China has a well-documented problem with ghost cities. Across the country, third- and fourth-tier cities are built on the peripheries of crowded metropolises like Shanghai and Beijing, with the promise of becoming economic hubs in their own right. Then they fail to attract businesses and residents, leaving a shell of a city that sits empty. That means millions of unsold housing units, rising property debt, and further fears that the inflated housing market has created a bubble that could soon burst.

But unsold properties arenâ€t the only problem. There are also tens of millions of units that have been boughtâ€�often by entrepreneurs and speculators who have no intention of living in them or renting them out. Some are bought as vacation homes or for single male family members, as itâ€s traditional for grooms to gift their brides an apartment. But in many cases, buyers hold on to them as investment property, with the hope of eventually selling them for a profit. Kaiji Chen, an economist at Emory University who studies Chinaâ€s housing market, calls them “ghost apartments.â€�

These vacant units make up more than one-fifth of Chinaâ€s entire urban housing stock, according to the latest nationwide housing survey by researchers at Southwestern University of Finance and Economics in Chengdu. That adds up to more than 65 million homes sitting empty nationwideâ€�and they arenâ€t all in ghost cities. In fact, the survey found the issue to be the most severe in second- and third-tier cities. And if you look at mortgage data, it also includes first-tier cities like Beijing, Shanghai, and Shenzhen, too, says Chen, who wasnâ€t part of the housing survey.

A main driver for this dilemma is that speculators put faith behind the value of the land that their properties sit on, Chen says. “Land in China is in limited supply, and is controlled by the [local] government,â€� he says. And buyers know that “the government doesnâ€t want land to be sold at a cheap price, because thatâ€s revenue for them. So under this expectation, the average household or entrepreneur expects the housing price to increase.â€�

Property speculation has long plagued China, where many believe that the best place to store wealth is in domestic real estate, given Chinaâ€s restrictions limiting overseas investments. Thatâ€s the other driver, says Chen. Entrepreneurs, for example, often find that returns on housing investment are much higher than investment in their own firms.

According to the nationwide housing survey, people in China devote as much as three-quarters of their savings toward housing�nearly twice as much as in the U.S. Mortgage loans for these vacant units amounted to 10.3 trillion yuan (roughly $1.5 billion) in 2017, about 47.1 percent of all mortgage debt in China. Second-home purchases made up some 44 percent of all home purchases in 2018, up from 27 percent a decade ago. Third-home purchases have grown too, from 3 percent to 25 percent, according to Bloomberg.

All that has contributed to soaring house and rental prices, which are pushing younger, first-time homebuyers out of the market. In recent decades, housing prices have risen nearly twice as fast as disposable income, according to Chen, who authored a report on the Chinaâ€s housing boom in 2014 for the Federal Reserve Bank for St. Louis.

That made curbing house prices one of Chinaâ€s top priorities in 2017, spurred by concerns of a collapsing property market and the larger implications on the rest of the countryâ€s economic growth. The governmentâ€s efforts to address this include limiting how many houses a family can own in crowded cities, raising down-payment requirements and mortgage interest rates, and other measures targeting speculators.

Also in 2017, President Xi Jinping delivered his now-famous mantra that “houses are built to be inhabited, not for speculation.� Last year, the government launched a six-month crackdown on property speculation in 30 cities, targeting developers and real estate agencies that encourage speculation through tactics like false advertising.

Still, average new home prices in 70 large and medium-sized cities have continued to grow, albeit at a slightly slower pace. Data from Chinaâ€s National Bureau of Statistics show that the average prices increased 0.61 percent from December to January, down from 0.8 percent between November and Decemberâ€�the slowest pace in 9 months.

Chen says two cities, Shanghai and Chongqing, have experimented with one solution: levying property taxes like in the U.S. Both cities†policies were limited, though: Shanghaiâ€s only applied to second-home purchases, while Chongqing taxed only the most expensive homes that cost more than double the cityâ€s average home price. The impact, according to Beijingâ€s business news site Cai Xin Global, has largely been ineffective given that the amount of tax collected has been low and that housing prices have continued growing.

Meanwhile, rolling out a nationwide tax as the government initially planned in its 2013 blueprint for economic reform is more complicated, and has sparked numerous debates. For starters, there are technical questions, as noted by Bloomberg opinion columnist Nisha Gopalan: Should the tax be based, for example, on market value or the much-lower purchase price for existing homes?

Then thereâ€s the problem of timing. It could lead to a deepening slump in the housing market amid an economic slowdown thanks in part to trade tensions with the U.S. Or worse, it could lead to a massive sell-off of unoccupied units and send housing prices tumbling, effectively bursting the housing bubble.

Still, Chen doesnâ€t think property taxes alone will solve Chinaâ€s vacant housing issue, as it doesnâ€t solve those two underlying issues “One, the Chinese financial market is not perfect,â€� he says, referring to the lack of alternative high-return investment opportunities. And two, Chinaâ€s land supply policy has formed peopleâ€s expectation about the stability of the housing market. “People understand that the government doesnâ€t want the housing market to crash,â€� he says.