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Housing affordability, subsidized lending and cross-city variation in the performance of China’s housing provident fund program

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  • Lan Deng
  • Xiang Yan
  • Jie Chen

Abstract

This study examines the cross-city variation in the performance of China’s Housing Provident Fund (HPF) program, a collective saving scheme that provides subsidized lending to support participants’ home purchases. It finds that while the program as a whole is limited in both participation and benefit provision, the level of HPF activities has differed across localities. Panel-data analysis of HPF lending in seven cities reveals that local housing affordability was an important determinant of who benefited from the program. Rising housing price increased the demand for HPF loans. But if price rose too high relative to household income, the share of participants who used HPF loans declined. This shows that as the program currently operates, expanding HPF participation would only increase the inequality in the distribution of program benefits. Finally, we did not find evidence for the counter-cyclic effects that HPF lending was expected to have in relation to bank lending. These findings have important implications for the program’s future reform.

Suggested Citation

  • Lan Deng & Xiang Yan & Jie Chen, 2021. "Housing affordability, subsidized lending and cross-city variation in the performance of China’s housing provident fund program," Housing Studies, Taylor & Francis Journals, vol. 36(4), pages 455-478, June.
    • Handle: RePEc:taf:chosxx:v:36:y:2021:i:4:p:455-478
    DOI: 10.1080/02673037.2019.1585521
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    Cited by:

    1. Chen, Jie & Wu, Fulong & Lu, Tingting, 2022. "The financialization of rental housing in China: A case study of the asset-light financing model of long-term apartment rental," Land Use Policy, Elsevier, vol. 112(C).
    2. Chen, Mengkai & Liu, Tong & Wang, Xianzhu, 2024. "The effect of the housing provident fund on housing affordability in Urban China: A quantitative analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 1-11.

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