Rent gap formation due to public infrastructure and planning policies: An analysis of Greater Santiago, Chile, 2008–2011

Abstract

Land upzoning and state investment in public infrastructure are two of the principal factors that increase the rent gap in the city; however, the scale of their impact remains unknown. This paper presents a novel method of rent gap analysis based on multiple linear regressions with controlled fixed factors, tested for Greater Santiago, Chile. Drawing on an administrative dataset of 36,911 transactions for new apartments sold between 2008 and 2011, along with data regarding the size of each apartment and its commercial sale price—but discounting imputed land and construction costs—it can be seen that state investment in the Metro rapid transit network enlarged the potential ground rent (portion of the rent gap capitalized by developers) by 25.6% over the period. Similarly, each additional floor area ratio point (dictated by district zoning guidelines) increased capitalized ground rent by an average of 6.1%. Meanwhile, the portion capitalized by small-scale private landowners through sale of un-redeveloped land increased by only 5.5% over the same period. These results show the high elasticity of the rent gap, the strong influence of land regulations and state-financed Metro infrastructure on rent gap formation, and the need for discussion of taxation of the capitalized ground rent for redistributive purposes.

W.E.B. Du Bois and the urban political economy tradition in geography

“…Research on investment and disinvestment, with a particular focus on gentrification, has been abundant in urban geography (among many others: Ley, 1996;Smith, 1996). Within the political economy paradigm, Smith's theory of uneven development (1982, 2010 [1984]) remains foundational and influential (Lopez-Morales, et al, 2019;Wyly and 1999). In his wide-ranging book, Uneven Development, Smith explored a core dialectical tendency within capitalism.…”

“…The underlying logic of this was that gentrification occurs because inner core housing has been devalorized by years of disinvestment. A 'rent gap' emerges wherein renovation of that property can restore its actualized ground rent (Lopez-Morales et al, 2019;Smith, 1979). The greatest rent gaps exist in places where land values have been most suppressed.…”

Differentiation under capitalism: Genesis and consequences of the rent gap

“…Compared to the classical linear regression model, SLM is designed to solve the problem of spatial autocorrelation, e.g., the tendency for adjacent properties to have similar prices/rents. This methodology is previously adopted to estimate the augmentation of the ground rent and rent gap due to land upzoning and state investment in public infrastructure (López-Morales et al, 2019). SLM is conducted per annum (i.e.…”

Developing climate-responsive cities: exploring the environmental role of interstitial spaces of Santiago de Chile

“…The emergence of suburban interstices in Latin America, however, derives from a more liberal approach to land planning (Silva 2019) that defines urbanisation in specific locations and, thus, the interstices are randomly distributed in the city (del Castillo & Sopla 2018). The competing economic, social, and environmental values adhering to interstitial spaces ensure that some of them-including those attractive to the private sector-remain pending for prodigious periods of economic growth or financial stability (López-Morales et al 2019). Other factors relate to the emergence of informal settlements mainly fuelled by natural growth and rapid internal and cross-border migration (Sandoval & Sarmiento 2020).…”