Wednesday, 28 September 2016

Empty spaces in the crowd: Residential vacancy in Sao Paulo´s city centre

Vanessa Nadalin, IPEA - Institute of Applied Economic Research, Brazil

The issue of higher residential vacancies in the city centre has been relevant in the case of São Paulo, Brazil for quite some time. In fact, since 1997, social movements have been promoting squatting in empty central buildings, aiming to convince the government to use these vacant properties as social housing. Nowadays, these social movements play an important role even in national politics, with great power over street protests mobilisation.

Homeless people claim affordable housing at Avenida Paulista 
Foto: Marcelo Camargo/Agência Brasil (11/12/2013)

(Licença Creative Commons Atribuição 3.0 Brasil)

São Paulo is a wealthy city with respect to the rest of the country. It has been the centre of Brazil's industrial development. Still, the high income inequality implies a great concentration of poverty. The fast pace of urbanization during the 70s and 80s contributed to the fact that São Paulo is a huge disorganized urban area. Urban problems are everywhere: housing deficit, traffic congestion, violence.

The effort in attracting jobs and maintaining economic activities in the inner city is particularly challenging. Indeed, even if many cities have successfully regenerated their central areas, the so-called inner city problem is still very much alive in São Paulo. As a result, although the city centre has abundant urban infrastructure, it still has plenty of vacant spaces, including residential buildings. One could say that São Paulo’s city centre is characterised by a large number of empty spaces in an area that is simultaneously crowded with buildings and urban facilities.

A 1960 building that houses 378 squatting families in São Paulo city centre
Foto: Marcelo Camargo/Agência Brasil

The ‘housing deficit’ in São Paulo´s urban area amounted to 694,042 units in 2010, whereas there were 476,112 vacant residential units in total (IBGE 2010 Census). This significant housing deficit indicates the need to seek alternatives in the provision of good quality housing and, clearly, the reduction of residential vacancy rates in the city centre might be an option. Nonetheless, to assess whether this is a sensible approach it is important that vacancy levels are monitored and their underlying drivers understood.

Residents of squatted building take turns in cleaning common areas
Foto: Marcelo Camargo/Agência Brasil

Our research intended to contribute to the empirical analysis of the determinants of vacancy rates, with a particular focus on historical city centres, using the Sao Paulo Metropolitan Area (SPMA) as our case study. Our empirical analysis relies on district-level data for the years 2000 and 2010, and combines standard spatial econometric methods with hedonic modelling.

We find evidence of three main groups of determinants: individual building characteristics, mobility of households and neighbourhood quality. There is also evidence that the historic central city is a distinctive submarket and its determinants work differently when compared to the housing markets of other areas across the SPMA. 

The empirical vacancy determinants indicate ways in which policy makers could interfere to change market conditions and improve the provision of good quality housing.  In general, one might think of policies that aim to reduce the natural vacancy rate or, alternatively, measures with the objective of correcting upward deviations from the natural vacancy level. For instance, the enforcement of laws that punish owners for keeping units vacant can influence and expedite the price adjustment process.

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