China is considering removing some of the largest remaining restrictions on home purchases after previous measures failed to revive a moribund housing market, according to people familiar with the matter.

Regulators are working on a proposal that would allow mega cities such as Shanghai and Beijing to relax restrictions for non-local buyers — those who don’t have a so-called Hukou residence permit for that location — the people said, asking not to be identified because the matter is private. It’s a barrier many smaller cities have already removed.

The government may also end distinctions between first- and second-home purchases, paving the way for smaller down payments and lower mortgage rates on second residences, the people added.

Policymakers are under renewed pressure to reverse a housing slump that’s dragging into its fourth year, stifling the world’s second-largest economy and putting millions of people out of work. Banks including UBS Group AG and Bank of America Corp. expect China will fall short of its roughly 5% growth target for this year.

Authorities are also mulling fresh measures to shore up the sluggish stock market, the people added, without providing more specifics. China’s CSI 300 Index has fallen about 7% this year, among the worst performers in the world.

The proposals would require approval from senior leaders and could change, according to the people. China’s housing ministry didn’t immediately respond to a request for comment.

“Such loosening is helpful but not meaningful as it will mainly benefit top tier cities,” said Raymond Cheng, head of China property research at CGS International Securities Hong Kong. To change the current tough environment of the property sector, China really needs to implement those policies announced in the past 12-18 months, such as urging local governments to buy unsold units from developers, he added.

Despite a slew of measures aimed at bolstering the market, China’s real estate crisis is showing no signs of letting up. The slump in home sales and prices both deepened in August as the impact of loosening efforts waned and buyers held out for lower prices.

China has given local governments more latitude to explore ways to stabilize the market. The State Council, the nation’s cabinet, in June asked officials to keep formulating new policies to help absorb existing housing stock. That stoked expectations of additional funding after Beijing in May unveiled a package of measures to support the sector, including lower down-payment requirements.

The government is also making a push to reduce borrowing costs. Authorities are considering allowing homeowners to refinance as much as $5.4 trillion of mortgages for millions of families, with rate cuts by some banks delivered as soon as this month,

Until now, local authorities at mega cities have refrained from lifting the ban on anyone not having Hukou from buying homes unless they have paid income tax and made social security contributions for a number of years. The policy has been the core restriction used to control prices.

Hukou — a powerful passport-style permit — has been used by policymakers to regulate population movements as it grants access to housing and medical and education resources in cities. One risk of easing home eligibility for non-locals at top-tier cities is that it could siphon demand from lower-tier cities and heighten economic imbalances within China.

The capital Beijing and tech hub Shenzhen both kept that ban when rolling out supports in May and June. Financial hub Shanghai in May shortened the required period of individual tax payments for homebuyers without Hukou to three years from five years.

China’s biggest cities have also long sought to control their population. The State Council in late 2022 reiterated to “slim down” ultra-big cities, after the coronavirus outbreak and city-wide lockdowns in Shanghai.