Industrial Land Expansion as an Unintended Consequence of Housing Market Regulation: Evidence from China

Sixuan Li (), Hangtian Xu and Wenzhuo Zheng
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Sixuan Li: School of Economics and Trade, Hunan University, #109 Shijiachong, Yuelu District, Changsha 410006, China
Hangtian Xu: School of Economics and Trade, Hunan University, #109 Shijiachong, Yuelu District, Changsha 410006, China
Wenzhuo Zheng: School of Economics and Trade, Hunan University, #109 Shijiachong, Yuelu District, Changsha 410006, China

Land, 2025, vol. 14, issue 11, 1-22

Abstract: China’s rapid urbanization, characterized by extensive land allocations, operates within a framework of binding quotas imposed by upper-level governments, while local governments exercise broad discretion over the zoning of newly transacted land parcels. In this context, investigating the evolving patterns of land supply structure during this period is therefore of critical importance. The central government’s 2018 articulation of the “Houses are for living in, not for speculation” ( fangzhubuchao ) sought to mitigate housing market speculation and curb potential asset bubbles, including through changes to residential land supply. Using a panel of 266 prefecture-level cities across China, this study employs a generalized difference-in-difference model to examine how housing market regulations affect the industrial sector through adjustments in land supply. To capture cross-city variations in local policy interventions, we construct a measure based on the land price wedge between residential (and commercial) and industrial land derived from a hedonic pricing model, which reflects underlying housing market conditions. The results indicate that a reduction in residential land supply caused by these policies results in a corresponding increase in industrial land supply, while the total land supply remains unchanged. These effects are more pronounced in cities with stringent policy regulations and relaxed urban land quotas. The short-term economic outcomes are inadequate. As of 2023, our analysis reveals no substantial increase in either the number of industrial enterprises or the industrial value added, notwithstanding the augmented industrial land supply. Consequently, these findings identify a secondary determinant of industrial location patterns and provide a scientific basis for designing efficient land-use regulations and sustainable urban development strategies.

Keywords: housing market; regulation; land supply; industrial land (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2025
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