Without financial support from parents, no owner-occupied homes for Chinese youth
Young people who want to buy a home in China, are dependent from their parents to a large extent, according to Wenjing Deng. According to her PhD thesis, government policies should invest more into the development of a healthy rental market for housing, to make young people less dependent of their parents.
Decades of policy reform in China have resulted in a public housing system in which owner-occupancy has moved to centre stage. Lots of young people in China experience difficulty finding an affordable house; financial support from their parents is essential to them. They are generally expected to reciprocate by fulfilling their moral obligation of caring for their parents in later life. The housing market therefore results in intergenerational transfers. This applies to an even greater extent to parents in rural areas, who have less opportunity to call on public services.
Chinese housing policy reform
Prior to 1978, employees who were loyal to the government had the best opportunities on the housing market. In that period, houses were allocated according to bureaucratic principles, and household income was of no importance. From 1978 onwards, rented houses (72% at the time) were converted into owner-occupied properties on a large scale and new owner-occupied properties were built (75% in 2010). Reforms in fields such as finance and urban planning created a ‘free market’ for purchasing owner-occupied properties. It was only in 2011 that the government began investing in public rental housing once again.
Differences between positions of men and women
Deng’s research reveals that young men more often receive financial support, and a greater level of financial support, from their parents than young women. It is therefore more difficult for women to build up personal capital and achieve financial independence; relatively speaking, women from single-child and urban families are the most likely to succeed in doing so. And while men are traditionally the homeowners in China, there are also women who share ownership with their husband, or who buy an additional house once married, either independently or together with their spouse. Women who move from a rural to an urban area are the worst off: they usually do not have a job and are completely economically dependent on their husband.
Two main systems of social coordination
Deng’s hypothesis is that two ‘main systems of social coordination’ have emerged in present-day China. There is a group who opt for owner-occupied properties, relying heavily on the husband’s parents. This arrangement involves agreements that the young couple will support the parents in the future: a system that draws on the principles of ‘home ownership-based welfare’. A second system involves a tenure-neutral housing policy, a highly developed welfare state, relatively little mutual dependence between parents and children, and equal opportunities for men and women. The first system of social coordination currently prevails. According to Deng, however, there are indications that China could develop towards the second system in the future.
Increase investment in rental market
The reforms in China in recent decades have had a major impact on the public housing system. The quality of housing has risen dramatically and the transition to a market economy has influenced housing opportunities, also those of young people. It is not so much what the young people earn that determines whether they are able to purchase a house, but rather the level of financial support they can count on from their parents. This can demotivate young people and have a negative effect on the Chinese economy. Deng’s recommendation is for the government to invest more heavily in the development of a healthy rental housing market in order to make young people less dependent on their parents and also increase home ownership opportunities for young women.