The inception of housing pathways in urban China: the declining household formation of young adults from 2011 to 2017

Abstract

ABSTRACT The homeownership rate of young adults has surged to an unprecedented level in urban China, despite rising housing prices and significant rural-urban migration. A trend analysis of nationally representative microdata shows that household formation is the missing link in the paradox and that many young adults aged 18–44 have failed to form independent households from 2011 to 2017, thereby delaying the start of their housing pathways. When factors such as socioeconomic and institutional attributes are controlled for, age differences in household formation decrease as expected. However, the age differences grow surprisingly larger over the study period, reflective of reform-induced changes in resource allocation. Further analysis demonstrates significant heterogeneity in headship status. While local young adults are squeezing into homeownership, migrants are overrepresented in the relatively stunted rental sector. Thus, while migration has brought newcomers to urban China and kept the headship rates from falling even further, institutional barriers have blocked migrants’ housing pathways. Overall, the pace of change is breathtaking. There is a growing divergence in young adults’ housing pathways, which depends on the timing of market entry, institutional attributes, housing prices, and personal income.