One housing program for people in small-town slums was actually responsible for 20% of the entire country's rent inflation.
March 25, 2026
Original Paper
Household Migration and Collateral Constraint: Cash-based Housing Resettlement in China
SSRN · 6371019
The Takeaway
By giving cash to people in shantytowns (the 'cash-based housing resettlement') rather than building them new local units, the Chinese government inadvertently enabled mass migration to more expensive cities. This 'location upgrading' funneled so much money into major real estate markets that it drove a massive national price boom between 2016 and 2020.
From the abstract
Collateral constraints limit household migration to expensive locations by restricting financing for home purchases. Such endogenous location choice amplifies the impact of relaxing household borrowing constraints. Using China's cash-based shantytown renovation program (2015-2018) as a natural experiment, we provide evidence that cash resettlementby converting illiquid shanty houses into cash-facilitated household location upgrading and raised house prices in more expensive locations. A dynamic