Evaluación de Impacto del Subsidio de Renovación Urbana: Estudio del Área Metropolitana del Gran Santiago 1991–2006

For several decades, central Santiago experienced depopulation and urban decline, a situation much worsened by the 1985 earthquake, one of the most destructive in the city’s history. Six years later, with the aim of renewing this area, the Ministry of Housing and Urbanism (MINVU) launched the Urban Renewal Subsidy (URS), a capital housing subsidy consisting of 200 Unidades de Fomento (UF) (index-linked finance units worth approximately UK£ 19 in today’s currency) to be paid directly to purchasers of new residential units built in medium- and high-density blocks, allocated within a predefined central zone, and whose maximum price should not exceed the equivalent of 2,000 UF. In parallel, central Santiago municipality liberalized its urban norms, increasing the allowed urban density, block sizes and plot area ratios, and also opening up possibilities for the localization of private educational centres, cultural activities and other amenities.

Despite a few initial years of uncertainty, the URS is currently proving successful. Property sales are notably quick and a number of new residential blocks have been built in the last 15 years, replacing several traditional urban areas. The subsidy’s application zone has also much expanded toward 10 peri-central and two additional peripheral boroughs that currently compete to attract the urban renewal market, although with quite uneven results. This subsidy has also been exported to several other cities in the country. In quantitative and economic terms, the URS has been highly successful.

However, through this report, MINVU for the first time publicly evaluates this instrument in other dimensions, such as its small scale compared to other public housing subsidies (it represents only 2 per cent of the total provided each year) but its high impact on the rise in property prices in the central area. The analysis focuses also on demographic processes that might contradict the initial aims of the subsidy: central Santiago has not stopped its depopulation tendencies, even though the number of new properties being produced has increased. A plausible reason is the spectacular reduction experienced in the last 15 years in the average size of families in the country. Hence, the families that migrate to the central areas are increasingly smaller and the floor space of the units built under the URS is therefore reduced. This aspect partially explains why the URS has failed to re-populate the metropolitan central area, but not why the prices of these smaller units rises. In general terms, the URS has firmly supported the private urban renewal market, clearly securing a niche for the firms operating in the sector. Other impacts of the URS on morphology, mobility, demography and local urban norms in the urban centre are also analyzed.

Some general conclusions and general policy recommendations include:

· the need to improve the connections between the URS and local norms and planning;
· the instrument should be oriented less to the production of new units and more to the rehabilitation of historic deteriorated neighbourhoods (the market has been highly predatory in historical areas);
· there should be more state management in the acquisition of free land for future developments; and
· the application of the URS should be done more in relation to each particular urban context.