Lan Deng has spent her academic career examining how government interventions work in improving housing affordability. Now, she’s completed the first paper that examines the changes in China’s real estate development industry since 2000 and what that means for local housing production. Deng, a professor of urban and regional planning and the associate director for the Lieberthal-Rogel Center for Chinese Studies, is a leading researcher focused on better understanding how China’s housing system has evolved to create obstacles to affordable housing.
Deng explains that gaining a deeper understanding of how housing is produced and the dynamics of the Chinese housing markets “can help us identify the right strategies to address the country’s housing challenges.” She said that the real estate industry in China has “grown tremendously in the last two decades,” from a small sector dominated by state-owned enterprises to a “trillion-dollar industry” populated by a large number of private firms, with recent evidence pointing to a growing concentration of development activities among the country’s largest real estate development firms. Deng recently finished a paper, co-authored with two Taubman College students and a colleague in China, which examines the factors that have been driving those industry changes and what these changes mean for local housing production.
The paper, currently under peer review, is one of the first to study the organization of China’s real estate development industry. “There has been very little scholarly research on how the real estate development industry works,” she said. “I argue that we need to look into how the industry works because the structure and behavior of the industry have consequences.” When their paper is published, Deng hopes it can open a whole new area of research.
Deng’s research shows how the organization of China’s real estate development industry has been shaped by the country’s public landownership system, which squeezes developers’ profits and prompts them to expand across markets. Since companies are expanding far across the country, the formulation of market monopoly and manipulation of local housing markets aren’t occurring. Yet as real estate development has become less of a local business, Deng is curious about what this means for local communities. She points to an oversupply of housing in less developed regions.
“There has been a phenomenon of ghost towns in China, where projects were built and few people moved in,” she said. “I am worried that it could turn into blight” like what Detroit has experienced, she said. Deng has been researching the factors that led to affordable housing issues in Detroit since 2010. “I feel that my Detroit research helps me see those problems, the issues that China is also likely to encounter in the future.”
There are many shared challenges among countries. Deng thinks it’s important for them to learn from each other. Last summer, she helped organize a panel on shrinking cities — former industrial cities in both the U.S. and China that are losing population. She brought together scholars from the two countries to “have a direct conversation on this global phenomenon and share experiences on what works and what does not in the government responses to it.”
Working with a colleague from Tsinghua University, Deng has recently co-edited a special issue in the journal Housing Policy Debate that looks at the recent shifts in Chinese housing policies. By showing how China has sought to rebalance social equity with economic development in its housing policy-making, Deng and her co-editor hope that this special issue can help elevate the debate on what governments can do to address the challenges of housing affordability and rising social inequality that have become pervasive among cities across the world.
Deng believes that increasing the supply of housing while curbing the speculative demand from an oversupply of capital will be critical to addressing the housing affordability challenge in the U.S. Housing construction in the last decade has not kept pace with demand, she said. Add to that supply chain issues, restrictive land use regulations, and the low interest-rate environment and “it’s a perfect storm. There are so many factors that contribute to this crisis.”
On the horizon, Deng wants to conduct research that directly compares the housing policies and markets of the U.S. versus China. Housing policymaking in the two countries has been heavily influenced by their ideological context, she said. In the U.S., the culture is to reject government intervention. Yet in China, there’s too much state control. “The two countries can learn from each other to figure out a more balanced approach to these housing and urban challenges,” she said.
– Julie Halpert
