The effects of transport infrastructure on housing and prices: the role of land-use regulation

Abstract

We estimate the impact of new transportation infrastructure on Santiago's housing market using historical microdata and instrumental variables. While subway and highway expansions generally boost residential floor space, housing units, and prices, the aggregate impact masks a heterogeneity driven by land-use regulations. In the wealthiest 20% of the city, highly restrictive regulations, such as low maximum Floor Area Ratios (FAR), effectively limit the impact on new development. Conversely, in the remaining 80% of blocks, the zoning is more permissive, and the infrastructure investment leads to a substantial and homogeneous increase in residential floor space and housing units. These findings suggest that zoning in affluent areas prevents the densification that would otherwise follow major public investments, limiting the city's overall housing growth.

Keywords: Land regulation, Zoning, urban economics, housing supply, commuter market access, transport infrastructure

JEL Classification: R31, R42, O18