Over the last decade, housing costs in big cities soared by 68%, far higher than in smaller cities or rural areas, stretching household budgets, and pricing young people and families out of urban centres. Can São Paulo’s new approach show the way for other cities?
Average price of home purchases by country and city size, 2023
Source: OECD Regions and Cities at a Glance 2024 (EN)
São Paulo’s Statute
Walk through São Paulo today and you’ll see a city of striking contrasts. With 12 million people spread across 1 500 square kilometres, Brazil’s largest city is a hub of opportunity, but also harbours some of the country’s deepest social and spatial inequalities.
Throughout the 20th century, new, often informal, settlements sprung up haphazardly on city’s fringes, absorbing waves of migrants from Brazil’s poorer northern states.
These informal settlements are marked by precarious housing, environmental risks, and social exclusion – and many residents lack access to public services like clean water or sanitation. By the turn of the century, these sprawling favelas demanded a new approach.
In response, the federal government introduced the 2001 City Statute, a landmark law that recognised land as a shared social resource, not just private property. It marked a turning point in urban thinking in Brazil, by giving cities powerful tools to shape fairer urban futures, from enforcing the social function of property and legalising informal settlements to boosting local planning, taxing vacant land, and making citizen participation a core part of city governance.
Turning urban growth into public wealth
This new framework enabled São Paulo became a laboratory for land-based finance in the early 2000s. The idea was bold: harness the value generated by urban growth to reinvest in the city itself – not only to build roads and metro lines but also to replace favelas with high-quality social housing.
At the core of this model are Urban Operations (Operações Urbanas) – strategic zones where zoning, infrastructure, and financing are co-ordinated for large-scale redevelopment. Developers can build higher and denser projects in these zones, but only if they make a financial contribution to the city’s broader needs.
In São Paulo, developers can only build for free floor space equal to the size of their plot (i.e., one storey building). To build additional floors, they must buy special certificates – called Certificados de Potencial Adicional de Construção (CEPACs) – at public auctions. Each CEPAC grants the right to add extra square metres beyond the basic plot size, effectively letting developers pay for more density.
The funds raised are reinvested directly into the Urban Operation area – financing metro lines, roads, bike lanes, green spaces, and crucially, social housing. The results are striking. Between 2004-19, the major Urban Operation of Faria Lima generated around USD 600 million, for approximately 900 000 CEPACs sold at auction.
Socialise the gains of production of the city
Source: Prefecture of São Paulo
Building the city for the most vulnerable
São Paulo’s model doesn’t just fund urban transformation – it helps ensure that the benefits reach those most at risk of being displaced. By law, 35% of Urban Operation revenues must go into social housing developments.
These projects are channelled through Zonas Especiais de Interesse Social (ZEIS) – areas reserved for affordable housing. ZEIS often overlap with existing favelas, guaranteeing residents’ right to stay. Families are registered, consulted, and sometimes even invited to influence design features of their new homes – such as adding balconies or communal areas. The process can take years, but it replaces precarious dwellings with safe, permanent housing.
Yet this model requires strong governance, transparent zoning rules, and a robust property cadastre – capacities that not all municipalities have. Managing these systems also demands legal expertise and administrative co-ordination that smaller cities often lack.
Landing the message
OECD work shows that other global cities are learning the lessons, and applying similar land value capture instruments to leverage urban growth for the benefit of all – efficiently, equitably and without raising taxes.
São Paulo offers a glimpse of what’s possible when cities use densification not just to build higher, but to build fairer. For other cities grappling with rising housing costs, the message is simple but powerful: when growth pays back, everyone gains.
For more reading, check out the OECD Regions and Cities at a Glance 2024 report. Discover more about the OECD’s work on Global Compendium of Land Value Capture Policies.
Thomas Kergonou Jimenez is an Economist and Policy Analyst in the Inclusive Growth in Cities Unit at the OECD in Paris. His work has primarily focused on housing policies as well as on the challenges facing urban centres, including retail vacancy and decline. He previously worked at the French Treasury on housing economics and at the French local authority of Aubervilliers, within the urban planning and housing department. He holds master’s degrees in Geography and Urban Planning from the École Normale Supérieure, in Urban Planning from Université Paris Nanterre, and in Economics and Management from ESSEC Business School.