Housing finance and inequality: Mortgage debt in urban China

Mortgage credit has played a central role in driving housing market dynamics. The differentiation of the mortgage market is an important embodiment of housing inequality and a dimension of social stratification. Using the Chinese Housing Consumption Survey (CHCS) data, this study aims to understand the temporal dynamics of the mortgage market and factors influencing access to housing finance in urban China, which offers important insights into housing inequality in transitional economies. Since 2013, the use of mortgage loans to achieve homeownership has become the dominant source of housing finance in urban China, with intergenerational transfers remaining crucial in influencing the development of the mortgage market. Considerable variation is found in Housing Provident Fund participation, access to mortgages and the type of mortgage among different demographic and socio-economic groups. Institutional features, such as hukou status, hukou location, party membership and employer type are crucial for securing policy-based subsidies, influencing access to homeownership and therefore generating housing tenure inequality and housing wealth inequality. At the city level, state forces affect the acquisition of Housing Provident Fund loans, whereas market forces prompt reliance on commercial mortgage loans. The scrutiny of the housing finance systems contributes to the understanding of the formation of wealth inequality in transitional economies. • The expansion of mortgage markets has been linked to rising inequality. • Since 2013, mortgage loans have become the dominant source of housing finance in urban China. • Intergenerational transfers enable high down payments and often extend to mortgage repayments. • Households' institutional features and the city's administrative hierarchy shape access to policy-based loans.