A Quantitative Evaluation of the Housing Provident Fund Program in China

University of Michigan

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Date Published 2017
Primary Author Xiaoqing Zhou
Other Authors
Theme Funding Housing Finance
Country China


The Housing Provident Fund program is the largest public housing program in China. It was created in 1999 to enhance homeownership and to make housing more affordable. This program involves a mandatory savings scheme that requires participating workers to deposit a fraction of their income into the program. Past deposits are refunded when the worker purchases a house, or retires. The program provides mortgages at subsidized rates to facilitate these home purchases. Given the empirical challenges in evaluating the success of this program, I use a calibrated life-cycle model to quantify the effectiveness of these polices. My analysis shows that a housing program with these features is expected to increase the rate of homeownership by 4 percentage points in steady state. In addition, the average home size increases by 21% relative to the baseline model. These results are largely unaffected by the existence of employer contributions. I discuss the economic mechanisms by which these outcomes are achieved.

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