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The Price of Crowding: Modeling the Rental Market for Overcrowded Housing in Shanghai

Julia G. Harten and Annette M. Kim
Real Estate is driving China’s economy. But with housing prices climbing for decades now, the size and importance of China’s real estate market is increasingly watched with concern. The rise of “ghost cities” of empty housing developments has received wide-spread attention in the midst of housing shortages; fears of a property bubble are growing loud. The research we present here highlights a different side of China’s urbanization story: the informal and hidden housing markets that have been forming to meet real demand. Making use of new data strategies and directing our attention to an often overlooked demographic, this study uncovers a housing submarket, which shows the great length people are willing to go to take part in China’s urban economies. The country’s planned cities lack visible squatter settlements, but informal markets have still formed in response to the unmet demands of the millions of migrants still coming to the cities. Here, we document the market for bed spaces or (group rentals) in Shanghai. Group rentals are essentially formal commercial and residential units that have been illegally converted to overcrowded dormitories where rent is charged by the bed. To maximize rent extraction, landlords typically pack these units with beds, even placing them in bathrooms, kitchens, and walk-in closets.