This article investigates the relationship between São Paulo's Zoning Law and the growing supply of smaller housing units. Initially designed to address housing and mobility challenges for the city's low-income population, the Master Plan has led to a significant increase in the availability of compact apartments. Through a critical analysis of the Zoning Law, the study reveals that the Plan was specifically intended to promote the development of smaller units in areas with easy access to public transportation, targeting low-income residents. However, as real estate developers and construction firms recognized the commercial potential of these zones, they began producing housing solutions, such as studios and micro-apartments, geared toward broader, more affluent demographics. This research contributes to the public policy literature by exposing the unintended consequences of regulatory ambiguity. It also underscores the Plan's limitations in its attempt to decentralize economic activity from the city center, potentially reinforcing patterns of segregation on the urban periphery. Finally, the study offers practical insights into how emerging housing typologies are transforming the broader real estate market. • Zoning incentives drove the rise of studios from 12% to 34% of new housing launches in São Paulo (2016–2022). • Regulatory ambiguities enabled Social Interest Housing to be captured by higher-income real estate markets. • Compact housing shifted from social provision to investment-oriented real estate assets. • Short-term rental platforms intensified speculative use of centrally located small apartments. • The 2023 zoning reform failed to decentralize economic activity, sustaining socio-spatial segregation.
Cavalcante et al. (Sun,) studied this question.
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