How Much Money do you Need in Order to Afford Government Housing?

Issue 481, August 9
Translated by Tang Xiangyang
Original Article:[Chinese]

Guangzhou, Shanghai and Beijing have sparked a debate on the unsettled rental price of public housing. Beijing tried to settle with rent rates similar to market prices but was forced to “listen to public opinion” due to severe criticism from the media.

People with a low-income who once lived in Tangjialing Village, a village located in a Beijing suburb where hundreds of thousands of low-income college graduates and migrant workers live, have gradually been excluded from public housing. In 2008, the workers of Tangjialing began to be targeted by the “public rental housing system” policy. As a new policy-based housing project (government constructed housing for low-income families and individuals) separate from affordable housing and lower priced housing with area limits for families with low or middle income here on referred to as “limited housing”, the public rental houses were originally named "policy-based renting housing”; later their name was changed to "public rental housing". Public rental housing was to be provided for people who cannot afford a home and need temporary housing including college graduates and migrant workers.

However, when public rental housing was about to appear on the market, its coverage was shrunk to families that had already been approved to buy or rent policy-based homes and had a local household registration (hukou 户口). In other words, all the people waiting for affordable housing, limited housing, and inexpensive housing have been joined by the people waiting for public rental housing. Moreover, people from other provinces who rent homes in Tangjialing Village will not have access to this type of policy-based housing.

Under these circumstances, where are the “public” traits of these housing policies? Nowhere to be found - regardless of whether they are called affordable housing, limited housing, or any other type of housing policy name.

The government announced its reasoning stating there are too many people waiting for affordable housing and limited housing. To prevent families from having too long of a wait, the government has provided them with an alternative choice: “public rental housing”. As the number of applicants increase, the fate of policy-based housing becomes more and more uncertain. In 2009, the Beijing government planned to construct 8.5 million square meters of policy-based housing but only finished constructing two million square meters worth. According to public data, for the past several years the amount of public housing planned has largely outnumbered the amount of housing that was actually constructed. For example, in 2005, the projected area was 7.83 million square meters while the constructed area was only 3.25 million square meters. Public rental houses are going to be used to make up for past unfinished policy-based houses.

Up until now, local governments have gained 7.6 trillion Yuan from their financing platforms, but most of them have never used the money to construct policy-based housing. The reason for this is obvious: if governments sell land through public bidding, they can gain huge amounts of money, but if they use their own financing to construct policy-based houses, they will have to invest a large amount of money that may never be reclaimed. For these reasons, local governments are using bank loans and public housing funds, rather than financial capital, to construct policy-based housing.

This has produced a dilemma: one cannot reach a target if they have no way to achieve it. The construction of policy-based housing which should be paid for by financial revenue is now relying on bank loans for finance. Banks naturally demand both principal and interest, and in that case, who shall the public rental houses be rented to? The answer is quite simple: only those who can afford the construction fees and bank interest rates will be allowed to rent them. Are these people really low-income?

If public commodities are not provided for the public, their original aspiration of promoting social justice and fairness can no longer exist. Officials with the Beijing Municipal Commission of Construction said they would “listen to public opinion” to determine the rent costs of public rental housing, but how much is the public willing to pay? What if the rent paid by the “public” cannot pay off bank loans? The official response is that our government may use some financial revenue to progressively pay off the bank loans every year. So far, this has been the only official declaration by the construction commission on using financial revenue to construct policy-based housing. But, will the financial bureau agree? How much will it cost to pay off the loans and how long will they take to pay back? No one has provided a clear answer.

There is a huge mismatch between the design of policy-based housing and its current reality. With limited financial revenue, local governments do have some difficulties in constructing policy-based housing. But if they continue to take determined action resembling a response to a military command by rushing to action regardless of the consequences, their original target will keep getting further and further away. Then, their determination will become meaningless. If we cannot construct affordable housing on time, then why bother constructing public rental housing? To see how committed they are to their promise, maybe it is best to rely on the old saying,“Less talk, more action".

This article was edited by Rose Scobie