.9
Source: SCI, data accessed from www.amar.org.ir on May 23, 2012.
Ninety nine percent of Iranians are Muslims, the majority of whom follow the Jafari
Shia branch of Islam (also known as Emami or Twelver Shi’ism). There are
significant numbers of Sunnis and smaller numbers of other branches of Shi’ism
(other than Jafari). Other officially recognized religions in Iran include Christianity,
Judaism, Zoroastrianism, and to some extent Mandaeanism. Most Iranians speak an
Iranic language, which is a branch of the Indo-European family of languages. Among
these, Persian (known as Farsi-ye Dari, Farsi, Dari or Tajiki in the language itself) is
the official medium of communication in the country and is used and understood by
most Iranians. While no reliable estimates exist, probably around 60 per cent of the
population speaks Persian as a first language. Other Iranic languages or dialects
spoken in Iran include Caspian dialects, Kurdish languages/dialects, Lori/Bakhtiari
dialects, and Baluchi. Turkic (mostly Azarbaijani) is probably spoken by about 25 per
cent of the population as a first language. There are also speakers of Semitic
languages in Iran, including Arabic and neo-Aramaic. Armenian is spoken by
Armenian Christians.
9
SCI, data accessed from www.amar.org.ir on May 23, 2012.

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Recent urban development and housing trends
The above-mentioned urbanization experience has placed significant pressure on
urban service and housing provision. There has been a persistent gap between the
number of housing units and the number of households the country. This gap does
not equal shortage but is indicative of it. Based on the 2006 Census, there were 1.5
million more households than housing units. Yet, the same Census figures indicate
that 500,000 housing units were vacant in 2006.10
This means that housing
shortages notwithstanding, there may be a mismatch between what the market
potentially supplies and what lower-income households demand. There is also a big
gap between average demand for square footage of housing by households and the
larger size housing units available in the market.11
Indeed, a major characteristic of
Iranian cities is the dual housing market. In the past decade and a half, the price of
housing across all urban areas in Iran has skyrocketed due to the fact that at last a
part of the economy has done well (and real estate has traditionally been a place
where people have tended to put their money). Therefore, in all cities, a portion of
the population pay premium prices for desirable real estate while some others have
to settle in slums (although this does not mean that the price of housing in the low-
income neighborhoods has stagnated).
Indeed, an important factor related to above observations, which is most likely
impacting trends related to informal settlements, is affordability as experienced by
real consumers. Housing costs as a portion of total household expenditures have
been on the rise in Iran, especially among households in the lowest consumption
deciles. The drop in home ownership rate from 70.7 percent in 1986 to 63.4 percent
in 2006 may be thought of as a reflection of this development. It is estimated that
22.7 percent of urban households can only afford 14-35 square meters of housing
while the housing affordability range for another 24 percent is 43-50 square meters.
Based on findings from the Comprehensive Housing Plan (also called Housing
Master Plan), the average time it will take households in the two middle consumption
deciles to purchase a house is 18 years, provided that they save one third of their
income per month for this purpose. For households in the lowest consumption decile
10
Source: SCI, Statistical Yearbook of Iran, 2008.
11
Minou Rafii (2003) “Housing Economics,” in Eqtesade Maskan, edited volume published by National
Organization for Land and Housing, Tehran (in Persian).

10
the corresponding figure is 100 years. Rising home prices and rapid housing market
fluctuations are at least partially due to macroeconomic shifts. Furthermore, the dual
nature of housing demand – for shelter and investment – makes the housing market
more susceptible to macroeconomic shifts. In Iran, around 41 percent of the demand
for housing was attributed to seeking an investment opportunity between 1988 and
2002. The corresponding figure was calculated as 59 percent for the period 2000-
2001. The high demand for housing as an investment has a reinforcing impact on
home prices but a negative effect on the housing possibilities of the low-income
groups.12
12
Ibid.; Ministry of Housing and Urban Development, Housing Master Plan, 2006.

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PART TWO: GOVERNANCE AND PLANNING STRUCTURE
2.3Governance Structure
Form and structure of government
Iran was declared an Islamic Republic in 1979 following a national referendum. The
Supreme Leader, chosen by the Council of Experts, itself an elected body, has the
highest authority within the state. An elected president, head of the executive
branch, nominates the cabinet, which is currently composed of 18 ministers (as
shown in Figure 2.1) to be endorsed by the legislative. The president also selects the
heads of several highly important organizations, such as Strategic Planning and
Control (formerly a more independent Management and Planning Organization),
Environmental Protection, and Atomic Agency as his deputies. The legislative branch
of the state is led by two institutions − the Majles or Parliament and the Guardian
Council of the Constitution. All legislation passed through parliament must be
approved by the Guardian Council in order to become law. The judiciary is
independent of both the legislative and the executive branches of the government
and answers directly to the Supreme Leader.
Figure 2.1: Government Ministries in Iran
Directly Responsible for Urban
Affairs
Roads and Urban Development; Interior
Responsible for Basic Urban
Services
Energy; Communication and Information Technology; Education;
Health; Culture and Islamic Guidance; Labor, Cooperatives and
Social Welfare
Responsible for Important
Urban Services
Industry, Mines and Commerce; Youth and Sport
Other
Finance and Economic Affairs; Justice; Agricultural Jihad;
Defense; Intelligence; Foreign Affairs
Administration in Iran is centralized and provincial officials are appointed by the
central government. There are 31 provinces, around 300 sub-provinces, and close to
800 counties in Iran. Provincial governors are selected by the central government
and their letters of appointment are signed by the Minister of Interior. They are the
most important actors at the provincial level, responsible for coordinating all
provincial activities that are executed in a top-down manner. At the same time,
provincial service agencies are controlled by their respective ministries.13
13
K. Tajbakhsh, “Municipal Management and Decentralisation Study: Iran,” The World Bank Regional
Municipal Management and Decentralisation Project, 2003.

12
Despite centralization, three levels of government may be discerned in Iran –
national, provincial, and local – with the latter comprising county, city
(municipality/mayor), and village (sub) levels. At the county level the
governorate/governor (farmandar/farmandari) is in charge while cities are managed
by the mayoral administration/mayor (sharhdari/sharhdar). The village authority is
called dehdari in Iran.
National planning structure and shelter policy
Iran follows a five-year development planning cycle. These national development
plans are the most important documents specifying social, economic and cultural
programs to be pursued over a five-year period. The Presidential Deputy Office of
Strategic Planning and Control is now responsible for drafting the five-year national
plans as well as other medium and long term plans, preparing annual budgets, and
monitoring the execution of plans. A total of 5 five-year national development plans
have been initiated in Iran since the 1979 Revolution and 4 have been completed. In
earlier years, post-revolutionary and war upheavals, displacement of a large number
of people, and various political prerogatives had an impact on both the formulation of
these plans vis-à-vis shelter needs and their implementation.
2.4Urban Planning
Urban plans, their scope and extent, and their relation to national plans
Comprehensive and detailed plans (for small towns, combined initiatives called
guidance plans) are prepared for Iranian cities on a regular basis – theoretically
every 10 years. Together, these plans essentially determine the official municipal
boundaries, land use, and lay out of streets. While they are also supposed to link to
the urban economy on the one hand and financial resources of the municipality on
the other, they have been criticized for erroneous forecasts as well as for being no
more than a wish list prepared in the form of maps. Indeed many details of such
plans never materialize. While some level of zoning may be discernible in the more
recent comprehensive/detailed plans, the central practice is to mark each individual
lot for a certain land use (including the ratio of built floor area to the lot area, called

13
construction density). In practice, across many cities, much of the land earmarked
for residential construction enters the speculative market and is hoarded, whereas
land outside the municipal boundaries attracts informal settlements. Another issue is
the so-called sale of construction density (tarakom-forushi). As a result of municipal
funding shortages in many of the larger cities in Iran, particularly in Tehran, mayoral
administrations practice the sale of extra construction density and the change of land
use, nullifying to some extent the original intention of the plans. Despite all this,
comprehensive and detailed plans remain the most important guidelines for urban
development in Iran. More localized plans are prepared for certain areas of the city
(tarhe mowze’i) or for a certain issue in the city (tarhe mowzu’i). There are regional
and spatial plans in Iran as well that are considered intermediate between urban
plans and the national plan. These include metropolitan area plan (tarhe majmu’eye
shahri), provincial physical plan (tarhe kalbadie ostani), national physical plan (tarhe
kalbadie melli), and territorial preparation plan (tarhe amayeshe sarzamin, which is
again a spatial plan but different from the national physical plan).
Influence of central government in relation to municipal/local structures
Municipal councils allow for democratic representation at the city level. Municipal
council members are directly elected by city residents and are responsible for
nominating the mayor. Yet, line agencies in charge of urban service provision in the
cities (e.g., water and sewerage, electricity, gas, and communication) are local arms
of their respective ministries. Thus, the scope of activities performed by municipal
authorities (councils and mayors) is rather limited. The Municipalities Law, dating
back to the earlier part of the twentieth century, originally authorized 53 sets of duties
for mayoral administrations. However, in subsequent periods, many of these duties
were taken over by the central/provincial government/governmental organizations,
so that in recent years mayoral administrations have only performed 21 sets of
duties with another 7 duties jointly managed by them and governmental
organizations.14
Based on the Third Development Plan (2000-2004), a number of
municipal responsibilities (potentially up to 22, according to one internal study
14
Kazemian, Gholamreza and Navid Saidi-Rezvani, Emkansanjie vagozarie vazayef jaded be
shahrdariha [Feasibility of delegating new duties to mayoral administrations], Modiriyate shahri va
shahrdariha dar Iran, Tehran: Entesharate sazmane shahrdariha va dehdariha, 1381 [2002].

14
conducted at the Interior Ministry,) were supposed to be given (back) to mayoral
administrations.
In practice the scope of the above re-delegation initiative has been very limited. This
said, the institutionalization of directly-elected municipal councils in the last decade
has resulted in some degree of devolution (in light of their authority and responsibility
vis-à-vis the mayoral administration and the mayor). Whereas prior to the late 1990s,
mayoral administrations were integrated in the structure of Interior Ministry and the
national government, they are now considered to be a “public sector” institution
monitored by municipal councils as representatives of the urban residents. The
authority of municipal councils has nonetheless been limited due to the legal
ambiguities surrounding their position and activities.
Ministry of Roads and Urban Development (MRUD) and Ministry of Interior (MI) are
the main national-level, urban development actors, with local arms in every city.
MRUD wields authority over the development of city plans while MI supervises city
administration and funds certain urban projects. The Municipalities Organization was
established in 2002 to coordinate the development of urban infrastructure and
delivery of urban services through the Ministry’s Office of Development. The Cultural
Heritage, Tourism, and Handicraft Organization also plays an important role in
planning for urban areas of architectural/cultural/historical value.
Figure 2.2 summarizes the relationship between various levels of government and
the public sector from the standpoint of urban development. The main government
body responsible for slum upgrading is the Urban Development and Renovation
Organization (UDRO) which is organized as a company (thus more appropriately
called Urban Development and Renovation Corporation). It is headed by a Deputy
Minister of Roads and Urban Development. UDRO’s relationship with other urban-
related agencies may be observed in the table as well.

15
Mayoral administrations
Roads & Urban
Development Ministry
Supreme Council of
Urban Planning &
Architecture
Private sector institutions and
corporations: banks, consulting
firms, investors, developers,
financial institutions
Relevant Ministries:
Communication and
Information Technology,
Energy, etc.
President
Cultural
Heritage,
Tourism
and
Handicraft
Organiz.
Endowments Organization
Article 5
Provincial
Commission
s
Provincial Organizations: Water
and Sewerage, Electricity, Gas,
Cultural Heritage, Environment,
Roads, Endowments,
Municipalities Organization
Interior Ministry
Provincial governorate:
Deputy for Coordination and
Development
Deputy for Strategic Planning
and Control
Municipal Councils
Deputy
for
Strategic
Planning
and
Control
Planning for transport, urban
development, architecture,
housing and construction
Affiliated organizations and
corporations: National
Organization for Land and
Housing, New Towns
Development Corporation, Urban
Development and Revitalization
Organization (Corporation),
Executive Organization for the
Construction of Government
Buildings and Public Facilities
Office for Upgrading
Distressed Urban Fabric
Provincial Physical
Development and Housing
Corporation
)‫استان‬ ‫عامل‬ ‫(هیات‬
Figure 2.1: National-to-Local Structure of Urban Management

16
National development objectives and strategies in relation to urbanization and shelter
The focus and achievements of Iran’s planning structure in areas of shelter and slums
are explained below:
1979-1989 (ad hoc planning): In the immediate post-revolutionary period, the prevailing
regulatory environment both limited legal ownership of land and ignored land takeovers
including squatting. At the same time various post-revolutionary obstacles including
budget shortfalls precluded adequate attention to urban development. Supply of new
housing dropped from 300,000 to 110,000 formal units per year. This situation was
exacerbated by a rapid population growth and a significant volume of migration to the
cities (partially as a result of the war). All these gave impetus to the expansion of urban
slums.15
1989/90-1993/4 (First Post-revolutionary Plan): The actual plan was not endorsed by
the Majles, although many of its provisions were followed in practice. This period
coincided with the post-war reconstruction efforts. A set of structural adjustment
measures was pursued by the government as the main economic strategy. In the
housing sector, initiatives toward privatization and deregulation were carried out
together with measures to prevent informal construction and control rural-urban
migration. This period witnessed the largest volume of housing and land subsidies and
transfers allocated by the government in the Iranian history. These subsidies and
transfers were for the most part nontransparent and untargeted. During the whole
period, 1.5 million formal housing units were built which amounted to 75% of the
planned 2 million units. Furthermore, while annual construction of homes reached
309,000 formal units per annum, the urban population doubled during the period. Either
in spite of government policies or as their consequence, the price of land, housing, and
urban services gradually increased. This was accompanied by the expansion of slums.
Slum areas also received population overflows from other parts of their respective cities
due to the prevailing socioeconomic conditions. At the same time a number of ad hoc
15
Ministry of Housing and Urban Development, Comprehensive Housing Plan, 2006 (in Persian).

17
renovation projects were carried out in urban slums and a few studies were conducted
on informal settlements in this period.16
1995/6-2004/5 (Second and Third Post-revolutionary Plans): The main housing policy
approach in this period was dubbed “PAK” which means clean in Persian and is an
acronym for “saving, mass production, and small units.” These were to be achieved
through market mechanisms and reduced government intervention. Construction of
social housing (50 square meter units), protected housing (74 and 100 square meter
units respectively in metropolitan cities and smaller towns) and free housing (without
floor area constraints) were facilitated by the government by freeing the land market and
decreasing subsidized land transfers as well as by involving private financial institutions,
floating banking interest rates, and increasing the ceiling of housing loans. A total of 1.8
million formal housing units or 91.9 percent of those planned were actually built during
this period. Yet, this achievement was mainly due to the success of the free housing
subsector since only 60 percent of the planned social housing units were actually
constructed. Furthermore, the expansion of slums and migration to cities and peri-urban
areas gained the attention of the government in serious ways during the Second
Development Plan, although the main public policy focus was on physical rehabilitation
in the initial stages. Most importantly, the Urban Development and Rehabilitation
Organization was established in this period to eventually deal with slums in Iran (see
Part Three of the report for the two types of slums officially recognized in the country,
namely distressed fabric and informal settlements). This led to the adoption of a national
document on Strategies for Regularizing Informal Settlements, activating Regional
Housing Companies, and rehabilitating an area of 600 hectares across Iranian cities on
a project basis.17
2005/6-2009 (Fourth Development Plan): Several important slum-related provisions
were included in the Fourth Plan Law. Revitalizing stressed zones and regularizing
fringe zones (informal settlements) through an enabling approach are the most
important of these. In particular, using internal and external sources, the Government
16
Ibid.
17
Ibid.

18
was required to initiate the reconstruction and renovation of aged urban fabrics
(including retrofit of buildings to make them earthquake-resistant) and complete them
within ten years. In practice, however, major problems surfaced in coordination among
various agencies relevant to slum upgrading. Yet, among the most important
developments toward the end of this period were the regulations governing intervention
in the distressed fabric of urban areas ratified by the Supreme Council of Architecture
and Urban Planning. Concerning shelter, the Ministry of Housing and Urban
Development (now Ministry of Roads and Urban Development) was required to carry
out the Comprehensive Housing Plan (prepared in this period), including: strengthening
housing cooperatives as well as charity and non-governmental organizations; taking an
integrated land management approach for the purpose of housing provision; creating a
secondary mortgage market; increasing mass construction; expanding housing capital
markets; supporting non-governmental players active in the provision of housing to
vulnerable groups; attracting foreign investment to the housing sector; providing
subsidies to builders with the aim of housing provision for low-income groups, white-
and blue-collar workers, and female-headed households.18
2010/11-2014/15 (Fifth Development Plan): Based on Article 171 of the Law of the Fifth
Plan, the Ministry of Housing and Urban Development (now Ministry of Roads and
Urban Development) and mayoral administrations (municipalities) are required to
reconstruct and revitalize 10 percent of physically-distressed urban areas each year.
The required funding for this endeavor is to be proposed by the Ministry yearly and
included in the annual national budgets. Furthermore, the government is required to
allocate at least 50% of housing funds, credits, and facilities, including those for the
Mehr Housing Plan as well as housing for the youth and those in need, to the distressed
fabric (although it is not clear through which institution, mayoral administration or any
other, these funds should be allocated). Furthermore, Article 172 of the Law of the Fifth
Plan addresses “fringe areas [manateqe hashiyeneshin]”. According to this article, such
areas when inside the city boundaries and designated by the Supreme Council of Urban
Planning and Architecture should be regularized through the formulation and realization
18
“Law of the Fourth Economic, Social and Cultural Plan,” 2005.

19
of legal, financial, cultural, and enabling mechanisms with the participation of residents
in the framework of the national document on “Enabling and Regularizing Unpermitted
Settlements.” Also, provisions are supposed to be made to prevent formation of
settlements outside city boundaries by controlling the expansion of peripheral villages
and destroying illegal construction with the assistance of the Judiciary. Abandoning the
Comprehensive Housing Plan, the sole means of housing provision to low-income
households is now the Mehr Housing Plan.19
19
“Law of the Fifth Economic, Social and Cultural Plan,” 2010.

20
PART THREE: SLUM CHARACTERISTICS AND REGULATORY ENVIRONMENT
3.1 Slum Typologies
The term “slum” covers a wide range of urban settlements, and its definition often varies
from one country to the next. It may be thought of as generally referring to urban areas
where residents have comparatively lower qualities of life and fewer opportunities due to
the physical and economic as well as socio-cultural and legal characteristics of the built
environment. Slums are often associated with lack of access to potable water, health
facilities, and other urban infrastructure as well as high density, low quality construction,
and/or lack of land and housing tenure.
Two types of slums, namely, distressed fabric (baft-e farsudeh) and informal settlement
(sokunatgah-e gheyr-e rasmi) have been officially recognized in Iran in the past
decades. According to the definition advanced by the Supreme Council of Urban
Planning and Architecture, distressed fabric is characterized by micro land divisions
(less that 200 sqm for more than 50 percent of the lots), impenetrability (less than 6 m
wide alleys in 50 percent of cases), and lack of sustainability (lack of structural integrity
in more than 50 percent of buildings). Depending on the existence of one or more of
these conditions, the area is considered relatively distressed, highly distressed, or
extremely distressed.
Furthermore, the national document on Strategies for Enabling and Regularizing
Informal Settlements addresses urban areas with the following features: “Hastily
constructed housing often built by their eventual occupants, mostly without permit to
construct…outside existing formal planning…; Concentration of lower income
groups…with functional linkages to the main city…; [and]… low quality of life and
desperately low urban services…and high population density.”20
While distressed fabrics and informal settlements for the most part have been
addressed in separate programs and by separate agencies in Iran, their definitions have
20
Urban Development and Rehabilitation Organization, “Strategies for Enabling and Regularizing Informal
Settlements,” 2004.

21
a great deal of overlap. It is also possible to provide the following slum typology in an
attempt to better reflect the Iranian context.
1. Areas located in the historical/central parts of Iranian cities that have been
experiencing steady physical, economic, and social decline: These older areas
might have been low-income neighborhoods for a very long time or have become
such in a more recent downward disinvestment spiral whereby:
i) Poor households have remained in the neighborhoods with narrow,
meandering alleys and old houses.
ii) Better off households have moved elsewhere in the city with better streets
and avenues (more upscale) in which they can live in newer houses.
iii) Some of the new arrivals (poor households) also go to the older
neighborhoods, essentially replacing the better off ones who are leaving.
iv) The municipality does not provide services to these neighborhoods on a
par with more affluent settlements party due to the former type of
neighborhoods’ physical attributes.
Such neighborhoods may contain no building of historical significance, a single
historical building (bana), a set of connected or disconnected historical buildings
(majmu’eh), or a relatively large area of historical significance (arseye tarikhi),
each warranting a different intervention strategy to capitalize on its (cultural
heritage) assets.
2. Slums located outside official city boundaries: This is the classic case of the
newer types of neighborhood formed when migrants from outside the urban area
(often rural areas) or poor households already in the city, who cannot afford
regular types of housing offered in the formal market, purchase land in the
informal land market in areas just outside the city boundary. This is quite possible
in Iran since much of the land on the fringes of the cities is owned privately. What
makes this type of land attractive is exactly the fact that it does not have proper
plot division or construction permits, thus making it much cheaper than land
elsewhere. Some documentation is provided for the transaction, such as a

22
promissory note (qowlnameh or pateh). Therefore, those who purchase this land
are more or less the legal owners of their plots, although they lack construction
permits and full titles. Construction on such sites therefore tends to take place at
night and illegally. These slums are not recognized by the municipal authorities
although they may get some urban services.
3. Slums formed in villages located just outside city boundaries: This is a special
case of the previous type with the difference that the slum has previously been a
village with agricultural or related functions. Yet, due to its proximity to the city it
has attracted low-income households unable to afford housing in the city.
4. Slums recently incorporated into the cities: The nucleus of these slums may be
former villages or just cheap land outside city boundaries occupied by low-
income households. Incorporating them has been one way to provide them with
basic services. Considering how these types of neighborhoods start, even when
they are incorporated into the city, they are slums (land divisions are not proper,
housing stock is of poor quality, etc.). Therefore, even these types of
neighborhoods go through the downward spiral similar the older types of
neighborhood described above.
5. Squatter settlements: Some squatting took place in the late 70s and early 80s,
that is the immediate post-revolutionary and the war periods, due to the relaxed
regulatory environment of the time. The possibilities for squatting have
diminished in the larger cities now and very few such cases are reported today.
6. Slums formed in and around brownfields: These include areas that have been
formed in and around semi-active or abandoned workshops and depots. Some of
these workshops have been deactivated as a result of urban outgrowth or due to
environmental regulations. These areas may not have any significant populations
or may have residential characteristics in common with one or more of the
previous categories.

23
3.2 Informal Tenure Arrangements Commonly Found in the Cities
A relatively significant number of housing units may be found that lack official deeds
across Iranian cities, but this situation is not restricted to slum areas. In fact many such
dwellings may be found in the more affluent neighborhoods. The main reasons behind
such tenure problems include the slow development a cadastre system and widespread
attempts at overstepping regulations with the hope of paying a low fine to receive titles.
Lack of a cadastre system has resulted in a large number of tenure disputes that must
be settled through the courts. Furthermore, owners of structures not constructed
according to regulations (including improper land divisions and construction) must work
out their problems with the municipality which may take a long time. Additional tenure
problems may exist in slum areas. Slums located outside official city boundaries, slums
with rural origins, and slums recently incorporated into the cities are likely to have their
genesis in informal land transactions. Owners may therefore only possess promissory
notes (qowlnameh or pateh) and often need to go through a lengthy process at the
municipality or at the courts (if there is a dispute) to get proper titles. Squatter
settlements (the case of which was more prevalent in the past) face similar situations
but with more difficulties.
No official statistics are available on homelessness in Iran. Homeless shelters exist in
larger Iranian cities. In Tehran there are 3 such shelters for men and three for women.
Together they provide their services to 1500-2000 persons.21
Many of those who receive
services at these centers are drug addicts. There are a large number of seasonal and
migrant workers who may be in fact homeless during parts of the year, but generally do
not stay at homeless shelters. So the actual homeless figures may be much larger.
Information on evictions by the municipal authorities or landlords is also anecdotal. It is
generally believed that such instances have been of eviction have become rare in
recent times.
21
Akbar Aliverdinia and William Alex Pridemore, “Individual-Level Factors Contributing to Homelessness
among Adult Males in Iran,” Sociological Spectrum, No, 32, 2012, pp. 209–225.

24
3.3 Statistics on Slums
There exist relatively good estimates on the size and population of the two official types
of slums (informal settlements and distressed fabric) which however may have a great
deal of overlap.
According to the figures from the National Task Force for Enabling Informal Settlements
on 20 major Iranian cities, informal settlements on average cover around 8 percent of
urban areas, 93 percent of which are found within the official municipal boundaries.
Needless to say there are significant differences from one city to the next. For example
in Bandar Abbas, about 31 percent of the land area is composed of informal settlements
whereas the corresponding figure for Zanjan is less than 1 percent. Two sets of
estimates are available on the extent of stressed fabric in Iranian cities – one is on 330
cities and the other on 17 selected cities. The first set gives us a figure of 9.2 percent as
the average share of distressed fabric in the entire area of the cities while the
corresponding figure in the second set is 10 percent (3 percent historic, 7 percent non-
historic). A rough estimate of around 10 percent may also be provided on the share of
“underutilized” areas in Iran cities (brownfield, dilapidated, etc.).22
The above cited
figures are added up in Table 3, giving us a total rough figure of 28 percent for the
average share of slums in the total land areas of Iranian cities.
Table 3.1: Estimates on the Size of Slums
Slums
Percent of Total Urban
Land Area
Distressed Fabric 10%
Informal Settlements 8%
Underutilized 10%
Total 28%
Again, based on figures from the National Task Force for Enabling Informal
Settlements, 22.8 percent of the population 20 major Iranian cities live in informal
settlements (see Table 3.2). Extrapolating based on a figure of 48.2 million persons for
22
Pajuheshkadeye Towse’ye Kalbadi, “Regularizing and Enabling Urban Slums,” unpublished report
prepared for Urban Development and Revitalizaiton Oranization, 2011.

25
the entire urban population in Iran gives us 9.6 million persons for the total informal
settlement population in the country. Furthermore, at 195 persons per hectare the
average net density in the informal settlements of the 20 studied cities is 2.7 times the
corresponding citywide figure. No comparable information exists for the case of
distressed fabric. Based on anecdotal evidence from a few cities, density in such areas
is almost always higher than the rest.
Table 3.2: Slum Statistics for 20 Major Cities (Provincial Capitals)
Total Slum Areas
City Population
Area in
Hectares
Area in
Hectares
Percent
of Total
Area Population
Percent of
Total
Population
Percent
Inside City
Boundarie
s
Zahedan 650,000 4,800 1260 26.25 237,000 36.46 77.7
Kermanshah 692,986 9,569 739 7.72 270,979 39.10 70
Bandar Abbas 457,000 5,500 1700 30.91 137,100 30.00 100
Tabriz 1,191,043 23,000 1452 6.31 243,934 20.48 100
Sanandaj 325,618 3,561 536 15.05 173,672 53.34 100
Mashhad 2,400,000 24,000 1000 4.17 650,000 27.08 92
Ahvaz 1,100,000 22,000 1300 5.91 300,000 27.27 59
Arak 381,682 2,877 390 13.56 103,619 27.15 100
Ardabil 391,455 5,715 810 14.17 99,485 25.41 89.9
Shiraz 1,053,025 18,951 1808 9.54 180,671 17.16 100
Ilam 140,301 1,718 202 11.76 31,800 22.67 100
Hamadan 464,162 9,972 598 6.00 2,439 0.53 80
Orumieh 520,000 7,570 1180 15.59 146,000 28.08 78.6
Khorramabad 382,640 3,695 219 5.93 22,668 5.92 99.8
Qom 1,020,000 8,125 315 3.88 90,000 8.82 95
Saveh 165,000 2,053 244 11.89 18,140 10.99 95
Qazvin 291,117 6,430 50 0.78 22,000 7.56 100
Yazd 326,776 13,616 440 3.23 6,000 1.84 100
Zanjan 286,295 6,393 169 2.64 58,000 20.26 100
Birjand 127,608 2,776 98 3.53 22,000 17.24 98
Total/
average
12,366,708 182,321 14510 7.96 2,815,507 22.77 -
Source: UDRO
According to the most recent information provided by UDRO, 72,800 hectares of
distressed fabric with a total population of 8.5 million persons across 471 cities as well
as 43,000 hectares of informal settlements across 60 cities (710 settlements with a
population of 5,119,490 persons and a total area of 45,994 hectares) have been
identified.

26
3.4 Characteristics of Slums in Selected Cities
As mentioned, distressed zones (fabric) have been defined in physical terms. For this
reason, only anecdotal information exists on socioeconomic conditions in such zones.
The characteristics of a number of informal settlements have been probed in a few
studies. The results of a detailed social assessment conducted on Bandar Abbas,
Zahedan, and Kermanshah, three significant cities in three different corners of Iran, are
summarized below:23
1. The three surveyed cities were found to be different in terms of migration
patterns observed in their informal settlements. While a large number of
households among residents of informal settlements in Bandar Abbas were more
or less natives, there were significant migrant populations in such settlements
across Zahedan and Kermanshah. In Zahedan, about three quarters of the
heads of households had rural backgrounds. Yet, even in Zahedan (as well as in
Kermanshah), the population was found to be very young which means that while
the head of household may be a migrant, the next generation is more often than
not born in the city.
2. High rates of unemployment, underemployment, and employment in the informal
economy were observed in the informal neighborhoods. This situation created a
significant poverty trap.
3. An examination of household consumption levels in the surveyed settlements
revealed high incidence of poverty. Households in these settlements fell within
the lowest consumption brackets among all urban households in their respective
cities.
4. Houses in the informal neighborhoods were constructed using relatively durable
materials in the Iranian context, but they were not built according to standards.
23
P. Alaedini, et. al, “Informal Settlements in Iran: Examining Conditions in Bandar Abbas, Kermanshah,
and Zahedan,” Iranian Journal of Anthropological Research, Vol. 1, No. 1, 2011, pp. 35-59.

27
Most houses did have kitchen, bath, and toilet, but their overall situation is less
than desirable. Furthermore, some water discharge from homes flew into the
streets and canals depending on the settlements.
5. There were few sources of housing finance other than households’ own funds.
While a large percentage of households did have accounts at banks, they had
not been able to benefit from the housing loan system. Most likely the full amount
of loan from the Housing Bank did not cover the cost of a unit in the more formal
housing markets while houses purchased in the informal market did not qualify
for loans. High interest rates due to the high rates of inflation exacerbated the
situation.
6. A relatively large number of households owned their homes, but a large number
of owners do not have full titles. This said, since there was little threat of eviction
made against those households who did not have titles for their homes, lack of
full title only affected the price of homes. Other things that determined the price
of housing units were location and size. Furthermore, there was a positive
relationship between ownership and welfare as measured through consumption
levels.
7. The local arms of the Ministry of Energy had been able to provide water and
electricity to the overwhelming majority of the households in the informal
settlements. Several other urban services including those related to street
conditions and garbage collection were supposed to be offered by the
municipalities. Yet, the municipalities often lacked adequate funds or enough
capacity to deliver these services in the informal neighborhoods. Security issues
faced by informal settlement residents, in particular women and girls, were
partially related to the unsatisfactory street conditions and well as the limitations
of security forces.
8. Households in the informal settlements did invest in their dwellings but they paid
little attention to the façade and outside of their homes which most likely had
something to do with their sense of private versus public space. There was a

28
relationship between ownership and tendency to repair one’s home. However,
the type of ownership document in the hands of the owners was not significant in
this observation.
9. Housing prices, for rent or purchase, had been on the rise in the surveyed
neighborhoods as everywhere in Iran. Thus, even these neighborhoods had
probably fallen outside the affordability range of poor households without homes
in the city, migrants, or those starting a family. It was then easy to speculate that
these households would have to look toward new informal settlements on the
fringes of the city to be able to afford a home.
10.There was almost a complete absence of social, cultural, and sports centers in
the informal neighborhoods of the three cities. Such centers could provide
various types of programs including skills training that can help transform the
socio-cultural atmosphere in the neighborhood and have a positive social impact
on the next generation of the residents.
11.While residents of the informal neighborhoods exhibited high levels of traditional
social capital, they lacked modern types of social capital to participate in local-
level initiatives. They were more or less estranged from the urban management
and were not in reality full citizens yet. In the absence of an empowering milieu,
their social capital would not be easily transformed.
Another study, using available information from 8 provincial capitals, provides the
following summary tables on the characteristics of informal settlements in Iran.24
24
Mohandesine Amayesh va Towse’ye Alborz, “Emkanshanjie nahadinesazie farayande behsazie shahri
dar Iran,” report prepared for UDRO, 2009.

29
Table 3.3: Characteristics of Informal Settlements in Eight Provincial Capitals
City total
Informal settlements
Population Social Economic Basic services
Population
Population
%oftotal
Householdsize
Agecharacteristics
Percentilliterate
Origin
Percentof
householdswith
dailyincomeless
than$5
Percent
unemployed
Percentwithhealth
insurance
Cleanwater(%)
Electricity(%)
Sewerage(%)
Urban
Rural
Bandar Abbas 379301 137100 36.14 5.7 young 26.3 ×× × 71.4 30.7 N/A 97.5 99 1.5
Kermanshah 794863 270979 34 5.1 young 23.5 × ×× 67 18.5 35 100 100 N/A
Esfahan 1601766 221000 13.7 4.01 N/A 21 × ×× 30 22 N/A 100 100 N/A
Tabriz 1398060 243934 17.4 4.02 young 24 × ×× N/A 5 N/A 100 100 89
Hamadan 479640 98000 19.7 4.4 N/A 22.1 × ×× 92.3 8.3 27.9 32 100 9.1
Ilam 160355 31800 19.4 5.5 young 25 × ×× 94.5 26.5 29.7 100 99.5 6.8
Zahedan 567449 237000 41.8 N/A young 36 × ×× N/A 17 N/A 80.2 87 0
Sanandaj 316862 173672 54.7 N/A N/A 42 × ×× 66.9 66.9 41.9 100 100 84
Total 5698296 1413485 24.8
Source: Mohandesine Amayesh va Towse’ye Alborz, “Emkanshanjie nahadinesazie farayande behsazie shahri dar Iran,” report prepared UUHRP, 2009, from Urban Development and
Revitalization Organization studies and Census figures.

30
Furthermore, according to the aforementioned study, many of the settlements in the
examined cities are located in hazard-prone areas, as shown in the following table.
Table 3.4: Informal Settlements in Hazard Areas across 8 Cities
City where informal
settlement is located
Characteristics Hazard
Esfahan, Kermanshah, Ilam,
Bandar Abbas, Hamedan,
Zahedan (Dominant Type)
Settlements in agricultural plain
area with proper access to
basic services, located around
the main city
Low
Tabriz, Sanandaj, Bandar
Abbas
Settlements built on steep
hillsides, loose soil, rocky
ground, flood land
High
Tabriz, Sanandaj, Kermanshah Near high voltage lines Medium
3.6Land Use Regulations, Property Ownership Laws, and Shelter Legislation
Land use
Land use in each city is determined by its comprehensive and detailed plans, which are
supposed to be prepared every ten years. Whereas these plans usually contain minimal
zoning, they set the type of land use for each lot, minimum sizes of lots, and a specific
construction density for each lot. These may be altered on a lot-by-lot basis through a
specific committee (Provincial Article 5 Commission) and payment of fees. These land
use regulations in practice limit the supply of land and increase its price, which affect
low-income households most severely. In the first few post-revolutionary years,
attempts were made to address the needs of certain low-income groups through
occasional (and rare) decrees.
Low-income households face constraints in acquiring land and housing as a result of
the inefficient functioning of land and housing markets. Due to high levels of inflation
and the scarcity of secure investment channels, land and housing markets have
become the subject of speculative activities and hoarding.

31
All land is either publicly-owned, privately-owned, or is managed by the Endowments
Organization (Sazmane Owqaf). If a private person claims the possession of the parcel
of land, but is not in the possession of a full land title, s/he may apply for one through
the Judiciary and the Registration Organization. The legal process will ensure no
alternative claims are made to that land parcel. In practice, many slum residents with
informal claims to their parcels of land have been able to get their full titles after a very
lengthy process. There are also instances in which whole areas have become eligible to
receive full titles.
Legal aspects of formal tenure
Private property is protected under Article 47 of the Iranian Constitution which states
that “Private ownership, legitimately acquired, is respected. The relevant criteria are
determined by law.” Furthermore, according to Article 30 of the Iranian Civil Code,
“Every owner has unlimited rights of occupation and exploitation over his/her property
when no exception is made by the law.” Some of these exceptions overriding the
aforementioned article are included under the Law of Renter and Landlord Relations,
Law of Urban Land, and Law on Expansion of Streets.
Articles 35 of the Civil Code states that “Possession as ownership is taken as proof of
ownership…,” while Article 36 specifies the legitimate basis of such possession. Yet,
two types of ownership based on the validity of title (either official or regular) are
distinguished in the following Civil Code articles: “Article 1287— Documents which have
been drawn up at the General Department for Registration of Documents and Landed
Properties, or at notary public offices, or before other official authorities, are considered
official within the limit of their competency and in accordance with legal regulations,
…Article 1289—Other than documents mentioned in Article 1287, all documents are
regarded as regular.” Regular documents are by definition nonofficial with negative
ramifications for those claiming ownership based on them.
In practice, in many cases private land on the fringes of the cities is unofficially divided
and sold with promissory notes (qowlnameh or pateh). What makes this type of land
attractive is exactly the fact that it does not have proper plot division or construction

32
permits, thus making it much cheaper than land elsewhere (and a location for the
formation and expansion of informal settlements). Therefore, those who purchase this
land are more or less the legal owners of their plots, although they lack construction
permits and full titles. Construction on such sites therefore tends to take place at night
and illegally.
Regulations concerning tenure security and eviction
Based on Iranian laws, taking over any real estate without possessing its title is illegal.
Exceptions were made in Articles 147 and 148 of the Registration Law (Qanune sabt)
which is no longer in effect. Yet, the Law on Determining the Status of Real Estate
Lacking Official Document (Qanune ta’yin taklife vaz’iyat sabtie arazi va amlake faqede
sanade rasmi) makes legality of possession conditional upon the legality of its origin.
Thus any real estate lacking formal title may be granted such a document provided that
an applicant can produce adequate evidence to satisfy a special conflict resolution
committee (made up of representatives from the governorate, judiciary, registration
office, housing and urban development office, etc.) created for this purpose in each
registration zone. Furthermore, Article 9 of Law on Supporting Revitalization,
Upgrading, and Renovation of distressed and Underutilized Urban Fabric (Qanune
hemayat az ehya, behsazi, va nowsazie bafthaye farsudeh va nakaramade shahri)
states that: “Conflicts concerning the tenure status of real estate located within areas
approved for revitalization, upgrading, and renovation projects, whether lacking title, or
lacking owner, or with no known owner, or with other issues, are resolved by a
committee comprising a seasoned judge selected by head of the Judiciary, the head of
the local Registration Office or his representative, and a person representing the
provincial Housing and Urban Development Organization through a verdict issued by
the presiding judge.”
Laws related to informal settlements
The most important national document dealing with informal settlements is Strategies
for Enabling and Regularizing Informal Settlements adopted by the Cabinet in 2004.

33
Some of the main strategies and policies on informal settlements specified in this
document are:
General
 …creation of informal settlement provincial taskforces…
 Creating a national coordinating institution [National Enabling Taskforce]….
 Supporting locally elected institutions in informal settlements as the focal forum
for all negations…
 Establishing a multi-sectoral institution at the city level …
 Facilitating cooperation and exchanges between public sector and residents…
 …good governance incorporating participation and consensus building…
 Encouraging professional NGOs to respond effectively to the needs and
demands of informal settlements…
 Resolve…legal…issues within existing informal settlements towards formal
recognition of the permanency of these settlements
 With the aim to avoid natural hazards or to appropriate land for public goods or
services, achieve resettlement through a participatory process of negotiation.
 …using participatory processes for …service provision…
Provision of affordable infrastructure and basic services
 Reviewing…building codes …and planning regulations with a view to
affordability…
 Supporting self-built [housing] and self help…
 Providing adequate land…for low-income housing…
 …supporting regularization plans…
 Creating a national center for informal dissemination, research…
Financial matters
 Assessing all regulations and legislation which limit access of lower-income
groups to formal financial facilities…

34
 Creating a housing and employment fund [and] micro-credit units with financial
participation of local people plus other public and private resources.
 Allocating a certain portion of government subsidies to seed capital for micro
credit funds…
 …insurance coverage for…activities…in informal settlements
 Encouraging effective participation …through…credit [and] facilities…
 …avoiding …untargeted subsidies…
 Urgently allocating state funds usually used for the provision of urban
infrastructure to informal settlements.
 …creating public spaces (sports grounds, cultural and leisure centers) within the
informal settlements.
In conjunction with the above document a “Resettlement Framework Document” was
also adopted in 2004. According to this document, resettlement should only take place
in exceptional cases for which adequate compensation for financial, social, cultural, and
human disturbances should be made. Resettlement decisions in each city are to be
made by a “Special Resettlement Committee” formed in the Provincial Enabling
Taskforce and headed by the Mayor.
Shelter legislation
The issue of providing land to low-income households was not specifically dealt with by
the government until 2008/9 when Law on Organizing and Supporting Production and
Supply of Housing (Qanune samandehi va hemayat az towlid va arzeye maskan) was
adopted to address the access of low-income groups (the poor) to housing. This Law
requires the government to make land available for housing both inside the cities and
outside cities in detached housing complexes and new towns. Some of its main articles
are provided below:
Article 1—Concerning housing provision, in order to facilitate the access of those
in need (especially low-income groups) to adequate housing, improve housing
production in qualitative and quantitative terms, encourage investment in housing

35
production using advanced industrial technology, upgrade and renovate
distressed urban zones and informal settlements, and retrofit existing housing
units, the government is required to undertake to provide the required support to
making suitable land available, eliminating or reducing the price of land in the
cost of housing, offering inexpensive banking facilities, granting tax exemptions,
preparing other necessary inputs to the housing sector in the framework of this
Law, formulating national building schemes/regulations and monitoring their
realization, and enhancing the capacity of the housing sector (production and
supply) to attract investment with the aim to secure housing for those lacking it
(once for every household) in accordance with the national building regulations,
the housing consumption model, and urban planning and architectural principles.
Part 7, Article 2—Supporting upgrading/renovation and production/supply of
housing in Distressed urban zones and informal settlements by the non-
governmental sector.
Article 9—In order to provide part of the needed credit for implementing this Law,
the Ministry of Housing and Urban Development can, with the endorsement of
the government, sell some of the land in its possession through public offering,
based on current prices determined by expert opinion.
Article 12—The Central Bank of the Islamic Republic of Iran shall undertake to
make available long-term facilities – as part of the total banking facilities, the
amount of which must be determined every year – for the specific purpose of
building housing units and upgrading/renovating Distressed fabrics and informal
settlements as well as granting no-interest rental loans (for temporary
settlement), subject to this Law. Once the housing units are built, these facilities
may be transferred to buyers; transfer and repayment conditions shall be
approved by the cabinet per the proposal of the Ministry of Economic Affairs and
Finance.

36
Article 18—In order to realize the aims and programs of this Law, the
government is required to foresee (in annual budgets) and provide the needed
credit (from public income) in the yearly amount of 10,000 billion rials for the
remainder of the Fourth Economic, Social and Cultural Plan of the Islamic
Republic of Iran. The aforementioned credit is considered 100 percent allocated,
and the Ministry of Housing and Urban Development is permitted to use part of
this credit to aid mortgage rates provided by banks or managed funds upon
entering into contracts with agent banks in order to create the grounds for the
provision of inexpensive facilities and targeted subsidies.

37
PART FOUR: SLUM UPGRADING IN PRACTICE AND FUNDING MECHANISMS
4.1 Evolution of Activities in Physically-Distressed Zones
In the past two decades a number of initiatives have been undertaken by the UDRO to
tackle the problems of urban areas considered physically vulnerable, problematic, or
exhibiting lack of spatial organization. In the early 1990s, the main emphasis was on
reconstruction of war-damaged areas as well as on upgrading old city centers
(upgrading cultural-historical axis). This was followed by a redevelopment or “urban
development and renovation” focus in the mid-1990s which was a top-down attempt at
addressing decline of the older parts of the cities and regenerating valuable land. The
expression “distressed fabric,” mostly applied to the old city centers, gained widespread
currency in this period, while the term “problematic urban fabric” was specifically
referred to in the Second Economic, Social, and Cultural Plan. The main initiatives
included purchasing land, integrating small lots (tajmi’), and widening streets and alleys.
Some of the important cities targeted in this period included Semnan, Gorgan, Yazd,
Bushehr, Shiraz, Kashan, and especially Mashhad. In Mashhad an area of 360 hectares
around the Shrine of Imam Reza was designated for complete renovation. Usually,
some specific company, owned by the public sector, would be created to undertake
such projects. Little attention was given to the social and economic impact of these
endeavors on the residents. It also soon became clear that the required funds for the
purchase of land made such large programs prohibitive in most cases. While these
projects were in many cases sponsored by the central government, charismatic mayors
with authoritarian management styles who believed in large-scale urban renovation
projects also played important roles in this period. The Navvab Avenue project in
Tehran is an important example. Furthermore, despite centralization and the top-down
nature of these activities, no policy-making authority existed to formulate the main
strategies and policies based on best practices.
The Urban Development and Revitalization Organization as a deputy administration
under the Ministry of Housing and Urban Development (now Ministry of Roads and
Urban Development) was formed in 1997 to usher in a new era of policy-making on
slums (both distressed fabric and informal settlements). Prior to its establishment, urban

38
renovation activities concentrated in the city centers (especially historical parts), were
dominated by central government initiatives in terms of planning, funding and execution,
and comprised physical interventions solely. New ideas, particularly “balanced and
sustainable urban development,” began to permeate policy, demanding increased
attention to social, economic, cultural, and demographic issues in regeneration
activities. Terms such as enabling, empowerment, and revitalization were thus included
in UDRO’s vocabulary.
Since 2005, UDRO has adopted a new approach to regenerating distressed fabric by
aiming to maximize people’s participation. The main activities of the central government
are concentrated on creating the grounds for and facilitating regeneration of distressed
fabric though the activities of local agents, mayoral administrations, the private sector,
banks, local cooperatives, charity foundations. Furthermore, upgrading projects are to
be financed through the private sector, banks, participation bonds, and general
government budget while addressing the needs of owners and residents. As the main
policy, planning, and management arm of the government in this field, UDRO has
concentrated on two sets of initiatives, namely software (non-physical) and hardware
(physical) activities. Software activities include cultural advocacy (e.g., information
dissemination), capacity-building (e.g., training), creating institutions and means, and
documentation. Hardware activities comprise the set of physical projects undertaken by
the public sector that in turn facilitate the activities of owners and residents, developers,
investors and other players in the process of regenerating distressed fabric. Such
projects include pilot initiatives to gain knowledge about best practices, upgrading
infrastructure, street widening, creating and improving public spaces, and expanding
neighborhood services (e.g., parks, playgrounds, libraries, neighborhood centers, and
mosques). Table 4.1 summarizes the above experience.

39
Table 4.1: Evolution of Activities in Physically-Distressed Zones
Timeframe
1990-1993:
Upgrading city
centers/cultural axes
1994-1996:
Problematic urban
fabric/Integration of
small lots
1997-2004:
Urban Renewal
After 2005:
Renovation and
reconstruction of
distressed fabric with
an emphasis on
sustained
participation
Since 2009:
Urban Upgrading
Main
approach
Reconstruction of
war-damaged areas;
renovation of old city
centers
Renovation and
reconstruction of
aged urban areas
through purchase of
land
Promoting
endogenous
development;
preventing
uncontrolled
expansion of cities;
improving previous
large-scale
interventions;
institution-building;
formulating
redevelopment
regulations
Continuing and
improving on previous
policies; return of
attention to old parts of
cities as well as areas
generally thought as
distressed and
inefficient; retrofitting
and improving safety
Sustainable and
widespread
participation of
citizens though the
creation of
appropriate
grounds and
activities to jump
start local
development
process
Main players
Central government
and mayoral
administrations
Central government
with the participation
of mayoral
administrations and
other stakeholder
institutions through
the formation of
companies owned by
the public sector
Central government
with the participation
of mayoral
administrations,
cultural and heritage
organization, banks,
and other public and
private stakeholders
Central government
through local agents,
mayoral
administrations, private
sector, banks, local
cooperatives, and
charity organizations
Central
government as
policy maker and
monitoring
authority, mayoral
administrations for
management of
implementation,
and the private
sector as the main
actor
Scale/location City centers
Aged inner city
neighborhoods
City neighborhoods
and special zones
Neighborhood/areas
designated as
distressed fabric
Structural axes of
neighborhoods in
specific areas
Financing
General government
budget/mayoral
administrations
General government
budget/limited
sources of other
partners
Public private
partnership/banks
Private sector, banks,
participation bonds,
general government
budget
Private sector,
participation
bonds, general
government
budget
Social aspect
Encouraging owners
and
residents/developing
housing cooperatives
for medium- and low-
income households
Pushing natives out;
lack of attention to
the role of residents
and owners as well
as planning for new
residents
Increased attention
given to the quality of
life of residents and
encouraging them to
participate;
strengthening the
role of housing
cooperatives in the
distressed fabric
Stressing the role of
social groups;
strengthening the
position of owners and
residents and giving
attention to their needs
Emphasis on the
participation of all
social groups
Physical
aspect
Uncontrolled,
horizontal expansion
of cities; declining city
centers
Widespread
destruction of target
zones; exacerbation
of spatial problems
Addressing spatial
disorganization and
attempting to benefit
from all available
capacity for
development
Addressing spatial
disorganization and
attempting to benefit
from all available
capacity for
development
Addressing spatial
disorganization of
major structural
axes of urban
centers
Preservation
aspect
Formation of the
Cultural Heritage
Organization; grounds
for increased attention
to cultural values
Taking old urban
fabric to be
problematic;
destruction and
reconstruction
Increased attention
given to existing
structures; striving to
reequip old
structures; promoting
“new life in old
structure”
Withholding
intervention in historical
zones and striving to
interact with relevant
organizations,
especially Cultural
Heritage Organization
Withholding
intervention in
historical zones
and striving to
interact with
relevant
organizations,
especially Cultural
Heritage
Organization

40
4.2 Earlier Experience with Informal Settlement Upgrading
A major initiative on Iran’s informal settlements was undertaken through the Urban
Upgrading and Housing Reform Project with the assistance of the World Bank in the
period 2004-2009. The main purpose of UUHRP (APL1) was to pilot-test and refine
an integrated approach to upgrading underserviced neighborhoods in 5 Iranian
cities, and to initiate reforms in the public management of the housing sector toward
a market-led structure. The upgrading initiatives in the 5 cities of Kermanshah,
Zahedan, Bandar Abbas, Sanandaj, and Tabriz aimed to improve living conditions in
informal settlements based on community priorities, help indigenize an urban
upgrading model for Iran, and provide feedback for the institutionalization of an
upgrading structure at the national, provincial, urban levels. The housing reform
activities were to prepare a system, the capacity, and the regulatory framework for
market-based housing reforms.
UUHRP succeeded in bringing about a new government direction in dealing with
informal settlements in Iran. The preparation of the national document on Strategies
for Regularizing Informal Settlements was an early achievement of the Project. In
this document a new approach and orientation to informal settlements based on
upgrading is delineated. With this document the National Enabling Taskforce was
formed assuming the responsibility for the subject and coordinating activities on the
informal settlements. The National Taskforce has also established provincial
taskforces not only in the 5 UUHRP cities but also across the provinces in Iran. Most
of these taskforces have commissioned studies on the informal settlements and how
to upgrade them while some have already come up with upgrading initiatives of their
own. Implementation coordination taskforces have also been formed in some cases
at the city level to coordinate the activities of the municipality and urban service
agencies based on the recommendations of the commissioned studies. Some
training has already been provided to members of these taskforces by the National
Taskforce. As a result of the project, a specific national budget line was approved for
the informal settlements. The heightened attention of the authorities to informal
settlements in Iran was revealed in the President’s provincial trips. In Bandar Abbas
alone 350 hectares of land were allocated as collateral for the purpose of informal
settlement upgrading by presidential decree.

41
UUHRP was able to deliver a set of upgrading activities in the informal settlements of
5 target cities using an integrated approach with significant impact on their urban
management orientations. A major change of attitude toward and appreciation for the
upgrading approach to informal settlements has been a clear result of the project. As
an important example, while the project spent about US$ 14 million in Bandar Abbas,
it is claimed that the Province put in an additional US$ 20 million while the mayoral
administration spent US$ 4-5 million on the target settlements. The Municipality in
particular has significantly increased its activities in the target informal settlements
and has in some instances enhanced its quality and quantity of interactions with the
communities. In effect, it has fully embraced its responsibilities to the target
neighborhoods, perhaps since they no longer appear so informal. The same may be
true for other agencies. For example, it is claimed that new projects have been
formulated for the target settlements and a specific detailed urban plan for the
informal settlements is being commissioned (since much of the informal settlement
areas are not covered by the city’s detailed plan).
UUHRP was able to disburse around 50 percent of its loan amount only. This means
that it was unable to deliver the full package of its activities. Furthermore, at the time
being, prospects for the outputs of its housing reform component are at best
uncertain while those for the institutionalization of an urban upgrading process and
urban upgrading fund as well as city development strategies are only slowly
evolving. Yet, the major positive impact of UUHRP should be observed outside of its
own subprojects, in developing a new orientation to informal settlements at various
public sector levels in Iran. It has created a number of institutions at the national,
provincial, and city levels that should ensure major future activities concerning
informal settlements. As a result of the project, informal settlements have now
attracted major funding from the public budget. Furthermore, the main reasons
behind UUHRP’s lackluster performance may be summarized as: UUHRP’s
complicated initiatives that required coordination among a great number of actors;
the novelty of the activities in Iran, which meant that neither UUHRP staff nor Iranian
consulting firms (against the background of a limited use of international consultants)
nor Iranian authorities were experienced in delivering or facilitating the delivery of the
Project’s outputs (especially in the case of software initiatives such enabling,
capacity building, and institutionalization, but also across the subprojects); and

42
difficulty of delivering works in informal settlements due to their nature as well as
land acquisition problems.
Project initiatives in the cities have shown some success with regard to beneficiary
satisfaction, participation, and sustainability as demonstrated by the case of Bandar
Abbas. Sustainability and participation have been enhanced in areas where
interactions between the Municipality and the people have been high. Many of the
resident priorities have materialized including better street conditions, surface water
drainage, canal rehabilitation, access to transport services, garbage collection, and
green space for families in which to spend their leisure time. The project has ended
the isolation of the neighborhoods and has increased their security. However, the
scale as well as the geographical and substantive scope of the initiatives has been
limited. The neighborhoods are still in need of services that are supposed to be
provided by the unfinished initiatives as well as those not planned or not with a full
geographical coverage. Community mobilization activities, interactions between the
community and service agencies, and other enabling initiatives have been promising
(e.g. Municipality-resident interactions, neighborhood mayor, microfinance groups,
etc.). Yet, they have not been adequate in number and coverage to leave a lasting
impact. Nor did the enabling activities create the theoretically-desired synergy with
the physical improvement initiatives. They nonetheless have set a number of good
examples on which to build further efforts.
4.3 Funding for Slum Upgrading
Upgrading initiatives undertaken in Iran in the last two decades have benefited from
a number of funding modalities explained below.
Financing Revitalization of Physically-Distressed Zones
1. Subsequent to a preliminary analysis of the extent of physically-distressed
zones in Iranian cities, funds were earmarked in the budget law of 1994-95 (in
conjunction with the Second Five-Year Development Plan) for a set of
upgrading feasibility studies to be conducted under the supervision of the
Ministry of Housing and Urban Development (currently Ministry of Road and
Urban Development) on 273 hectares across 24 selected cities

43
(approximately 10 hectares per city). This was the first time specific
government funds were allocated for such a purpose.
2. Concurrent with the above research initiative, physically-distressed zones in
the Shush neighborhood of Tehran and peripheral neighborhoods of Imam
Reza’s Shrine in Mashhad as well as certain areas in Gorgan, Ardabil,
Hamadan, Kermanshah, Semnan, Esfahan, Shiraz, and Yazd – totaling 63
hectares – were targeted for revitalization. Around 130 billion rials (in 1995/6
prices) were allocated from the internal sources of the Land and Housing
Organization (through the sales of its real estate assets).
3. Regeneration of the peripheral areas of Imam Reza’s Shrine in Mashhad was
taken up by the government as a priority project. As a result, other than the
internal funds of the Housing and Land Organization, purchase of the needed
land was made possible through issuing participation bonds in 1996-7.
4. A certain national budget line was allocated for the first time for the purpose
of renovating valuable architectural/cultural/historical buildings in physically-
distressed zones in 1996-7 based on an edict issued by the Supreme Council
of Money and Credit. But this initiative did not prove effective.
5. Along with the establishment of the Urban Development and Revitalization
Organziation (UDRO) in 1997/8, through an edict issued by the cabinet, 10
billion rials worth of land belonging to the Land and Housing Organization was
set aside as capital asset for UDRO’s operations. Funds released from the
sales of these assets were allocated to specific projects (mostly opening
passages and free up spaces) in the physically-distressed zones of Tehran
(Cyrus neighborhood), Orumieh (Imam Khomeini Circle), Tabriz (Saheb-ol-
amr underpass), Rasht (Seyqalan-Takhti axis), Shiraz (Karim Khan
underpass), and Mashhad (further purchase of land around Imam Reza’s
Shrine) as well as preparing upgrading and renovation plans and repairing
valuable buildings under the “Old Structure, New Life [kalbade qadim,
zendegie jaded]” project. The aforementioned assets are still being used for
to fund upgrading projects.

44
6. In 2001/2, participation bonds for a total amount of 100 billion rials were
issued (based on the permit provided in the budget law of the aforementioned
fiscal year) to fund the purchase of land and a few projects in conjunction with
the revitalization plan of Imam Reza’s Shrine in Mashhad as well as
renovations concerning the Shahid Beheshti Circle of Tabriz, Imam Khomeini
Circle of Orumieh, and few historical buildings of value in Yazd. Participation
bonds were further issued in 2006/7 and 2007/8 for the amount of 6,500
billion rials. Eventually more than 15,000 were issued by municipalities aiming
to fund the renovation of the peripheral areas of Imam Reza’s Shrine, the
shrine-to-shrine project of Qom, and certain areas of Tabriz and Tehran.
7. Through the efforts of the Management and Planning Organization (now,
Presidential Deputy Office for Supervision and Strategic Planning) and based
on the provisions of the Annual Budgets Law, 10-20 billion rials per annum
were allocated through the Housing Bank for the purchase of land in
physically-distressed zones (opening up space) in the period 1999 though
2004/5.
8. A total of 79 billion rials were allocated in 2002/3 budget law for the purpose
of purchasing land in physically-distressed zones as well as projects
undertaken by UDRO.
9. Credit was allocated in 2004/5 to private-sector developers for the purpose of
upgrading and renovating the peripheral areas of Imam Reza’s Shrine of
Mashhad and Sheikh Safi-al-din’s Tomb in Ardabil in the form of managed
funds – one third of which was covered by the Management and Planning
Organization and two thirds of it was provided through the facilities of Bank
Tejarat.
10.Upgrading a number of physically-distressed zones in Tehran was financed
(worth $300 million) by ABC Bank of UAE through Bank Mellat.
11.In light of the ratification of the Fourth Five-Year Development Plan requiring
the revitalization of physically-distressed urban zones within ten years,
support packages were also approved in the annual budgets laws of 2005/6,
2006/7, and 2007/8. Furthermore, with the passage of law concerning

45
reorganization and support of housing production and supply, the incentive
package for upgrading and renovating physically-distressed zones, as
detailed below, assumed a permanency.
 Discounts of 50-100 percent on renovation and high-density
construction taxes
 Provision of inexpensive facilities and subsidies toward renovation and
purchase of housing units in physically-distressed zones (with the
government subsidizing at least 6 percent of interest rate): for each
unit under construction, initially 140 million rials and currently 200
million rials (may be increased in the near future).
 Provision of inexpensive facilities and subsidies for the repair of
buildings of architectural/cultural/historical value.
 Addressing cost of temporary relocation during reconstruction or
retrofitting of buildings in the physically-distressed zone.
12.Annual budget allocations comprising special credit to assist upgrading and
renovation of physically-distressed zones has increased every year since
2008 and reached 650 billion rials in the latest Iranian fiscal year (2011-12,
ending last March 20). This special credit has been used through UDRO to
address the impenetrability of certain distressed urban fabric (reopening
space) via tripartite agreements matching provincial and municipal funding in
equal terms. Some of this credit has recently been used for advocacy to
prepare residents to participate in upgrading distressed fabric.
Financing Informal Settlement Upgrading
1. The Urban Upgrading and Housing Reform Project (UUHRP) was funded by
the World Bank (providing loan to cover 80% of costs) and the Iranian
Government (covering 20% of costs). The main purpose of UUHRP was to
pilot-test and refine an integrated approach to upgrading underserviced
neighborhoods in 5 Iranian cities, and to initiate reforms in the public
management of the housing sector toward a market-led structure. The
upgrading initiatives (Component A) in the 5 cities of Kermanshah, Zahedan,

46
Bandar Abbas, Sanandaj, and Tabriz aimed to improve living conditions in
informal settlements based on community priorities, help indigenize an urban
upgrading model for Iran, and provide feedback for the institutionalization of
an upgrading structure at the national, provincial, urban levels. The housing
reform activities (Component B) were to prepare a system, the capacity, and
the regulatory framework for market-based housing reforms. A third
component of the project (Component C) created management capacity for
the implementation of the project. All three components were supposed to
eventually feed into the second (and ultimately third) part of a 12-year
program. UUHRP was implemented in the 2004-2008/9 period and was able
to disburse around 50 percent of its budget only before closing.
2. In Bandar Abbas alone 350 hectares of new land were added to the city and
allocated to UDRO as collateral for the purpose of informal settlement
upgrading by presidential decree.
3. A microfinance initiative was carried out by the Agricultural Bank that targeted
some informal settlements as well. This project used linkage banking.

47
PART FIVE: RECENT PERFORMANCE AND POLICY PROSPECTS
CONCERNING SLUM UPGRADING AND SHELTER PROVISION
5.1 Current Policy
Government policy on slums, both informal settlements and distressed fabric, is
increasingly assuming an urban upgrading orientation. Emphasis is placed on
reshaping existing structures, introducing new elements, reorganizing spaces and
functions, and planning for the optimal utilization of existing capacities. A wider range
of issues are now taken into account and local capacities and enabling approaches
have become important areas of focus. Furthermore, the central government is
avoiding direct intervention and is delegating significant authority to local agents.
Major efforts are also being made to benefit from private sector funding and financial
resources of slum residents. This is in line with the emphasis placed on enhancing
the role of owners and residents to address their needs and to solicit the participation
a wide range of stakeholders in the process of urban upgrading. This in turn
requires creating the appropriate grounds and the qualitative as well as quantitative
requisites and incentives. The main initiatives undertaken to create the grounds for
upgrading activities include the formulation of necessary means, enabling, and
cultural advocacy. Further tools to jumpstart local development are demonstration
pilots on the one hand and provision of services and improvement of infrastructure
on the other. Finally, managing the upgrading process strategically rests upon
institutionalization, capacity-building, and coordination. The main players in the
process of urban upgrading include the private sector, the government, the mayoral
administrations, and most importantly the people. The main governmental agency
responsible for policy and coordination is UDRO.
5.2 Current Activities Concerning Physically-Distressed Urban Fabric
As mentioned, 72,800 hectares of distressed fabric with a total population of 8.5
million persons across 471 cities has been identified by UDRO. Since 2005, 5,885
hectares of the urban distressed fabric has been renovated. The current instruments
for the renovation of distressed fabric are: preparation of specific plans for physically-
distressed zones; provision of loans up the amount of 150 million rials for each
housing unit without any collateral; giving a 50 percent discount on housing

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