**2. Theory and Hypothesis**

Since the 1980s, the relation between China's market transition and social stratification has been a main focus in academic research, and scholars have performed productive research in this respect. Although judgments vary regarding social inequality in early socialist China, many scholars have emphasized that the redistribution of collective goods is likely to form greater inequality than once thought against the background of "egalitarianism" in a redistribution structure bonded by a unit system [7–10]. Correspondingly, such a habit of redistribution of collective goods is likely to continue even after market transition due to institutional inertia or path dependence [11,12].

Housing is a clear example of this. In the early days of the reform, many urban residents could purchase houses at a price lower than the market price through their work unit ties or social relations [10,13,14]. In recent years, many empirical studies have indicated a gradual widening of housing inequality in urban residents from every stratum of society [15,16]. From the perspective of market transition theory [17,18], housing inequality among different strata is inevitable and will decline because the market transition will form a new means of resource allocation under a redistribution system. In this emerging market, the influence of old political capital declines, and market mechanisms focused more on individual capabilities and fair competition assume greater importance. Because of the Matthew Effect from competition, housing inequality will widen in the short-term. In the process, the return on human capital, such as education, will increase, and the return on political capital, such as party membership and cadre position, will decrease. Compared with old powerful elites, current market elites have gained new access to real-estate profits. Market transition will eventually create a fairer and more equal housing supply mechanism. With the further deepening of the market transition, ever more people with substantial human capital are able to profit from it, and inequality will eventually decline due to the more thorough social security system established by the government [19].

Another theory is the Power Continuance Theory or the Power Transition Theory [20], which underscores that the state's power creates an innate advantage and a stronger ability to expand in the process of market transition. Additionally, compared with other governments, local governments in China tend to participate in economic construction more actively under the pressure of political achievement in terms of economic development [21]. These factors justify the further expansion of bureaucracy in the market, and government functions also become stronger. Under such circumstances, factors such as political capital may assume greater importance in the process of market transition. Empirical studies have also demonstrated the positive effect of the work unit system and public power on property area and purchasing opportunity [22]. Additionally, income studies have shown that China ranks relatively low among developing countries regarding the monetary return on one

extra year of schooling. Additionally, the income advantage of Chinese Communist Party membership is remarkable [23]. Chinese Communist Party membership is often regarded as a kind of political capital [24], similar to a kind of social capital (relationship), which can obtain many resources (information, influence, or operation power) and opportunities [25]. In other words, party members have the opportunity to contact people who are highly beneficial to their future careers [26]. The aforementioned statistics support the argument of power continuance.

The major difference between market transition theory and power continuance theory is that the resources brought by market reform are acquired by new market elites or old powerful elites. The common assumption of the two theories is as follows: China's marketization reform cannot be achieved instantly; by contrast, it continues gradually. The marketization level of China seems to increase continuously and is now in its preliminary stage. Marketization is bound to offer a dynamic aspect to economic development. The advantage of such an assumption is that the stimulating effect of the market on economic development has been clearly expounded in economics [27]. Needless to say, the market improves the efficiency of the economy in a broader sense. Although market transition advances step by step, means of production, such as commodity, workforce, and property, slowly form their respective markets simultaneously. However, these markets almost complete the commodification process overnight, which is characterized by "punctuated" institutional changes (Punctuated-Equilibrium Theory, for reference). The time factor has tended to be ignored in the literature. Based on CHIP long-term statistics, Li concluded that the pronounced wealth inequality of Chinese residents began between 1995 and 2002 [28].

Additionally, based on mean regression studies [29,30], one problem that can easily be ignored in many cases is that unequal models vary among different groups of people. The progressive reform functioning as "China's experience" is the fundamental logic of Chinese urban residence institutional reform and avoids overall turbulence in the reform process. Notably, something else ensues; because the basic attribute of urban residence and the concept of equality of urban residents have been changed, the difference in housing benefits acquired by individuals from every stratum of society has accumulated and strengthened, and this allows the market capability of residents to play a bigger role in social stratification [31]. Due to the ongoing process of marketization and social stratification, housing will continue to strengthen the benefits of individuals who already own a house. Additionally, people in a relatively low-income class will find profiting from the property market more difficult. Another technical problem is that plenty of papers on housing inequality have been published based on survey data from around 2005 [32,33]. Additionally, the independent variable has tended to be living space; thus, property value has not been fully studied. As such, there is a gap in the literature that is worthwhile filling.

To sum up, some classic hypotheses and propositions in previous theories can be borrowed to illustrate housing inequality:

**Hypothesis 1a.** *The higher the educational level, the higher the housing value*.

**Hypothesis 1b.** *The higher the income, the higher the housing value*.

**Hypothesis 2a.** *The cadre position has a greater advantage than other occupations in terms of housing value.*

**Hypothesis 2b.** *People with party membership have a greater advantage than non-party people in terms of housing allocation and acquirement*.

**Hypothesis 3a.** *It is easier for non-market organizations, such as state-owned enterprises and the party and government organs, to acquire high-value housing than market units in a manner similar to private enterprises and self-employed individuals*.

**Hypothesis 3b.** *Non-market organizations, such as state-owned enterprises and the party and government organs, profit more from the property market than market units, such as private enterprises and self-employed individuals*.

This paper proposes the following research hypotheses:

**Hypothesis 4a.** *Time factor. Against the backdrop of progressive reform, individuals who enter the property market late receive relatively high returns due to fully developed marketization*.

**Hypothesis 4b.** *Time factor. Against the backdrop of progressive reform, individuals who enter the real-estate market late receive relatively low returns due to a limited holding period for housing*.

Above all, a close and hierarchical analysis is conducted for people receiving different levels of housing profits.
