Conference Agenda

Detailed Abstract:

Developing subsidized housing represents an effective strategy to address the housing affordability crisis that plagued the nation (Jiang et al., 2022; Kosareva & Polidi, 2021; Li & Shamsuddin, 2022). Negative perceptions of subsidized housing have long impeded its expansion (Diamond & McQuade, 2019; Nguyen, 2005). Previous studies have attributed resistance to subsidized housing to the adverse effects of subsidized housing on adjacent property values (McNee & Pojani, 2022; Wassmer & Wahid, 2019; Woo et al., 2021). It has also been noted that new housing units should produce a supply effect, absorb demand, and relieve the growing pressure on housing rents (Glaeser & Gyourko, 2018; Li, 2022). Therefore, the competitive relationship between subsidized housing and market rental housing may represent an important factor hindering public support for subsidized housing development. While to our knowledge, the impact of subsidized housing on the local housing rental market has hitherto received scant attention by scholars (Eriksen & Rosenthal, 2010; Yun et al., 2021).

In recent years, government-subsidized rental housing, a type of public rental housing, has quickly become a pivotal policy instrument for the Chinese government to alleviate the housing difficulties faced by residents in major cities. According to the “14th Five-Year Plan for Public Services”, China has set a target to raise 8.7 million units of government-subsidized rental housing between 2021 and 2025, with the aim of improving the living conditions of over 26 million new citizens and young people. Hangzhou is one of the leading cities for government-subsidized rental housing development. According to the Hangzhou Municipal Bureau of Housing Security, at present, there are three main ways to prepare for the construction of government-subsidized rental housing, first one is building new housing units, second one is rebuilding non-residential buildings into the government-subsidized housing and third one is converting stock housing into the government-subsidized housing.

Given the significance of government-subsidized rental housing in China's housing policy, the effects of subsidized rental housing on the local housing rental market need to be carefully examined. The specific questions which drive the research are: Firstly, how and how much do different types of government-subsidized rental housing impact on neighborhood housing rents? Secondly, did government-subsidized rental housing affect the willingness of landlords to rent out their properties? Thirdly, did government-subsidized rental housing contribute to an improvement in the overall quality of rental housing in the market?

Taking Hangzhou, China as the experimental field, this study investigates the impact of government-subsidized rental housing operations on the housing rental market, employing the spatial difference-in-differences method. Hangzhou is one of the key cities that receive state funding support for the development of government-subsidized rental housing. Data for this study include two parts: (1) information on government-subsidized rental housing projects that commenced operation in 2021 and beyond, including project names, fundraising methods, start of operation time, location, scale, and occupancy rate, etc. (2) housing listing and transaction records of the housing rental market in Hangzhou from 2021 to 2023. Our empirical design consists of three main steps. In the first step, we develop a spatial double-difference model to assess whether and how different types of government-subsidized rental housing affect rents in surrounding housing. In the second step, we use the double-difference approach to examine the response of landlords as landlords to government-subsidized rental housing operations. In the third part, we further estimate the heterogeneous effects of government-subsidized rental housing on rents and willingness to rent across housing classes.

Based on the spatial double difference model, we anticipate the following findings: First, new and remodeled government-subsidized rental housing diverts the demand for existing housing rentals and worsens the neighboring housing rents (i.e., supply effects). The negative impact is smaller for substitutes that are more distant. Second, government-subsidized rental housing negatively affects landlords' willingness to rent out their properties (i.e., crowd-out effects). Finally, the operation of indemnificatory rental housing primarily reduces the rent of surrounding low-end housing and leads to the withdrawal of some low-end market rental housing from the market, thereby enhancing the overall quality of rental housing in the market (amenity effects).

This paper makes the following contributions. Firstly, our study adds to the existing literature on the spillover effects of subsidized housing (Craw, 2020; Diamond & McQuade, 2019; Gonzalez-Pampillon, 2022; Voith et al., 2022). Prior research has mainly focused on the impact of subsidized housing on property values, while our paper investigates the effects of subsidized housing on housing rents. Secondly, this paper contributes to the literature on rent control by arguing that subsidized rental housing ultimately leads to the "rat race" of the private rental market by regulating market rents and eliminating low-end market rental housing (Breidenbach et al., 2022; Kholodilin & Kohl, 2021). This perspective complements previous research that has demonstrated the adverse effects of strict rent controls on the development of the private housing rental market (Gabriel & Nothaft, 2001; Tandel et al., 2016). Therefore, our work is highly relevant to the literature on housing affordability (Archer, 2022; Kosareva & Polidi, 2021; Li & Shamsuddin, 2022; Lux et al., 2023). Furthermore, this paper is also related to the literature examining the effects of government policies (Chiu, 2007; Deng et al., 2019; Wassmer & Wahid, 2019). We provide more accurate micro-empirical evidence to support the effectiveness of subsidized rental housing policies.

References

[1]. Archer, T. (2022). The mechanics of housing collectivism: how forms and functions affect affordability. Housing Studies, 37(1), 73-102.

[2]. Breidenbach, P., et al. (2022). Temporal dynamics of rent regulations - The case of the German rent control. Regional Science and Urban Economics, 92.

[3]. Chiu, R. L. H. (2007). Planning, land and affordable housing in Hong Kong. Housing Studies, 22(1), 63-81.

[4]. Craw, M. (2020). Effects of Proximity to Multifamily Housing on Property Values in Little Rock, Arkansas, 2000-2016. Housing Policy Debate.

[5]. Deng, Y., et al. (2019). Singapore's cooling measures and its housing market. Journal of Housing Economics, 45.

[6]. Diamond, R., & McQuade, T. (2019). Who wants affordable housing in their backyard? An equilibrium analysis of low-income property development. Journal of Political Economy, 127(3), 1063-1117.

[7]. Eriksen, M. D., & Rosenthal, S. S. (2010). Crowd out effects of place-based subsidized rental housing: New evidence from the LIHTC program. Journal of Public Economics, 94(11-12), 953-966.

[8]. Gabriel, S. A., & Nothaft, F. E. (2001). Rental housing markets, the incidence and duration of vacancy, and the natural vacancy rate. Journal of Urban Economics, 49(1), 121-149.

[9]. Glaeser, E., & Gyourko, J. (2018). The economic implications of housing supply. Journal of economic perspectives, 32(1), 3-30.

[10]. Gonzalez-Pampillon, N. (2022). Spillover effects from new housing supply. Regional Science and Urban Economics, 92.

[11]. Jiang, R., et al. (2022). Placing public housing provision in Chinese cities: land-centered development, cadre review mechanism, and residential land supply. Housing Studies.

[12]. Kholodilin, K. A., & Kohl, S. (2021). Social policy or crowding-out? Tenant protection in comparative long-run perspective. Housing Studies.

[13]. Kosareva, N., & Polidi, T. (2021). Housing Affordability in Russia. Housing Policy Debate, 31(2), 214-238.

[14]. Li, X. (2022). Do new housing units in your backyard raise your rents? Journal of Economic Geography, 22(6), 1309-1352.

[15]. Li, X., & Shamsuddin, S. (2022). Housing the Poor? A Comparative Study of Public Housing Provision in New York, Hong Kong, and Shenzhen. Housing Policy Debate, 32(4-5), 678-696.

[16]. Lux, M., et al. (2023). Why so moderate? Understanding millennials' views on the urban housing affordability crisis in the post-socialist context of the Czech Republic. Journal of Housing and the Built Environment.

[17]. McNee, G., & Pojani, D. (2022). NIMBYism as a barrier to housing and social mix in San Francisco. Journal of Housing and the Built Environment, 37(1), 553-573.

[18]. Nguyen, M. T. (2005). Does affordable housing detrimentally affect property values? A review of the literature. Journal of Planning Literature, 20(1), 15-26.

[19]. Tandel, V., et al. (2016). Decline of rental housing in India: the case of Mumbai. Environment and Urbanization, 28(1), 259-274.

[20]. Voith, R., et al. (2022). Effects of concentrated LIHTC development on surrounding house prices. Journal of Housing Economics, 56.

[21]. Wassmer, R. W., & Wahid, I. (2019). Does the Likely Demographics of Affordable Housing Justify NIMBYism? Housing Policy Debate, 29(2), 343-358.

[22]. Woo, A., et al. (2021). Who believes and why they believe: Individual perception of public housing and housing price depreciation. Cities, 109.

[23]. Yun, M. T., et al. (2021). The Effects of Happy House Development on Nearby Rent of Non-Apartment. Journal of the Korea Real Estate Analysts Association, 27(1), 7-20.

This paper exploits the effects of home purchase restriction (HPR) policy on industrial structure change. Using the databases of industrial value-added outputs and listed companies in the secondary industry in 141 China’s cities over the period 2000-2020, this paper finds that HPR policy abates the value-added output shares in the real estate industry, construction industry, and financial industry, while elevates the value-added output share in the secondary industry. The underlying mechanisms suggest that HPR policy not only dampens the demand for residential housing, but also increase employment share, labor productivity, total factor productivity, and the number of patent applications in the secondary industry. As consequence, HPR policy could provoke economic growth by virtue of industrial structure change.

This study examines the effect of the property tax on the housing wealth inequality in China using the property tax pilot program in Shanghai and Chongqing in 2011 as a quasi-natural experiment. The difference-in-differences (DID) estimation results indicate that the property tax significantly decreases the housing wealth inequality. In the eight years since the implementation of the property tax, the Gini coefficients of the housing wealth of Shanghai and Chongqing have dropped by 13.8% and 36.6%, respectively. Further analysis suggests that the property tax pilot program has significantly changed the housing demand structure and the housing prices. In Shanghai, the property tax has decreased the demand for upgrading and investment housing, stimulated the demand for consumption, thus leading to the falling and then rising of the average housing prices. In Chongqing, the property tax has risen the upgrading demand, whereas it has significantly decreased the investment demand and the average housing price. Furthermore, the price effects are more significant for big-size houses in both cities. This study enriches the existing research by providing empirical evidence for the distributional effect of property.

The purpose of this study is to investigate if housing developers’ investment behaviour cause housing price changes and the change is not only affected by the change of local factors but also affected by related cities’ development. This research uses more than 30 threshold housing investment projects across 269 Chinese cities and applies spatial econometric models with three spatial weights. We find that there is an obvious spatial correlation between housing investment and housing price. Also, residential investment concentration has a significant positive promotion effect on local housing prices and a significant positive spillover effect on surrounding areas. In terms of regional heterogeneity, housing investment concentration in eastern and central regions has positive direct and spillover effects on housing prices. This paper fills the research gap of studies on modelling the supply side of the new housing market.