Socio-Economic Differentials and Stated Housing Preferences in Guangzhou, China
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ARTICLE IN PRESS Habitat International 30 (2006) 305–326 www.elsevier.com/locate/habitatint Socio-economic differentials and stated housing preferences in Guangzhou, China Donggen Wang, Si-ming Li Department of Geography, Hong Kong Baptist University, Kowloon Tong, Hong Kong, China Abstract Households in Chinese cities today have to increasingly rely on the market to satisfy their housing needs. The growing freedom in choosing one’s own residence implies increased variations in all aspects of housing consumption. Examination of individuals’ housing preferences is crucial in understanding these variations. This paper studies the housing preference of Guangzhou people through choice experiments framed in state-of-the-art experimental design methods. Joint logit models comprising both neighbourhood and dwelling attributes are estimated for all subjects and for various sub-samples classified by family income, age, education, nature of employment organization, district of current residence, etc. The models are then used to compute utilities for different attribute levels, the impacts of these attributes on choice probabilities, and the relative prices that the subjects are willing to pay for buying a home in different districts, with different accessibilities, of different types, etc. Neighbourhood and location-related attributes are found to be more important than dwelling-related attributes in home purchase decisions. Further, factors such as family income, age, education, nature of employment organization, etc. are found, to various degrees, have affected housing preference. Based on the preference structures revealed, we envision a new urban morphology to take shape in Chinese cities which is not too dissimilar from the ones in cities in the West, with the inner core dominated by the aged and the urban poor and the outskirts occupied by younger people and the rich and well-educated class. r 2004 Elsevier Ltd. All rights reserved. Keywords: Housing studies; Stated preference approach; Housing market; China E-mail addresses: [email protected] (D. Wang), [email protected] (S.-m. Li). 0197-3975/$ - see front matter r 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.habitatint.2004.02.009 ARTICLE IN PRESS 306 D. Wang, S.-m. Li / Habitat International 30 (2006) 305–326 Introduction Two and half decades have passed since China first launched its housing reform. For many years under China’s planned economy, construction and provision of urban housing rested mainly upon the state work units or simply work units or danwei1and were subsumed under capital construction investment allocated to the work units under the annual budgetary exercise (Wu, 1996). Efforts were made during the early reform periods to disengage the work units from being directly involved in housing construction. Development companies were established to build ‘‘commodity housing’’ for sale, presumably according to market principles. Initially, though, the great majority of such commodity housing was sold to the work units for subsequent allocation to their workers (Li, 2000). Individual households purchasing homes directly in the market were rare. Also there were restrictions as to who could buy this ‘‘commodity housing’’. In general, foreigners (including Hong Kong and Taiwan ‘‘compatriots’’) were precluded from doing so. In cities with sizeable numbers of expatriates such as Beijing, Shanghai and Guangzhou, commodity housing for foreigners or waixiao shangpifang, which was usually of higher quality, was also built to accommodate the needs of and perhaps also to better monitor the foreign population. Urban development tied to specific capital construction investment projects tended to be associated with a high degree of haphazardness and uncertainty, especially when funding was subject to the outcome of the annual budgetary exercise. A major objective of the supply side reform was to bring in more orderly urban growth. Under the reform, the municipal government rather than the work units became the most important player orchestrating urban development. Often the municipal government would allocate a large tract of land to a development company, usually at a price. The development company would then undertake housing and other real estate development projects. It would also be responsible for roads, sewage, landscaping and other infrastructure provision. By the early 1990s the bulk of new housing in urban China was commodity housing built by the development companies. Invariably the new housing estates were located outside the former work unit compounds, resulting not only in increased commuting but also in new dimensions of differentiation of the urban residential space. Comparatively speaking, demand-side reforms were carried out with much greater caution. In China the term ‘‘public housing’’ refers to the housing provided by the state work units and also the municipal housing bureau. Until mid-1990s the reform was restricted to gradually raising public housing rents and selectively selling public housing to workers of state work units at discounted prices (Li, 2000). Housing allocation remained largely the prerogative of the work units. In fact it has been revealed that state work units had played an even greater role in housing provision under the reform, despite all the rhetoric of marketization and commodification (Wu, 1996; Li, 2003). In recent years, though, the pace of reform has quickened considerably. The pronouncement of cessation of welfare allocation of housing by the former premier, Zhu Rongji, in 1998 perhaps marked a watershed in China’s urban housing reform history. Since then, there have been massive disposals of the stock of public housing. In Shanghai and a few other cities full property rights have been given to owners of ‘‘reform housing’’, i.e., former public housing that 1This include state-owned enterprises as well as government departments and party and quasi-government organizations. ARTICLE IN PRESS D. Wang, S.-m. Li / Habitat International 30 (2006) 305–326 307 had been sold to workers of state work units and others at highly subsidized prices. The domestic housing market and the market for foreigners have also been merged. A major obstacle hindering home purchase by individual households in the market was the problem of affordability. Under the traditional work unit system, in-kind payment including virtually free housing constituted a major part of the reward the work unit paid to its workers. Monetary income was of relatively minor importance. This resulted in exceedingly high price-to- income ratios for commodity housing. In Beijing, for example, in 1992 the average price of commodity housing stood at RMB21613 per m2. A 60 m2 apartment would cost RMB96780. The average household income, on the other hand, stood at RMB 8300. The price-to-income ratio was therefore 11.65 (see Lau, 2003, for details of these and the computation on price-to-income ratios reported below). That is, the average household had to save all its income for more than 11 years in order to purchase a flat in the open market! Obviously, commodity housing was beyond the means of most except the very rich. Five years later, in 1997, the average household income increased markedly to RMB24056. Yet the average price for a 60 m2 apartment rose by an even larger margin, to RMB320000. The price-to-income ratio increased further to 13.31. In more recent years, there has been an apparent revamp of the remuneration system. There have been further and quite drastic increases in wage, and many work units now grant cash subsidies to their workers for home purchase in the open market. Also, home price appears to have stabilized. In fact, the average price for a 60 m2 apartment in Beijing dropped slightly to RMB283000 in 2001 while the average household income continued to increase to RMB34980. Hence, the price-to- income ratio declined to 8.09. Commodity housing is now more affordable. The rate of urban homeownership has showed corresponding sharp increases. For the first time in the history of the People’s Republic of China, a large portion of urban households can now exercise choice in housing consumption. The market finally begins to reign. The increasing role played by the market and the growing freedom in choosing one’s own residence imply increased variations in all aspects of housing consumption in China: where the residence is located; what kind of neighbourhood and location attributes the dwelling is associated with; in what tenure mode housing is consumed and how much; etc. Probably because of this, recently more attention has been given to the individuals and individual households in China housing research. One major area of concern is housing tenure. Li (2000a), employing data derived from a sample survey in Guangzhou, studies how different types of households are channelled to different types of housing under a semi-marketized regime. Huang and Clark (2002) and Ho and Kwong (2002) study tenure composition. They conclude that both market mechanisms and institutional forces are of importance in structuring the mode of housing tenure. A related area of research is residential mobility. Li and Siu (2001a, b) examine mobility behaviours in Beijing and Guangzhou and reveal the continual dominance of danwei in determining residential location, especially the movement to the suburbs. Li (2003) further reveals that while the direction of movement is related to current housing tenure, it is unrelated to previous tenure. Based on retrospective residential histories, Li (forthcoming) finds that in Beijing the rate of residential mobility has exhibited a fluctuating but slightly downward trend since 1985, despite the marketization drive. 2RMB stands for Renminbi, the Chinese currency. At current rate of exchange, RMB 1=US $0.12 approximately. ARTICLE IN PRESS 308 D. Wang, S.-m. Li / Habitat International 30 (2006) 305–326 The above-cited works often purport to study tenure and housing choice, with the view of unravelling residential preference of individuals and households. Both Ho and Kwong (2002) and Huang and Clark (2002) claim to have estimated a choice model of the McFadden (1973) variety (see also Quigley, 1976; Friedman, 1981).