Housing Disparity between Homeowners and Renters: Evidence from China

This paper examines whether there is housing disparity between homeowners and renters. Using data from Chinese Urban Household Survey, we find that homeowners on average have much higher housing quality than renters after controlling for household characteristics, regional factors, location and time fixed effects, and such disparity increases significantly over time. We also find that the disparity is mainly concentrated on the people who are disabled, divorced and the people with low education or rural hukou. Furthermore, we investigate possible factors contributing to this increasing disparity. Our results suggest that the disparity is largely driven by increasingly home improvement for owner-occupied houses but not rental houses. In addition, we also find that the 1994-1998 housing reform has contributed to inequality in homeownership between state employees and other groups, especially the disadvantaged groups such as people with rural hukou who are completely excluded from the reform. With housing prices soaring in the past two decades, people who benefited from the housing reform in the 1990s have enjoyed enormous housing appreciation. However, the disadvantaged people who were excluded from the housing reform now live in the bad housing conditions. Given the evidence that housing quality is key to both mental and physical health, our findings have important policy implications for Chinese government.