What is Preventing Privately Owned Homes from Entering the Rental Market? Evidence from Large and Medium-Sized Cities in China

In many Chinese cities, the underuse of existing housing resources coexists with a shortage of private rental housing. The factors that shape whether privately owned homes enter the rental market remain unclear. This paper aims to explore the key factors influencing the supply of private rental housing. Based on Fogg’s behavioural model, we propose a private rental housing supply model that empirically assesses the macroeconomic factors that influence the supply of rental housing in large and medium-sized cities in China. The results show that rents, interest rates, housing affordability for residents, available units for sale, rental policies, and the size of the floating population are important explanatory factors for rental-listing activity. In addition, we observe an inverted “U” shaped relationship between housing price expectations and private rental housing listings. This paper explains the mechanism by which expectations affect rental supply responses from the perspective of user costs.