The performance and problems of affordable housing policy in China: The estimations of benefits, costs and affordability

Abstract

Purpose

The paper's aim is to estimate the benefits and costs of China's affordable housing program, as well as to provide recommendations to this housing policy.

Design/methodology/approach

The Cobb‐Douglas utility function is employed to estimate the net benefits of the affordable housing policy. Both of the sunk costs and current costs are computed, and an improved housing affordability index is used to measure the levels of housing affordability in cities in China.

Findings

The total net benefits of this policy are estimated to range from $234,176.7 million to ¥271,020.4 million. The costs are divided into sunk costs and current costs, computed to be ¥447,598.63 million and ¥328,685.21 million, respectively. The supply size of affordable dwellings is far from adequate due to the low level of housing affordability in China.

Research limitations/implications

The data in this study is insufficient and some information such as the income of occupiers has yet to be estimated. However, if more individual data was available, the conclusion would be confidential.

Practical implications

From this paper the policymakers may understand how to estimate the welfare efficiency of affordable housing policy, adjust the participant regulations and determine the supply of affordable houses.

Originality/value

This paper estimates the benefits and costs of China's affordable housing program as the first study in this area. The Cobb‐Douglas utility function was used in the analysis of China's housing policy.

Citation

Niu, Y. (2008), "The performance and problems of affordable housing policy in China: The estimations of benefits, costs and affordability", International Journal of Housing Markets and Analysis, Vol. 1 No. 2, pp. 125-146. https://doi.org/10.1108/17538270810877763