Working Paper

A Quantitative Evaluation of the Housing Provident Fund Program in China

Abstract: The Housing Provident Fund (HPF) is the largest public housing program in China. It was created in 1999 to enhance homeownership. This program involves a mandatory saving scheme based on labor income. Past deposits are refunded when the worker purchases a house or retires. Moreover, the program provides mortgages at subsidized rates to facilitate these home purchases. I calibrate a heterogeneous-agent life-cycle model to quantify the effects of these policies. My analysis shows that a housing program with these features is expected to raise the rate of homeownership by 8.7 percentage points and to increase the average home size by 20%. I discuss the economic mechanisms by which these outcomes are achieved and which features of the HPF program are most effective. I also consider several extensions of the model such as requiring employers to contribute to the program and allowing renters to withdraw funds from the HPF.

Keywords: Public policy; Housing Provident Fund; Policy evaluation; China; lifecycle models; Homeownership;

JEL Classification: E2; E6; H3; R2; R3;

https://doi.org/10.24149/wp2008

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2020-03-19

Number: 2008