Affordable housing supply and dual-use innovation: evidence from China

Against the U.S. dual-use export control shock, this paper examines how China’s targeted affordable housing supply to sanctioned firms affects dual-use innovation, within its land-driven development context. Theoretically, we embed military revenue objectives into a welfare economics framework and build an optimal housing allocation model featuring external sanctions, endogenous innovation, livelihood welfare, and fiscal costs, uncovering equilibrium trade-offs across military competition gains, household utility, and fiscal burdens. Empirically, we manually construct U.S. sanction lists, identify dual-use patents via China’s export control catalog and large language models, and estimate the impact of nearby affordable housing land. Results show targeted housing significantly boosts dual-use innovation, robust to endogeneity and validity checks. Mechanisms include attracting firm-specific human capital, retaining patient capital, and enabling tacit knowledge spillovers through residential social networks, easing confidentiality communication tensions in civil-military integration. Effects are stronger under heavier sanctions but weaker under tighter fiscal and livelihood constraints. This study offers insights for coordinating housing security, national security, and key technological self-reliance under external pressure.