An Analysis of Housing Policy during Economic Transition in China

Abstract

It has been more than ten years since intensified housing marketisation reform began in China. During this period, reforms have achieved some extraordinary outcomes: speeding up the development of real estate and improving levels of urban housing. At the same time, there have also been some undesirable effects, such as declining housing affordability, and worsening housing conditions for disadvantaged groups. Critically, the housing market is producing negative outcomes in terms of its social security functions. This paper analyses policy effects of the late 1990s housing marketisation reform in China and elaborates on the housing welfare system. The focus is a quantitative analysis of Beijing's social housing policies. Finally, we use the Nash Equilibrium to analyse the social welfare features of housing policy and suggest future policy directions.

Key Words:

• Housing marketisation
• social housing
• Nash Equilibrium

Notes

1. China took a gradual approach in reforming the economic system, converting the originally planned economic system to a market economic system. The China's economic transition in this paper refers particularly to the period after the announcement of the ‘housing marketisation reform’ in 1998.

2. The policy here refers to ‘further deepening the urban housing system and speeding up the housing supply’, which was announced by the central government of China on July. 3 1998.

3. Sometimes referred to in English as ‘economical and comfortable housing’

4. 100 yuan = US$14.6447 on 8 June 2010.

5. Disadvantaged groups here refer to those whose income are low and cannot afford to buy commodity housing.

6. Groups benefit from housing marketisation reform and gradually increase control the social resources.

7. Groups are weakened by housing marketisation reform with welfare conditions deteriorating and social status and economic positions dimishing.

8. The rate of growth of commodity housing prices in these four years was: 2004 18.71 per cent, 2005 12.61 per cent, 2006 6.21 per cent, 2007 16.86 per cent.

9. Household income here is calculated from official statistics on individual income and average household size. The commodity housing price, residents’ income per capita and the number of people per household comes from Statistical Yearbooks. The mean area per home is assumed to be 80 square metres.

10. Wealth here refers to the increases in housing price that can allow the city to increase its tax base, and fee for land use etc.

11. Welfare indicates the social benefit coming from the improvement of equity as a result of government policy.