Urban villages and housing values in China

The presence of urban villages is a unique product of China's urbanization. In this article, we explore the effects of urban villages on the formal housing market. For this purpose, we develop a hedonic housing price model to investigate whether the proximity to urban villages affects the selling price of urban housing units. Controlling for the structure and other characteristics of urban housing units, we find that housing prices are lower the closer the buildings are from urban villages. We then carry out a survey of households living nearby and explore how they are affected by urban villages. The results indicate that there are both positive and negative effects associated with these villages.

► In this article, we explore the effects of urban villages on the formal housing market in China.
► Propose a theoretical urban model of urban villages.
► We test the model and find that housing prices are lower the closer the buildings are from urban villages.
► Households declare that they are both positive and negative effects associated with these villages.