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We estimate the economic value of zoning reform in São Paulo, which altered maximum
permitted construction along transportation corridors. Developers increased filings for multifamily
construction in blocks affected by the reform, leading to more housing supply and lower
housing prices in neighborhoods that allowed more densification. Our equilibrium model of
housing markets estimates an aggregate 1.6% increase in housing stock and a 0.4% reduction
in prices, resulting in large housing wealth transfers from current to future homeowners. The
reform produced welfare gains of 0.65% of city GDP, mostly due to developer profits and consumer
gains from the newly built environment.
