2. Rural Housing in China

Housing is the most expensive item in one's lifetime and is a crucial determinant of the subjective well-being for most people. People need housing in terms of three housing values, namely residential value, investment value, and status value. The housing consumption outcomes such as housing size and housing tenure are considered as a balance between housing market supply and household housing demand [20]. Many theories were raised to explain the household housing outcomes worldwide from both the macro level and micro level. Theories at the micro level include the neoclassic consumption theory, life cycle theory, housing filtering theory, gradient consumption theory, and so on [21]. In general, household needs, household financial capacity, and external market environment would influence the household housing outcomes. Factors such as socio-economic condition, social network, housing market condition, and housing policies are usually considered when analyzing household housing outcomes.

In the Western world, the housing market is the main mechanism of both urban and rural housing resource allocation. Most housing research is located in an urban context, but rural housing research is gaining in popularity. In the post-World War II period, rural areas were initially treated as economically dependent on urban areas [22]. Since the 1990s, the local action and endogenous development of rural areas were given more attention [23]. Rural areas’ uniqueness of less density, natural environment, and policy context make rural housing quite different from urban housing and worthy of further research. Despite various types of rural areas worldwide, there are some common research topics in rural housing studies including gentrification, landscape preservation, and so on. For example, some rural counties in the United States have gone through the exurbanization process and attracted retirees and second-home owners [24]. In England, rural “locals” often become displaced by counter-urbanization processes, leading to acute affordability issues in rural England [25].

In the context of China, the socio-economic conditions in rural areas are quite different from Western countries. In particular, the housing market has not been established in rural China. Unlike the deregulated housing trade and rent in urban areas and urban villages, the housing trade is still under strict regulation in rural areas. Rural villagers commonly live in self-constructed houses [3]. In this way, rural housing in China is segregated from the urban housing market, and provides residential and status function without an investment function. In rural housing research, both residential land area and housing size can be used to measure the housing outcomes, but housing size was less used for data availability. Therefore, instead of focusing on research of rural housing size, the following paragraph gives a general context on the evolution of rural housing in China.

Rural housing has an extensive history in China [2]. According to growth rate and government policy, the development of rural housing can be classified into three stages. The first stage is the slow growth stage from 1949 to 1978. After the founding of the People’s Republic of China in 1949, the Rural Collective Land Property was gradually formed, namely collective ownership and individual using rights, and rural housing was considered individual property that was protected by the constitution [26,27]. During that period, the growth in rural housing was slow due to low income from collective farming jobs and the Chinese traditional norm of generations sharing houses (so-called “si shi tong tang”). If villagers lived in a capacious house, it would have been considered as a form of capitalism.

The second stage, from 1978 to 1995, was the period of “both rural housing and the rural population increase”. Since the opening-up policy in 1978, China has experienced a rapid transition from a central planning economy to a market-based economy, and the rural “Household Responsibility System” greatly stimulated rural economic growth. Many farmers became wealthier, and they began to prefer multi-functional, more comfortable, or spacious houses, making the rural household model of “si shi tong tang”decline in popularity [2]. Therefore, rural housing demands grew rapidly with the reconfiguration of rural households’economic activities and social aspirations, triggering waves of rural housing construction. From 1978 to 1995, the rural resident population increased from 790 million to 859 million. The average construction area (referred as “average area” in the following) per person also increased from 8.1 m² to 21.0 m², indicating that rural housing areas were increasing faster than rural populations [28]. However, the enthusiasm for rural housing led to problems such as cultivated land shrinkage, rural hollowing, and land resource waste [2,12,29]. Under these circumstances, China's central government established the national specialized bureau of land management (“guojia tudi guanliju”), set restrictions for the application of rural housing land, and created punitive policies against illegal behavior in order to conserve arable land from the excessive occupation of housing construction [6]. For example, the procedure for applying for rural residential land was required by the State Council in 1982, and residential land was limited to one lot per household [3,30]. However, these measures were not so effective because of the difficulties related to supervising rural land.

The third stage was from 1996 to the present, the transitional period of “rural population decrease but rural housing land increase”. With the new round of market-oriented economic reforms and the flexible hukou system, the rural resident population decreased from 704 in 1996 to 671 million in 2008 [31,32]. Under the condition of large-scale outmigration, a substantial amount of income earned in urban areas was reinvested in rural housing construction. As a result, rural housing land continued to expand despite the shrinking rural population. From 2000 to 2008, rural housing land expanded from 16.53 million ha to 16.66 million ha at an annual growth rate of 0.1%, while per capita rural housing land (PRHL) increased from 204.5 m² to 231.0 m² at an annual growth rate of 1.6% [4,33,34]. As such, the governments became more aware of farmland protection, so more exact policies and techniques were introduced to supervise rural land. For example, it was made explicit by law that rural households were prohibited from applying for more than one housing lot [35,36], while hollowed villages and idle land were investigated and cleaned up gradually by the Ministry of Land and Resources thanks to the “Opinions about strengthening of rural homestead management” [6]. As a result, rural housing land expansion slowed down a little, whereas the enthusiasm for rural housing did not decrease. From 1996 to 2007, average housing area per capita increased from 21.7 m² to 31.6 m² at an annual rate of 3.47%. From 2008 to 2019, average housing area per capita increased from 32.4 m² to 48.9 m² at an annual rate of 3.81%, which was even faster compared to 1996 to 2007 [37]. Meanwhile, multiple floors replaced farmland occupation, gradually gaining popularity among villagers as a way to build large houses. In 2011, the central government initiated a policy to restrict floor numbers and the height of each floor [7], but only recently, local provinces such as Guizhou, Sichuan, and Fujian have begun restricting rural housing to three floors.

The expansion of rural settlements has not been sufficiently curbed by the decreasing rural population, and government regulations are ineffective in controlling housing construction in rural areas, which has aroused great research interest [2,8]. Research on rural housing development is embedded in a wide context and various factors. The first explanation, which is widely accepted, is the increase in socio-economic developmental level caused by rural-to-urban migration. The rapid increase in migration affected the rural economy in the late 1990s [10,11,38,39]. Migrants went to eastern seaboard coastal regions for economic opportunities and sent their remittance back home, making housing improvements economically feasible. Second, some researchers hold the opinion that migrants build housing to ensure their membership due to their future plans for returning. In cities, migrant workers are not granted permanent household registration, are excluded from many social welfare entitlements, and are still subjected to socioeconomic, institutional, and cultural discrimination, making returning home in the future more appealing [40]. Third, villagers close to major urban areas and towns with high land values tend to build large houses for potential rental profits [3,41]. Fourth, villagers build large houses as conspicuous assets and symbols of success [8,12]. As with other institutions in rural areas that lack wellfunctioning markets, migration can play a complex role in asset accumulation. Following this conformity to building more housing assets [42], villagers can achieve identity and social status within a village and become competitive in terms of marriage options and credit market [43–45].

3. Peer Effects and Housing