São Paulo Moves to Cap Social Housing Prices and Ban Rentals Amid Fraud Scandal

São Paulo’s city government, according to official municipal statements and public records, plans to cap the price of social housing units and prohibit their use as rental properties.

This move comes after investigations exposed widespread abuse of public housing incentives, with developers and buyers exploiting regulatory gaps for profit.

Mayor Ricardo Nunes announced the city will set maximum prices for subsidized housing: R$266,000 for HIS 1 units, R$369,600 for HIS 2, and R$518,000 for HMP units.

These limits correspond to income bands tied to the minimum wage, aiming to ensure that only eligible low- and middle-income families can buy these homes.

The city will also ban the purchase of such units for rental purposes, closing a loophole that allowed investors to profit from properties meant for the most vulnerable.

This policy shift follows a surge in property prices across São Paulo, with the average residential price per square meter expected to rise by 15% in 2025.

This increase has outpaced inflation and made affordable housing even more scarce for those in need. The city’s real estate market remains attractive to investors, but the demand for well-located, affordable homes continues to exceed supply.

Authorities uncovered that some developers used “letters of awareness” to bypass income restrictions, selling subsidized units to buyers far above the intended income thresholds. These buyers often rented out the properties, sometimes via short-term rental platforms, further distorting the market.

Notary offices reported over 560 suspicious transactions in just two months. Investigations revealed that major construction firms benefited from tax exemptions while failing to deliver homes to the target demographic.

São Paulo Tightens Social Housing Regulations

The city’s new decree, building on Decree 63,728 and recent cooperation agreements with real estate registrars, will require notary offices to notify the city of all transactions involving social housing units.

This measure aims to tighten oversight and ensure compliance with income and occupancy rules. The city will also require developers to provide documentation proving that buyers meet eligibility criteria before completing sales.

Regulatory lapses in recent years allowed the market to dictate prices and buyers, with little municipal oversight. Construction companies received incentives such as tax breaks and permission to build denser developments.

However, the lack of enforcement meant many units were sold to investors or higher-income buyers. The Public Prosecutor’s Office has criticized the city for failing to supervise its own policies, which granted public incentives without adequate controls.

The new rules will force developers and investors to adapt to tighter regulations. The city’s actions signal a shift toward restoring integrity in the social housing market, aiming to protect public investment and ensure that affordable homes reach those who need them most.

As São Paulo’s property market continues to grow, the challenge will be enforcing these rules and maintaining transparency in a sector vital to the city’s social and economic stability.

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