Analysing the willingness of real estate developers to densify and increase social inclusion: using stated choice data in a recursive fashion

Abstract

Real estate developers’ decision processes are intricate, involving many diverse variables. Understanding developers’ decisions is crucial in Latin America, where a growing demand for social housing on better-located land exists. We test the effectiveness of different incentives to encourage developers to build highdensity and socially integrated projects near transport stations using a sophisticated stated choice survey designed to elicit developers’ preferences. As the survey flow depended on the developers’ answers, we formulated and estimated a discrete choice model to address inherent endogeneity issues. Our results reveal developers’ preference for direct payment incentives and incentives that grant them more freedom to design projects. Further, we sadly confirm that social inclusion is a disincentive, reflecting a traditional Latin American aversion to mixed-income dwelling projects, suggesting a preference for segregated housing markets. Public policies planning to employ incentives must evaluate the monetary cost of such schemes and their consequences on local neighbourhoods.