(iPoster) Voting for Value: The Impact of Grassroots Democracy on Housing Prices

• In Event: Poster Session: Democracy and Autocracy II & Health Politics and Health Policy
  In Poster Session: Poster Session: Democracy and Autocracy II

Abstract

Democracy has long been a central topic in political science. Beyond its widely recognized intrinsic value, there remains significant debate over whether democracy delivers tangible improvements. One perspective argues that democracy enhances governance quality and improves social welfare by broadening participation, facilitating information flow, and strengthening accountability. An opposing view, however, questions the practical efficacy of democracy, highlighting potential issues such as inefficiencies in decision-making, heightened group conflicts, and even harm to public interests.
This debate is particularly pronounced in the realm of grassroots governance. While many studies emphasize the importance of grassroots democracy in enhancing community governance effectiveness, reliable empirical evidence to substantiate this claim remains scarce. In particular, existing research largely focuses on the political effects of grassroots democracy, such as increased political participation, strengthened civic awareness, and the development of social capital. However, there is a notable lack of systematic empirical studies investigating whether grassroots democracy generates measurable economic benefits and how it influences the actual welfare of residents.
Housing prices serve as a crucial indicator of social welfare, reflecting not only market supply and demand but also residents’ overall evaluation of community quality. Through "voting with their feet," individuals select communities that best align with their preferences, and these choices are ultimately captured in housing prices. Therefore, if grassroots democracy enhances community governance effectiveness, the resulting institutional benefits should be reflected in housing prices as a market-based measure. Against this backdrop, this paper centers on the following research question: Does grassroots democratic practice influence housing prices, and if so, through what mechanisms? Addressing this question not only deepens our understanding of the economic effects of grassroots democratic practices but also provides policymakers with a new perspective for assessing the outcomes of democratic governance.
Housing prices are an important indicator of social welfare, as they directly reflect the demand for housing, which itself is the outcome of residents "voting with their feet." From this perspective, the housing prices in a community not only capture market supply and demand dynamics but also embody residents' evaluations of the area's governance quality and public service provision. Consequently, communities with more effective democratic practices may be better positioned to attract residents, thereby driving up housing prices. Based on this premise, this paper addresses the following research question: Does democratic practice influence housing prices, and if so, through what mechanisms? Exploring this question not only deepens our understanding of the economic effects of grassroots democratic practices but also offers policymakers a novel perspective for evaluating the outcomes of democratic governance.
China's implementation of the Civil Code in 2020 provides a unique opportunity to study this question. The establishment of a homeowners' committee requires approval by homeowners who collectively own at least two-thirds of the total private property area and represent at least two-thirds of the total number of homeowners. This high threshold has led to a situation where some communities narrowly meet the requirements to establish a homeowners' committee, while others fall just short. This natural grouping creates an ideal setting for causal inference. We employ a regression discontinuity design, comparing housing prices in neighborhoods within similar cities and during roughly the same period, where the voting results either barely exceeded the two-thirds threshold or fell just below it.
This study is based on survey data collected from multiple residential neighborhoods in major Chinese cities. The survey gathered information on respondents' experiences with the establishment of homeowners' committees in their neighborhoods and the details of voting processes. It also focused on the governance of neighborhood public affairs, such as homeowners expressing demands, participating in rights protection activities, and voting on decision-making matters.
We find that neighborhoods that successfully established homeowners' committees exhibit significantly higher housing prices compared to those that failed to do so. This result supports the following mechanism: homeowners' committees improve property management quality, optimize the allocation of public resources, and strengthen social capital among community members through democratic governance. These improvements enhance the overall attractiveness of the neighborhoods, thereby driving up housing prices.

Author

• Lorraine Bu, School of Finance, Renmin University of China