How sensitive are housing prices to urban regulations? Supply-side evidence from Santiago, Chile

Abstract This study investigates how urban regulatory frameworks shape new-housing prices in Santiago, Chile, and the resulting built-environment outcomes. Using administrative transaction data (2019–2024) and an instrumental-variable strategy that exploits the lagged allowable levels of each regulatory tool, price elasticities are estimated. A 1% increase in building height lowers average apartment prices by 0.10%, whereas a 1% increase in density reduces them by 0.16%. A key finding is the complete reversal of these effects across the urban gradient, revealing a context-specific trade-off between construction cost savings and land value capitalization. The simultaneous application of height, lot coverage and floor-area ratio amplifies the combined impact, revealing systematic developer optimization through regulatory packages. The findings suggest that Chilean municipalities, and by extension other Latin-American cities, can enhance housing affordability and steer urban form by tailoring regulatory bundles to local land values and accessibility conditions instead of relying on uniform standards. JEL Classification: R31, R38, R52