The Reform of Housing Policies in Urban China and Household Consumption

Since 1998, housing policies in urban China have gone through a series of reforms that transformed housing allocation from a centralized welfare housing system to a market-oriented housing system. Through the process welfare dwelling residents are eligible to purchase their existing dwelling at a subsidized price. This access to welfare housing drives a wedge in the cost of acquiring property and subsequently can imply a substantial difference of net housing wealth and housing debts. This paper investigates the impact of access to welfare housing on household consumption by using a large household-level survey data from 2010 to 2018. Our results indicate that households owned welfare housing in the past had a higher level of consumption than households without access to welfare housing, and the benchmark estimate shows owning welfare housing can increase consumption by 11.5 per cent. Our results also suggest that this positive impact on consumption decays over time, and is particularly significant for low-consumption households and for those residing in first-tier cities.