A framework & dynamic model for reform of residential land supply policy in urban China

Abstract

Urban residential land supply is both driven by and significantly influences urbanisation processes, the optimisation of which are necessary to address housing issues. At present, China's urban housing system has three major problems, namely a shortage of affordable housing, rapidly increasing prices for regular commodity housing, and an under-supply, relative to market demands, of high-end commodity housing, calling into question the effectiveness of existing land supply policies. This paper first reviews policies governing residential land supply and then considers these policies in light of findings from semi-structured interviews conducted with key actors and a survey of households in Hangzhou, a city of more than nine million in eastern China. These analyses show that although the Chinese government has undertaken steps to reform land use allocation and increase housing affordability in its cities, significant opportunities for reform remain in both affordable and commodity housing sectors.Results from this study aid in formulation of a framework for residential land supply and a dynamic model for reform for Chinese governments to undertake to integrate housing provision across a range of household income and housing type classifications. The model demonstrates how reformation of the residential land supply system through improvements to the elasticity of residential land supply, optimisation of land supply for affordable housing, deregulation of land supply for and taxation of high-end commodity housing will significantly ease housing stress within Chinese cities. Finally, international experience indicates that the Chinese government can leverage revenues to acquire or otherwise support construction of additional affordable housing, with the increased volume of activity helping to arrest housing price inflation while achieving socialist ideals.