The demand for space in China

We review the evolution of housing policy in the People's Republic of China as the government has, between 1949 and the present, shifted the provision of housing services from a market system to a planned system, and back again. Properly designing and assessing housing policies in China or elsewhere requires knowing the price and income elasticities of housing demand. While demand elasticities for housing have been much studied around the globe, relatively few studies have estimated housing elasticities in formerly planned economies. We use the unusually rich data from the 1991 to 2006 Chinese Health and Nutrition Surveys to estimate that in China's renewed market phase the permanent income elasticity of housing services demand in China is .70 and the elasticity of housing services demand with respect to the price of space is −.64. We also estimate that in China the own-price and income elasticities of the demand for habitable space are −.38 and .29, respectively.