The impact of commercial land housing on residential land housing in China: a perspective of housing submarkets

While existing literature has explored the relationship between various housing submarkets from the supply and demand sides, few have examined the impact of commercial land (CL) housing on residential land (RL) housing. CL housing, a novel form of informal housing in China, violates land management regulations by converting commercial buildings for residential use, whereas RL housing constitutes the formal market. This study develops a theoretical framework and introduces the CL housing regulation to analyze the relationship between these two housing submarkets. Using a difference-in-differences approach and second-hand micro-housing transaction data from Beijing (2011–2020), we find that CL housing exerts a greater crowding-out effect on RL housing than a complementary effect. Following the implementation of the CL housing regulation, CL housing supply declined, prompting an increase in RL housing supply and a shift in some demand back to the RL housing submarket, resulting in lower RL housing prices. In addition, a regression discontinuity design reveals that the regulation curtailed investment demand while consumer demand persisted. To enhance the efficient use of CL housing, we propose policy recommendations for its repurposing. Our findings provide new evidence from China’s housing submarkets and offer a conceptual framework for other countries considering housing submarket dynamics in building use conversions.