Housing inequality has been well discussed within countries where formal institution dominates housing market. But little research has explored the issue within a society where both informal and formal institution work. Villages facing urbanization in China offer a unique institutional environment that combine both informal market-oriented transition and official socialist principle of equality. Drawing on a household survey of 32 villages in Guangzhou, this paper analyzes the housing inequality among indigenous villagers between and within villages. Empirical data shows that the socialist principle of equality still dominate the allocation of residential land for indigenous villagers but their dwellings are obviously differentiated and influenced by both individual socio-economic status and village context. It concludes that the state fails to respond to the growing difference between villages caused by rapid urbanization, and to the incremental stratification within villages caused by economic and political inequality, and by family’s life cycle. These findings contribute to a body of knowledge on understanding housing inequality with an institutional context of informal market-oriented transition under an authoritarian political setting.