Back in the Philippines, squatters (poor households setting up houses in lands that they do not own) have been one of the perennial problems in urban settings. Of course, in some instances, probably to make the government more popular to the masses, the government eventually awards land titles to some of these families. Well, it seems there's a social benefit to it.
In their latest paper in the Journal of Public Economics entitled, "Property rights for the poor: Effects of land titling," Sebastian Galiani and Ernesto Schargrodsky suggested that giving land titles to the poor can be an important tool for povery reduction through the slow channel of increased physical and human capital investment--channels that should help to reduce poverty in future generations:
"In 1981, squatters occupied a piece of land in a poor suburban area of Buenos Aires. In 1984, a law was passed expropriating the former owners' land to entitle the occupants... Using data from two surveys performed in 2003 and 2007, we find that entitled families substantially increased housing investment, reduced household size, and enhanced the education of their children relative to the control group. These effects, however, did not take place through improvements in access to credit."
I just have two comments on this. First, such positive effect depends on which sector is involved. If it's in the urban sector, as the case with squatters in Buenos Aires, the result is plausible and economically reasonable. But if it's in the rural sector, the story may be different. Again, the Philippines is a good example. Years of agrarian reform, of which involves transferring lands to several households for farming, has actually led to nothing. In some cases, these owners of small farming lands eventually sell their lands to bigger farms simply because they really can't compete.
Second, as mentioned, such land titling may be an incentive for these poor households to invest for their future generations. But what about the incentive of attracting more squatters? There is a serious case of adverse selection that will be happening. Knowing that there's a chance they will be awarded land titles by the government, more and more poor households will start squatting more and more privately-owned properties. What about the rights of the original landowners. The rule of law will definitely be in jeopardy if original landowners can't protect their lands from being given to these squatters.
So like most economic policies, there has to be some middle ground. It may seem to have a positive effect on poverty alleviation, but giving land titles of privately-owned properties may do more harm than good.