Upzoning and apartment market activity: evidence from Property Transfer Tax (ITBI) data

This paper evaluates the economic impacts of the 2014 São Paulo Strategic Master Plan (PDE), focusing on the incentives for higher building density within the Eixos de Estruturação da Transformação Urbana (EETU) policy. The analysis exploits spatial variation in treatment generated by the delimitation of EETU areas and the implementation of the 2016 zoning law, which operationalized these incentives. Using tax data on real estate transactions (ITBI) from 2010 to 2024 at the fiscal-block level, we implement a difference-in-differences framework comparing treated and non-treated areas before and after the policy. The empirical strategy is complemented by event-study specifications to assess dynamic effects and test the validity of parallel trends. The results indicate that treated areas experienced an increase in the number of transactions and a change in the composition of the housing stock, particularly through a higher share of small units and newly launched developments. Price effects are heterogeneous across space: central, high-value areas (ZF-1) show a stronger response in market activity, price per square meter and rates of newer, smaller apartments, while peripheral zones display increases in financing rates, suggesting a process of formalization. These patterns are consistent with a supply response driven by regulatory incentives, although effects vary across segments and locations. This paper contributes to the literature on land-use regulation and urban density by providing causal evidence from within-city variation in a large Latin American metropolis. The findings highlight how zoning reforms can reshape not only the scale but also the composition of housing markets, with important implications for urban policy design.