Reinforcing housing inequality: homeownership and investment trends in Buenos Aires and Santiago de Chile

Review: <i>The Metropolis in Latin America, 1830–1930: Cityscapes, Photographs, Debates</i>, edited by Idurre Alonso and Maristella Casciato

With the market-oriented reform of the housing system since the 1ate 1980s, the housing condition in urban China has improved significantly. On the other hand, it is widely believed that the introduction of market mechanisms has led to the rise of housing inequality among urban households. Based on panel data of the NBS survey (2004–2007), this paper examines recent trends in housing inequality in urban China and analyzes the influence of the market-oriented reform and traditional institutions. By measuring the Gini coefficient of two types of housing indicators, we find that in the period from 2004 to 2007 there exists a rising trend in housing inequality among urban households. However, the rise of inequality is not simply the result of the market-oriented reform. The results of the panel analysis show that, although household income and household head income have positive effects on the probability of owning a market-price (i.e., high price) house, the probability of owning a low-price house is heavily affected by some non-income factors including household member employment sectors and Hukou (registered residence status). As a whole, both income and non-income household characteristics have effects on the probability of home ownership as well as on the house size (house floor space). It means that the rising housing inequality in urban China should be regarded as the combined result of influence from ongoing market-oriented reforms and the persisting impact of some traditional systems.

Housing prices in China have been increasing at high rates over recent years. The average residential housing price has increased from 2,608 yuan per square meter in 2004 to 5,933 yuan per square meter in 2014 (National Bureau of Statistics of China, 2014, 2015). The growth in housing prices significantly exceeded household income growth. In 2013, the average residential house-to-income ratio was nearly 8.5 in major Chinese cities (Feng & Wu, 2015). Such dramatic house price growth and high price-to-income ratio have caused concerns about the formation of a housing bubble (Wu et al., 2012). Economic fundamentals and speculations are two parts contributing to the increasing housing prices. The speculation part is the key reason for housing price bubbles (Hu et al., 2006) as speculators own housing that are not their primary residence. In the present real estate climate, people tend to believe that housing prices will continue to rise. In addition to their primary housing, more and more people tend to purchase multiple properties for a variety of reasons. One obvious reason is that they consider real estate a vehicle for investment that will provide them a higher future return. According to the 2014 China Household Finance Survey (CHFS) report, about 16% of urban households owned more than one housing unit in 2011. The number increased from 19% in 2013 to 21% in 2014 (China Household Finance Survey, 2014). At the macro level, this non-primary housing investment helps the development of an economy. However, Chinese residents purchased housing units as a store of value. Whether current housing prices truly reflect the value of the housing units and the prices are rising too fast do not seem to concern most people. According to Fawley and Wen (2013), the current unusual demand for housing as an investment in China is speculative in nature. When both the household income growth rate and the savings rate begin to decline and the government relaxes capital controls (Fawley & Wen, 2013), the housing bubble will burst and have a negative impact on the economy, such as triggering financial crisis and causing a drag on economic growth. At the micro level, non-primary housing investment affects not only the diversification and performance of household investment portfolios but also the housing inequalities in urban China. In 2014, the top 1% income households owned the overwhelming majority of non-primary housing units (53%). Households who ranked in the bottom 25% still have high demand for primary housing (China Household Finance Survey, 2014). Significant ownership in non-primary housing lead to higher housing price volatility that causes mortgage defaults (Miles, 2008) as well as housing bubbles. Housing bubbles can lower housing affordability for the general population, especially young households (Hou, 2010) and hurt the household investment portfolio when the bubbles burst. Another important reason for purchasing non-primary residence is related to a social norm that groom’s responsibility for providing wedding house. Households with unmarried sons found it is important to improve their son’s competitiveness for marriage. Consequently, this competition for brides causes high demand for houses and leads to high prices in housing market. Homeownership in China is associated with both economic and cultural factors. This makes non-primary homeownership in China difference from other nations. Researchers have studied the housing bubble formation in China (Dreger & Zhang, 2013; Shen et al., 2005; Wu et al., 2012). Factors that affect non-primary housing investment, however, have received little attention. This study analyzes the 2013 China General Social Survey (CGSS) data to investigate factors contributing to non-primary housing ownership in China. Our findings provide insights about ways to help Chinese households avoid making mistakes in their housing consumption and investment portfolio allocation, as well as the importance of expanding financing and investing channels in China.

Global Development, Converging Divergence and Development Studies: A Rejoinder

In the introduction to this special issue on Latin American housing policies, we address the common elements evident in this collection of papers with the aim of enabling a better knowledge exchange between the ‘global North’ and the ‘global South’ on potentially common issues. These include the changing relationship between state and capital, with special emphasis on the new role adopted by the State as a facilitator for financial private capital in an increasingly privatised housing sector; the need to address precarious housing conditions among vast sectors of the population, including international migrants; and the various innovative roles played by civil society in housing provision. Notwithstanding these similarities between world regions, our editorial introduction highlights a number of particularities in housing research in the Latin American region, underscoring the need to reflect critically on the applicability of concepts and models created in different geographical contexts with different historical, social and political realities. Within this editorial, we also introduce the main themes discussed in the specific articles and attempt to place them within the more general scope of earlier research on housing policies in the region. We conclude by acknowledging that a solution to long lasting housing inequality in Latin America remains an unfulfilled promise.

When the twentieth century is viewed as a whole there is no clear trend in income inequality. Inequality was high and rising during the first three decades and peaked during the Depression. It fell sharply during World War II and remained at the lower level in the 1950s and 1960s. From the 1970s through the mid 1990s inequality steadily increased to levels not seen since World War II though well below those during the first three decades. The rate of poverty exhibited a long run downward trend from about 60-70 percent in the earlier years of the century to the 12-14 percent range in recent years. There was considerable fluctuation around this secular trend. Changes in inequality were largely produced by demographic and technological changes the growth and decline of various industries changes in patterns of international trade cyclical unemployment and World War II. The primary drivers of the rate of poverty were economic growth and factors that produced changes in income inequality particularly demographic change and unemployment. Public policy has reduced the market-generated level of inequality but since 1950 has had little effect on the trend in inequality. Prior to 1950 the growth of government and particularly the introduction of a broadly based income tax during World War II coincided with and partly produced the sharp downward shift in inequality of that era. Government had little effect on poverty rates until 1950. Public income transfer programs have reduced poverty rates appreciably in recent decades. Since World War II when it has been on a large enough scale to matter changes in tax and transfer policy have tended to reinforce market-generated trends in inequality and poverty rather than offset them. (authors)

This study explores the housing distribution effect of the Housing Provident Fund (HPF) system on households. Utilizing data from the China Household Finance Survey conducted in 2013, 2015, 2017, and 2019, this study empirically investigates this effect from two dimensions: the impact of HPF payments on household income and housing loan behavior, and the impact on the Gini coefficient of housing assets within the group. The results indicate that the HPF payment does not significantly impact household income levels. Instead, it increases their likelihood of obtaining housing loans, particularly for middle-income households. Additionally, for any group of families, the HPF payment decreased the housing Gini coefficient among households by approximately 0.11 units. This study may be the first to provide the most direct empirical evidence on the extent of HPF’s impact on housing inequality within a group. It also questions the inference in the literature that “HPF will aggravate housing inequality within the group.” Based on this study’s findings, we expect that housing inequality will continue to be alleviated with continued HPF implementation. In particular, this effect will be more significant if the credit support for low-income families to purchase houses through the HPF can be further enhanced.

Housing wealth inequality in China: An urban-rural comparison

Drawing on the nationally representative Census Bureau Household Pulse Survey (N = 443,375), this study examined how pre-pandemic and pandemic-induced vulnerabilities shaped racial inequalities in housing insecurity from August to December 2020. Theorizing the pandemic as a “systemic shock,” this article helps explain how racial inequalities are reproduced both as legacies of long-standing disparities and through widespread, societal moments of disruption. Our results indicated that Black, Hispanic, and Asian households were all significantly more likely to fall behind on housing payments than white households. We found that preexisting racial inequities, including in educational attainment, household income, and homeownership rates, largely explained racial disparities in housing insecurity during COVID-19. However, the pandemic also induced new pathways to racial inequalities. Black and Hispanic households were more likely to lose income and when they lost income, they faced a greater likelihood of experiencing housing insecurity. We conclude by highlighting the importance of theorizing disruptive systemic shocks to understand racial inequalities and discuss findings of both disparities faced by Black and Hispanic households, as well as underrecognized housing insecurity among Asian Americans.

The articles published in this issue of the Journal help advance the debate on market reform in former socialist states. In our comment, besides dealing with data analysis issues, we suggest several ways to improve the level of debate about substantive issues. These suggestions include more attention to politics, including path dependence, and more attention to middle-level generalizations from other developing market societies.

This paper examines how key differences in the very manner in which the environment/welfare nexus is experienced and understood in both the global North and the global South are managed in favour of the former over the latter. We show how in the case of the global North — the more affluent world, such as Britain — environmental issues have been usually construed as post-materialist and/or post-industrialist. We argue that predominantly Northern-based post-materialists see environmental welfare (largely through the rhetoric of sustainable development and ecological modernization) as either something separate from humans (for the welfare of the ‘rest of nature’) or for the welfare of unborn, future generations. We use the concept of the ‘post-political’ to interpret how the global North dominates debates on the environment and how it can be quite dismissive, and even negligent, of welfare issues in the global South. In the case of the majority world, green welfare policy agendas are littered with the consequences of environmental devastation incurred through centuries of Northern oppression and resource exploitation. In the global South green welfare goals concentrate on the alleviation of those more basic needs of survival — provision of shelter, water availability, air quality, food sovereignty, and energy security — for those humans actually living on the planet; rather than those who may at some time in the future. In short, issues of environmental debt are writ large, rather than those of an imagined environmental future.

HOUSEHOLD INCOME DYNAMICS AND POVERTY TRAPS IN RURAL EL SALVADOR

Despite repeated attempts to integrate competing perspectives (Szelenyi and Kostello 1996; Nee and Matthews 1996), the ongoing market transition debate has shown no signs of resolution. Instead, the 1996 AJS market transition symposium seems to have created more controversy than it settled (Nee 1996; Xie and Hannum 1996; Oberschall 1996; Parish and Michelson 1996; Walder 1996; Fligstein 1996; Szelenyi and Kostello 1996). And subsequent studies continue to reach nearly opposite conclusions (cf. Bian and Logan 1996; Gerber and Hout 1998; with Brainerd 1998; Nee and Cao, in press). When arguments become polarized, it often signals that divisions are falsely drawn (Bates 1997). Although originally made in another context, this observation is applicable here. As principals in this lively debate, we believe that clarification and reevaluation are essential for moving toward a reconciliation of competing viewpoints. In this comment we therefore identify the central issues in the controversy and provide an overall assessment of existing empirical evidence

With the development of the market economy in China, does the effect of the original socialist institutional arrangements on social inequality fade? We examine this issue by considering the effect of people’s positions in the work unit system and their socioeconomic status on patterns of housing inequality in urban China. Using individual-level data from the 2007 Household Survey on the Housing Conditions of Urban Residents in Nanjing, China, we find that although people’s socioeconomic status (measured by household income and householder’s education) has become very important in shaping people’s housing outcomes in urban China, housing inequality is also determined to some extent by their position in the work unit system—such as being employed in various units within the state sector—before and during the housing reform process. The pattern of housing inequality in urban China indicates that the impact of socialist institutional arrangements on social inequality can still be found in market transition societies even years after the market transition has occurred.

Using a unique data set with detailed information on Danish households and their mortgages, we show that young and old households are more likely to use interest-only (IO) mortgages compared with middle-aged households. Young households use IO mortgages because they expect higher future income and old households because IO mortgages allow them to circumvent an otherwise binding liquidity constraint. Through different channels, IO mortgages thus facilitate consumption smoothing for young and old households. Our detailed data also allow us to examine how households with IO mortgages differ from households with repayment mortgages in terms of leverage, debt and asset composition, and pension contributions. This paper was accepted by Tomasz Piskorski, finance. Funding: All authors gratefully acknowledge support from the Danish Finance Institute. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4787 .