Residential socio-economic segregation in Costa Rica had an overall decreasing trend between 1973 and 2011 because of a sustained reduction in the amount of lower income households. However, in 1986, the national housing program was reformed, including a ten-fold increase in housing supply (292 thousand subsidies allocated in 1987-2011, in a country with 1.36 million housing units). The pattern of these subsidies was hypothesized to increase residential segregation in Costa Rica. Segregation indices were estimated per municipality for lower and higher income groups. The impact of social housing subsidies on segregation levels was quantified using a fixed effects model with standard errors corrected for spatial dependence. Social housing supply was found to have historically reduced residential segregation; however, the 1986 reforms created a system that followed the patterns of real estate markets, in turn reducing much of the system’s mitigation effect on residential segregation.
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