Income inequality and access to housing: Evidence from China

• Income inequality is significantly associated with housing-price-to-income ratio.
• Income inequality negatively affects low-income households' access to housing.
• Rise in income of others hurt poor households in terms of worse housing condition.
• Product differentiation has moderating effects on the impact of income inequality.

Economic theory suggests that income inequality predicts housing price and housing affordability for low-income households. Employing Chinese urban household survey data, this paper examines empirically the relationship between income inequality and access to housing for urban low-income households. The empirical results demonstrate that higher income inequality within cities is significantly related to a higher housing cost burden, a smaller per capita living space, and lower housing quality for low-income households. Further studies demonstrate that the negative impacts of income inequality could be moderated by product differentiation in housing markets, as a higher degree of differentiation in the size of housing units corresponds to a smaller effect of income inequality on housing affordability.