While the U.S. is facing a housing shortage and affordability crisis that has Gen Zers questioning whether they’ll ever be able to achieve the idealized, white-picket fence American Dream, China is in the middle of a very different kind of housing nightmare. Years of debt-fueled overbuilding have left the country with rows and rows of empty homes—as well as almost entirely vacant “ghost cities.” And now a former government official says the number of empty residences is so big that a country of 1.4 billion people is struggling to fill them.

“How many vacant homes are there now?” He Keng, the former deputy head of China’s statistics bureau, said at an event in the southern industrial city of Dongguan over the weekend, Reuters first reported. “Each expert gives a very different number, with the most extreme believing the current number of vacant homes are enough for 3 billion people.”

“That estimate might be a bit much, but 1.4 billion people probably can’t fill them,” he added, referencing the current estimate for China’s entire population.

While estimates for the number of vacant homes and apartments in China vary widely, experts believe a range between 65 million to 80 million units is reasonable. Keng seems to be indicating that’s just not the full iceberg.

It ‘isn’t just a cyclical correction’

China’s real estate market has helped boost the nation’s GDP for decades, becoming the most important sector of its economy. In fact, according to a Bank of America Research team led by China and Asia Economist Miao Ouyang, China’s outstanding mortgages alone amount to 31% of its GDP, and 59% of the nation’s household assets are held in real estate.

In recent years, though, China’s post-pandemic economic experience has differed from that of the U.S. and Europe, as it’s grappled with deflation, rising youth unemployment, and a lack of demand, even as inflation has surged amid Western economies that have been running too hot. The nation’s once red-hot housing market has begun to crack as a result, leaving its mega-developers in particularly dire straits. The first pillar to fall was the real estate giant Evergrande, which defaulted on its debts in 2021 amid mounting losses. In 2021 and 2022 alone, Evergrande racked up $81 billion in losses, more than the GDP of Panama.

The pain in China’s housing market has only continued this year amid plummeting property sales, leaving Evergrande’s peers in limbo. Country Garden, the nation’s largest property developer, only narrowly avoided defaulting on its debts this summer after posting a $6.72 billion net loss in the first half of the year. And Chinese property developer stocks as a whole have collapsed in 2023, losing $56 billion of value.

Developers’ issues are an example of a structural change underway in China’s housing market that could prevent the sector from being the growth driver it has been historically.

Miao Ouyang’s Bank of America team explained in a Thursday note to clients that years of overbuilding and China’s aging population have combined to saturate the housing market with inventory, while slowing demand.

“China’s housing market downturn isn’t just a cyclical correction but also reflects a long-term decline in intrinsic housing demand,” they wrote, noting that 96% of urban households in China already own at least one house or apartment, according to a 2019 People’s Bank of China survey.

For Ouyang, and many of her economist peers, China’s property market issues raise serious questions about the nation’s ability to continue growing at the pace it has over the past decade.

“The key question now remains what can replace the property sector as a growth engine for the Chinese economy over the medium term, if not right away,” she wrote.