Working Paper: NBER ID: w29440
Authors: Santosh Anagol; Fernando V. Ferreira; Jonah M. Rexer
Abstract: We develop a framework to estimate the economic value of a recent zoning reform in the city of São Paulo, which altered maximum permitted construction at the city-block level. Using a spatial regression discontinuity design, we show that developers respond to the reform with short-run increases in filings for multi-family construction permits in blocks with higher allowable densities. In the medium-run we observe increases in housing availability and reductions in house prices in neighborhoods that were allowed more densification. Welfare is then estimated with an equilibrium model of housing demand and supply that allows for endogeneous housing regulation. We finding that, in the long-run, the reform produces a 1.9% increase in housing stock and a 0.5% reduction in prices, with substantial heterogeneity across neighborhoods. Consumer welfare gains due to price reductions are small, but increase 4-fold once accounting for changes in built environment, with more gains accruing to college educated and higher income families. However, nominal house price losses faced by landlords and existing homeowners overshadow all consumer welfare gains.
Keywords: Zoning Reform; Housing Supply; Urban Economics; Consumer Welfare
JEL Codes: H01; R00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| maximum built-area ratio (BAR) increase (R38) | multifamily dwelling permits increase (R31) |
| maximum built-area ratio (BAR) increase (R38) | housing units available for sale increase (R31) |
| maximum built-area ratio (BAR) increase (R38) | listing prices decrease (D49) |
| zoning reform (R52) | housing stock increase (R21) |
| zoning reform (R52) | average prices decrease (E30) |