This paper intends to analyze the ever-increasing housing prices in China from the perspective of community of interests between local governments and real estate developers with Game Theory． The results show that the collusion could increase the fiscal revenue of local governments through land sales dramatically．In the meantime，it helps real estate developers raise their operating profits． The benefits of the collusion mainly come from social welfare losses of housing consumers，which are more significant in central and western regions．The central government should increase penalties to cut off the collusion between local governments and real estate developers． Further，the legal system of local land use should be improved．