This paper provides the first theory and evidence on the role of presale policies in the residential housing market. We start with constructing a novel dataset of unfinished projects, presale policies, and land auction outcomes across 270 major cities in China. We then identify 2,330 unfinished residential projects from 2010 to 2017 on a citizen complaint website run by the central government. We find that both presale criterion and postsale supervision of construction costs relate to a lower probability of unfinished projects. But only presale criterion relates negatively to the pace of new housing development, measured by developers' multitasking and land auction outcomes. A back-of-the-envelope calculation suggests that the average bundle of presale policies is inferior to the Pareto frontier in our sampled cities. Tightening the regulation on postsale supervision by 2 standard deviations may lead to a 58% reduction in the occurrence of unfinished projects, while keeping the pace of new housing development unchanged. Eliminating unfinished projects would entail a drastic increase in both presale criterion and postsale supervision, with slower housing development.

I use land auction data in Taipei City and in Taipei County to test Sherman’s (2005) information production theory. Results show that bidders in Taipei City (a core metropolitan area) and those in Taipei County (a suburb) have different bidding behavior. I find that bids in Taipei City’s land auctions are generally consistent with the predictions of auction theory for informed bidders. They tend to expend resources to collect information and shave their bids optimally. However, bids in Taipei County exhibit uninformed and overbidding behavior.