Manual laborers working on the construction of the train line were provided with accommodation on site, but when this short-term work came to an end they had to build residences in places close to where they might be able to find future employment - The majority of new favelas were therefore concentrated in the city center, in close proximity to jobs.

In this period, favelas came under considerable criticism by the recognized public, seen as a form of urban decay that needed to be eradicated.

Mayor Francisco Pereira Passos consolidated the measures laid out in the Report for urban reform between 1903 and 1906, in an attempt to create order and reduce disease.