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Effect of increasing the rental housing supply on house prices: Evidence from China’s large and medium-sized cities

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  • Li, Yaoyao
  • Qi, Yuan
  • Liu, Licheng
  • Hou, Yuchen
  • Fu, Shuya
  • Yao, Jingtao
  • Zhu, Daolin

Abstract

Balancing the housing supply structure is important for the healthy development of the real estate market. China has invested considerable effort in improving the rental housing market in recent years. To explore the asymmetric effects of the rental housing supply scale on house prices, we constructed an analysis framework for the rental and sales markets based on substitution between owning and renting. Then, we reviewed the development of China’s rental housing market and used a threshold regression model to empirically study 29 large and medium-sized cities during the period 2008–2019. The results indicated that there was weak substitution between owning and renting a dwelling in China’s housing market. On the premise that weak substitutability cannot be changed, measures for increasing the supply of rental housing could not attract consumers to the rental housing market and thus could not curb increases in house prices. The substitution of rental housing and self-owned housing was vital for explaining the linkage between rental housing supply and housing price. Under the low substitutability regime, increasing the supply scale of rental housing caused house prices to rise significantly. Instead, in some cities with the high substitutability, increasing the supply of rental housing could lower house prices. And our findings implied that decision-makers should pay attention to irregularities in the rental market and stimulate the endogenous motivation of both supply and demand instead of relying on exogenous means.

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  • Li, Yaoyao & Qi, Yuan & Liu, Licheng & Hou, Yuchen & Fu, Shuya & Yao, Jingtao & Zhu, Daolin, 2022. "Effect of increasing the rental housing supply on house prices: Evidence from China’s large and medium-sized cities," Land Use Policy, Elsevier, vol. 123(C).
  • Handle: RePEc:eee:lauspo:v:123:y:2022:i:c:s0264837722004471
    DOI: 10.1016/j.landusepol.2022.106420
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