Housing market with informal density agglomeration: Investigating the form-context transition of urban village in China

The prevailing discourse in urban planning often relegates the concept of ‘urban informality’ to its margins, typically viewing it as an aberration or market failure needing correction rather than a developmental phase warranting integration. While studies and policies of urban redevelopment have shifted from large-scale, clean-sweep practices to less radical, sustainable regeneration approaches, the local variations and fiscal complexity of these informal settlements render it onerous to find an adaptive spatial governance mode. Focussing on urban villages in Shenzhen, China, this study integrates the concept of the ‘form-context ensemble’ with spatial equilibrium models, thus proposing a revised framework that better accommodates the irregularities (hyper-density but below-market prices) introduced by urban informality with empirical evidence. Our empirical analysis shows that dense settlements under the expected value curve (EVC) can help mitigate housing cost disparities between income groups, while redevelopment will bring the externality to shift the EVC to a higher level, thus enlarging the discrepancy. We propose a three-way trade-off matrix between value, access and amenity for assessing the utility of urban villages, providing a comprehensive framework for balancing various factors in housing policy design and delivery. Our findings suggest that preserving some imformal settlements may enahnce general welfare and economic equity, even as cities pursue selective formalization. This paves the way for adopting a classification scheme and concerted measures for making targeted regeneration policies from municipal management or planning perspectives.