Shantytown Redevelopment and Housing Prices: Empirical Evidence from Chinese Cities

Abstract

China has been undergoing urban regeneration and reconstruction over the past few decades. To improve the housing conditions of the poor and better achieve the goal of new urbanization, the Chinese government launched top-down shantytown redevelopment nationwide in 2008. Little is known about the economic effectiveness of shantytown redevelopment. Based on city-level data from 2014–2018, this study examined the impact of shantytown redevelopment on housing prices by using the fixed effects regression analysis and instrumental variables (IV) methods. The results show that shantytown redevelopment significantly increases the housing prices at the city level, and each 10% increase in the size of redeveloped shantytowns is associated with an average increase of 1.4% in housing prices. There is regional heterogeneity, with shantytown redevelopment in the central and western regions having a greater effect on housing prices. The rising home prices imposed by shantytown redevelopment negatively decrease housing affordability for those households not included in the redevelopment projects; thus, a more inclusive urban redevelopment policy should be considered.