The Policy-based Housing Cover-Up

By EO Editorial Board
Published: 2011-01-11

Issue 502, January 10, 2011
Translated by Tang Xiangyang
Original article:

After a policy-based housing "construction spree", local governments have finally met their targets.

This could only take place in China. In May 2010, staring down rising housing prices, the Ministry of Housing and Urban-Rural Development and local governments made a pledge to meet the 2010 construction targets for policy-based housing. Although local government officials were responsible for the construction of government-subsidized housing, local finance bureaus were reluctant to provide funding.

In the autumn of 2010, the National People's Congress (NPC) released a report which shows that by the end of August 2010, the highest completion rate among local governments of the 2009 policy-based housing plan was only 80 percent; some local governments only completed 40 percent of their original plan and had yet to begin on the 2010 projects. 

Since then, local governments have gone to great lengths to construct policy-based housing. Some of them even claimed they could meet original targets for housing construction in 100 days. Through frenzied construction sprees, local governments were able to meet their targets, but housing prices continued to rise.

While policy-based housing can be completed in a short time, housing distribution is a much tougher process. The process involves public supervision and a monitoring procedure, but it is still difficult to satisfy public scrutiny. Different types of policy-based housing have different distribution standards.

The Shenzhen government discovered that many applicants for local policy-based houses are living in luxurious houses; ten applicants were found to be multiple car owners. After losing their homes to the local government, villagers living in the Changping District of Beijing waited three years before discovering that the construction on the properties arranged for them had long been completed, and the properties being sold to the public as commercial housing. The tenants of Tangjialing, a village in rural Beijing which used to be a temporary home for many college graduates, had high hopes for the public housing under construction in their village. They could not have anticipated that the houses would be rented to Baidu, a Chinese internet giant, when the government promised the properties to the public. Such examples are representative of the general distribution problems for policy-based housing.

The problems have caused people to doubt the ultimate impact of the intended increase in policy-based housing in 2011. The government has promised that ten million suits of policy-based houses will be constructed and local governments have pledged to reach their respective targets.

The central government has stated that local governments will be forbidden to auction off commercial property if they fail to meet their policy-based housing construction targets, which means land will initially be offered to policy-based housing and then commercial flats, indicating a shrink in the supply of commercial apartments. Based on basic supply and demand economics, this will definitely result in even higher housing prices.

Policy-based housing co-exists with commercial housing, the prices of which are adjusted by the market. It seems logical for the government to be responsible for policy-based houses constructed for low-income people while letting the market determine the prices of commercial flats. But the reality is more complicated. As we saw in the policy-based housing market in 2010, a reduction in land supplied for commercial apartments caused housing prices to increase, and because of unforeseen factors, policy-based properties were never allocated to those who needed them.

When the flaws of a policy are concealed through official means, it becomes impossible to find a way forward.

The American philosopher Fuller once said: "A true system has its own morality, namely intrinsic morals or procedures as natural law. If the implementation of a system does not include morality, it becomes something that does not deserve to be called a system."

Openness and honesty are supposed to be principles of any policy. However, if the actual procedures are immoral, even in a market economy, the economy will suffer. "Competition" becomes an excuse for government officials to hoard benefits for themselves while "openness" becomes a screen with which to conceal the unjust allocation of public resources.

No one can doubt the government's enthusiasm for policy-based housing. But the flaws of the policy have been purposely concealed. This is our worry about public-based housing.

This article was edited by Rose Scobie and Ruoji Tang