Affordable housing policies serve as the core measure for China to address housing hardships among low-income households and constitute a vital component of urban housing system reform. Nevertheless, alongside the continuous advancement of urbanization, housing issues have taken on new complexities, especially in megacities and super-large cities: the affordability of commodity housing markets keeps declining, migrant populations keep pouring in, and the sandwich group—households that can neither afford commodity housing nor qualify for affordable housing programs—has expanded substantially, markedly undermining the effectiveness of affordable housing policies.
The Peking University–Lincoln Institute Center for Urban Development and Land Policy has published its latest research paper Research on Housing Market Operational Efficiency, the Sandwich Group Dilemma and the Optimization of Affordable Housing Policies (by Zhi Liu and Yunhe Li) in Issue 3, 2025 of Real Estate Economics (click "Read More"). Built on empirical analysis, this paper constructs a comprehensive analytical framework for the housing system, links the operational efficiency of the commodity housing market to the performance of affordable housing policies, thoroughly dissects the formation mechanism of the sandwich group, and puts forward systematic solutions for optimizing affordable housing policies.
The paper points out that irrational fluctuations in the housing market (such as skyrocketing housing prices and supply-demand imbalance) and policy lags (including rigid eligibility criteria and ineffective exit mechanisms) are the primary drivers behind the expansion of the sandwich group. Drawing on sample survey data from the National Bureau of Statistics of China in 2015 and 2024 as well as national residential housing transaction data, the study analyzes changes in housing affordability across different income brackets of urban residents. It finds that housing price growth has far outpaced household income growth in recent years, stripping portions of the middle-income group of homebuying capacity and pushing them into the housing-strapped sandwich group. Meanwhile, amid irrational housing market conditions, lagging design and flawed implementation of current affordable housing policies have aggravated this problem. For instance, overly rigid eligibility rules exclude many groups with genuine housing needs, while poorly enforced exit mechanisms lead to misallocation and waste of subsidized housing resources.
Adopting a novel perspective, the paper identifies policy bottlenecks within the housing system and argues that the effectiveness of affordable housing policies cannot rely merely on expanding supply and providing basic safety nets; instead, such policies must coordinate with and complement the operational mechanisms of the commodity housing market. The research concludes that dual optimization—improving market efficiency and implementing targeted policies—holds the key to alleviating housing pressure on the sandwich group. The paper puts forward the following core recommendations:
Guide the housing market back to rationality. Curb irrational housing price hikes through market-based mechanisms, and foster rational market operation by stabilizing housing prices and optimizing land supply.
Establish a categorized and targeted affordable housing system. Formulate differentiated policies tailored to urban characteristics and population attributes, and adopt city-specific plus person-specific policy strategies to meet diverse housing demands of sandwich groups including migrant workers, new urban residents and young talents.
Optimize institutional design and boost policy implementation efficiency. Refine eligibility and exit mechanisms for subsidized housing to lift policy performance, strengthen linkages between affordable housing policies and the broader housing market, and enhance the flexibility and pertinence of policy implementation.
Under the housing system framework featuring "equal emphasis on renting and purchasing, multi-agent supply and multi-channel security", follow-up research will continue to deepen and enrich relevant theories, providing theoretical support and practical suggestions for the equitable, stable and sustainable development of China’s housing market.
