Access to housing of sufficient space and quality has been a central element in social stratification in urban China. We examine the sources of housing inequality in 1993 in Shanghai and Tianjin, when a market reform process had been underway in the national economy for nearly fifteen years. The Chinese housing allocation system favors people with political position and connections, those of higher socio‐economic background, and those whose work units have greater organizational authority. There is only slight evidence that market reform has undermined this stratification order. To the contrary, there are reasons to believe that in some respects inequalities rooted in socialism are strengthened by institutional changes. These conclusions are reinforced by comparison to results of analyses of income inequality in the same cities.