The evaluation of the housing provident fund program in China.  The Housing Provident Fund program is the largest public housing program in China. It was created in 1999 to enhance home ownership 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 home-ownership 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.

The governments around the world take measures to support homeownership. These actions are driven by the belief that housing, for most households, is both an important investment asset and a necessary consumption good, and that homeownership promotes social and economic stability. The U.S. government, for example, has fostered homeownership by encouraging subprime lending and expanding secondary mortgage markets (see, e.g., Main and Sufi (2009) and Gabriel and Rosenthal (2010)). Arguably as a result, the U.S. homeownership rate reached 70% in 2004, compared to 60% in 1960 and 40% in 1940. Since the mortgage crisis of 2008, however, this rate has dropped back to 65%. Many Asian governments, in contrast, have adopted more centralized, mandatory savings plans that aim to fund households’ housing needs. The Housing Provident Fund (HPF) in China is one such example. Table 1 provides examples of similar programs in other countries.