Trying to make sense of Colombia’s “Strata” economic system

When I first moved here, the Colombian concept of Strata was one of the most difficult things for me to get my head around. Colombia defines economic difference within a unique legal framework, called “strata.”

The house or apartment building that you live in is designated by a government body as being in a zone or stratum, 1 through 6; those in Estrato 1 supposedly are those in the poorest urban areas and those in 6 in the richest. Accordingly and depending on where you live, you have a different tax rate and you pay very different rates for your public utilities. Public utilities include gas, electricity, water, and telephone. More or less, in terms of taxes and monthly bills, the government has outlined how the rich living in Estrato 5 and 6 need to pitch in to help the poor, those who live in Estrato 1 and 2. This exchange is often referred to as cross-class subsidy. Bottom line, the rich pay more, the poor pay less.

This has been going on for more than 30 years, made possible by a series of laws that began to come into effect in the 1980’s. A 1994 law specifically outlines how municipalities should classify their populations based on the characteristics of their housing, taking into account criteria such as garage, front yard, facade, construction materials, access roads and neighborhood. Basically, the distribution of social subsidy is based on a subjective visual perception of your place of residence. Income is not one of the criteria used.

To confound matters, landmark buildings and neighborhoods, including Bogotá’s central colonial La Candelaria, are given protection and classified as Stratum 1. Even though a historic home purchased today in La Candelaria might run you well above a $1 million, your monthly bills will be subsidized by those living in Stratum 5 and 6 buildings, many of whom most likely are living in housing that cost well below a million dollars. Owners of a designated patrimonio, or landmark building, on a street in a Stratum 4 neighborhood, will have benefits not available to their neighbors.

Further anomalies abound. I live in a building whose utilities are billed as Stratum 4, except for water. Water in my building is billed as Stratum 1. Go figure!

Colombians, who in general are surprised to learn that the idea of Strata is pretty much unique in the world, are deeply conflicted on the societal imposition of the concept.

You may live in a Stratum 5 building, have lost your job, be behind on your car payments, and yet be expected to pay more for your monthly electricity and other utilities than those living in a Stratum 3 building just a block away. You may end up living in a Stratum 6 apartment, paying the highest rates for water bills, and feeling disturbed at seeing those in front of a Stratum 1 building washing their motorcycles with a liberal use of water on a Sunday morning. This gets complicated.

The strata in Colombia have become culturally ingrained, straying far from the original intent of equalization. Personal classified ads, for example, now often state that the person placing the ad is professional, economically stable, good-looking, and looking for similar in Estrato 3. Both the terms Estrato Uno (1) and Estrato Seis (6) are now at times used derogatorily. And I have heard people say, I am not Estrato 10 or 11, to signify that their aspirations and goals are down-to-earth.

Needless to say, when looking to rent or buy an apartment or house, one of the first questions you ask is the Estrato of the building. Builders often advertise apartments still being built as Stratum 3, or 4 or 5 or whatever, even though the final governmental classification is not made until after the building is finished.

Trying to get the Stratum designation of your building changed is an ordeal. Thousands of petitions are submitted monthly. I would hazard a guess that not one of these petitions is seeking to have their Stratum upgraded so that residents of the building in question might be able to pay more in taxes and monthly outlay. Getting a response to your petition can take up to two years, and more often than not, the final decision leaves the original Strata designation in place.

Now jumping into the fray is UN-Habitat, a United Nations group dedicated to a better urban future worldwide. UN-Habitat believes that the Colombian system of Strata has created stereotypes, division, distrust and even fear among citizens. There is a sense that over time the Strata system has grown into a mechanism for segregation.

Believing that governmental subsidies should be focused on individuals and families in need and not on housing, UN-Habitat has been working with the city of Bogotá to refocus priorities. In July, the Mayor’s Office proposed congressional hearings on the elimination of Strata, or at the very least, the exclusion of Bogotá and other major cities from the constraints of the Estratos. In an editorial, the daily newspaper El Tiempo called the proposal both timely and necessary.

The Strata system has become so embedded in Colombia, that any change will necessitate a major realignment of thinking. Colombians will need to be convinced about an alternative system of subsidy. The discussion has just begun.

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  • Juan Felipe Diaz

    Great article. Interestingly, by charging different prices to consumers with different price elasticities of demand (or different incomes), utilities companies maximize their profits. I am inclined to believe that this apparent system of “subsidies for the poor at the expense of the rich” is not really motivated by social reasons but primarily by the economic interests of Codensa and the like.

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  • Eduardo

    As a colombian, the example of la candelaria is one small neighborhood in one very large city on a bigger country. I believe los estratos help the poor have access to basic needs like clear water, power or telephone access which would otherwise for those earning the government mandated minimum monthly wage.