Working Paper No. 65 Housing Reform in Urban China

Two decades of China's urban housing reform has produced significant quantitative and qualitative improvements. Despite various policies aimed to promote owner-occupied residential housing, the extent of commodification has been limited, and, in particular, most ownership transactions are independent of market considerations. This paper analyzes the reasons why significant commercial owner-occupancy has failed to materialize. On the one hand, the multiplicity of prices fails to reflect real market prices. On the other hand, flawed planning (which led to inappropriate real estate development) and extra charges have pushed most housing costs well beyond the reach of ordinary Chinese people. Although work units have gradually replaced the government as the dominant provider of urban housing, the implicit subsidies to employees of governments, and urban work units further complicate the question of who has actually "paid" for Chinese urban housing. This paper explores the related institutional reforms in the areas of land allocation and pricing, property rights, mortgage financing, informal housing and property taxation, which must accompany successful housing reform. The paper concludes by advocating an alternative agenda of housing commodification. ___________________________________________________________________________________ The research presented here was supported by the Center for Research on Economic Development and Policy Reform at Stanford University. It has been greatly improved by comments from Nicholas Hope, George Tolley, Pieter Bottelier, and the other participants in the Conference on Policy Reform in China, November 18-21, 1999, sponsored by the Center for Research on Economic Development and Policy Reform. Responsibility for the contents of this paper nevertheless rests entirely with the author.