Housing and Tax Policies in a Latin American City: Institutional Dynamics, Fiscal Decentralization, and Urban Inequality in São Paulo

This paper examines the intricate relationship between housing and tax policies in São Paulo, Brazil, from 1995 to 2022, through an institutionalist lens. It explores how fiscal decentralization policies, electoral competition, and alternating power between right and left-wing parties have shaped local revenue collection, leading to increased progressivity and redistributive potential in taxation. The study highlights the significant increase in property tax burden in general, and specifically on non-residential properties, high-standard dwellings, and areas occupied by upper and upper-middle classes.

Our analysis reveals that these reforms and actions by different administrations have also empowered the local government, enhancing its capacity to invest in housing policies targeted at lower-income groups, who constitute the majority of the local housing deficit. However, despite these changes and possibilities, housing affordability in the city has decreased, with sharp increases in property prices and rents, alongside a significant rise in high-income housing.

The research finds that while São Paulo has become more compact, dense, and vertical, with less occupation on environmentally sensitive areas, desirable features in urban and environmental perspectives, it has systematically relied on federal housing policies for middle and lower classes through market implementation. Simultaneously, the city has increased its role in regulation and funding through zoning incentives and new instruments of financial assistance for new dwellers. This dependence and changes in the State's role at the local level have resulted in missed opportunities for significant changes in reducing housing inequalities from an expenditure perspective.

By examining these dynamics, this study contributes to the broader discussion on rethinking public policies in the context of climate crisis and urban inequality, where cities play an important role in addressing these challenges. It offers insights into the challenges and opportunities of multi-level governance in addressing housing precariousness and sustainable urban development in Global South cities.