Inclusive growth or displacement? Examining upzoning and gentrification in Lahore, Pakistan

Abstract

This paper presents the first impact evaluation of recent upzoning reforms in Lahore, Pakistan - a megacity with a population of approximately 13 million. Leveraging data from Pakistan’s largest online property platform and nationally representative labor force surveys, we provide causal evidence that the 2020 policy reform permitting vertical development led to a significant increase in property prices within upzoned areas. Specifically, we find that upzoning increased property prices by at least 8.4 percent after controlling for unobserved heterogeneity within the city and hedonic attributes of properties. We also find compelling evidence of gentrification in upzoned neighborhoods: the likelihood of residents with higher wages, being literate, and having completed higher education increases as a result of upzoning. While upzoning does not affect the probability of working, it does increase the probability of working as a professional/manager or being employed in the tertiary sector. These patterns point to a marked shift in the socioeconomic composition of upzoned areas, aligning with the broader literature on gentrification as an unintended consequence of relaxation in land-use regulations. The effects of upzoning appear to be geographically contained, with no evidence of spillovers into adjacent areas. Owing to the inelastic nature of housing supply and data constraints, the study does not evaluate the policy’s effect on housing stock expansion. Nevertheless, this study offers novel evidence from a developing country context, where empirical research on upzoning remains scarce. The findings have important implications for housing affordability policy and the design of complementary public infrastructure to support upzoning reforms.