Sao Paulo, The Voluntary City?!

The Trotskyist mayor of Sao Paulo is embracing an idea long advocated by free market economists, creating a market in which zoning rights can be bought and sold. Sao Paulo will sell as much as $300 million in legal rights to build above existing height and bulk limits in certain areas. Penn State University professor of real estate, Abdullah Yavas, notes:

This is a first. The city is doing rezoning for payment and by having a secondary market, the city creates a way for the rezoning to be used by the highest bidders – the people who value the space the most.

Eliminating zoning altogether and relying on covenants and other private solutions, as does Houston, is probably best. But in the meantime, William Fischel, Robert Nelson and others have long-argued that its more efficient to price than to forbid. In a pricing system, land would be better allocated to its highest valued use and both the city and builder would be better off. In addition, open, competitive sale of zoning rights is preferable to widespread corruption and bribery which zoning naturally invites. The mayor of Sao Paulo, a rich communist (really), is more interested in revenues than efficiency but that’s often the way reform occurs.

Aside: The information on Sao Paulo comes from an article by Terry Wade in the WSJ, Wed. April 28, A14B, unfortunately the WSJ provides no way to provide a link if one is not a subscriber. For more on these issues see The Voluntary City (I am one of the editors). Here is Tyler on things Brazil is not doing so well.