Mismatches between the Supply and Demand of Public Rental Housing in Chinese Cities

Abstract

While many countries have witnessed the retreat of the state from social housing under neoliberalism, the Chinese government has taken the opposite trajectory, significantly expanding its involvement in public rental housing (PRH) over the past decade through substantial investments. However, the effectiveness of the PRH program has come under scrutiny due to its inability to meet the demand for housing units while grappling with a substantial vacancy rate. This study aims to unravel this paradox by utilizing a unique city-level database that encompasses information on public rental housing stock, land supply, waiting time, and allocation practices. The data suggest that there is a structural mismatch between supply and demand for PRH in China, with both high and low vacancy rates in different cities, and even high vacancy and high allocation rates co-existing in one city. The results of estimating the OLS regression model of PRH supply and demand indicate that the actual supply fails to align with the policy objectives and the actual housing demand. Rather, they are more a result of the power relationship between the central and local governments, and cities with high fiscal autonomy provide fewer PRH. Furthermore, local governments fail to set eligibility criteria in response to housing supply, demand, and allocation, further exacerbating the mismatch. This paper provides policy recommendations that aim to enhance the sustainability and effectiveness of the PRH program, contributing to more equitable urban development.