Editorial - Economic Observer Online
December 15, 2009
Translated by Tang Xiangyang
Original article: [Chinese]

This means that of the 7.47 million households that are to be housed over the space of the original three-year plan, only 3.67 households now remain.

If the current pace is maintained over the coming year, it should be easy to find a solution to the housing problems of the remaining households by the end of 2010.

Here we should stop and recognise the remarkable achievements of local governments around the country in terms of their ability to move ahead with the program at such a pace.

Especially as, according to an investigation report produced by the Standing Committee of the National People's Congress, up to the end of August this year, only 39.49 billion yuan had been invested in low-income housing projects, a figure which represents only 23.6% of the annual budget set aside for the program.

Of course authoritative statistics are reliable, but even still, in this case, we can't help but feeling a little confused. We were at first told that 10 million low-income households will have their housing problems solved, why is there suddenly an additional 5.4 million households popping out of thin air? 

One possible explanation is that local governments have lowered the threshold of what constitutes a "low-income household." 

The ten million figure comes from statistics collected in 2005, at that time there were 10 million low-income urban households that had housing difficulties in China.

As the standard of what exactly a low-income household earns differs from place to place, and if you think about the fluctuations in price and income levels, local governments may well have raised the cut off mark, for example if in the past a yearly income of 20,000 yuan was considered low, that may have since been raised to an annual salary of 40,000 yuan, and thus the number of low-income families might have increased.

If this is true, this will mean that the government will have to solve the housing problems of more poor families.

We know that there are many families that do not qualify as low-income and are therefore excluded from government-assisted housing programs, but who are in fact still unable to afford their own home.

Of course, it's good news that more of these families might now able to be included within the official definition of a "low-income household."

Another guess as to where these additional low-income households might have come from is that perhaps the standards have remained the same, and it's just that the number of low-income families has gone up over the past four years.

This theory can't be confirmed by reference to other data. But, for at least the past few years, the salary of urban residents has continually risen, and if the standard or which families qualify as "low-income" households has not been changed, it's impossible that the number of poor families could have increased on such a large scale.

One other possible explanation is that although the standards may not have changed too much, the number of low-income households reported by local governments has shot up.

Is it possible that the local governments might have be under reporting the number in the past? It's possible, but for the number of over looked households to be so high, perhaps something funny is going on.

It's hard not to suspect that some local governments maybe deliberately exaggerating and over reporting the number of low-income households, in order to receive more of the funds that the central government has promised to provide for the low-income housing projects.

According to the Low-rent Housing Program mentioned above, the central government will provide a subsidy of 400 yuan for every square meter of affordable housing constructed in western China and a 300 yuan subsidy per square meter for those that are built in central China. In addition, some other local governments may also receive a 200 yuan per square meter subsidy. The central government will also provide similar subsidies for programs that do not involve the construction of new housing, but still offer low-rent housing options to residents.

Of course the above conjectures are just guesses, but we do hope the our first guess is correct and that local governments are indeed expanding the scope of families that qualify for low-income housing assistance.

If this is the case, the number of poor households may have increased and this is unlikely to make the government look good, but if regular folk are able to receive material benefits and solve their housing problems, then, in keeping with the requirements of public spending, the government's investment in the livelihood of the people will have increased.

But even so, we need to realise, if every low-income family of the additional 5.4 million were to move into a 50 sqm apartment, the complete area of low-income housing will balloon by a total of 270 million sqm, which doesn't just mean that  the central government will perhaps have to pay more in terms of subsidies but that local governments will also be required to supply even more in the way of matching funds.

But saying is not the same as doing and ordinary Chinese will be eager to see what happens next.