Dreams to own housing come true ( 2003-08-21 09:51) (China daily HK Edition)
Buying a home is a relatively new concept in China, but the government wisely
eased the housing situation from that of allocation during the planned economy
to helping low-income urban families purchase housing for themselves.
Prospective
buyers wait to buy cheap apartments offered by the government to low
income-earning residents in Beijing August 6.
[newsphoto.com.cn]
Fortune smiled on Xue
Yuanchun and his family of five in 2001 when the Beijing municipal government
decided to rebuild the Jinyuchi neighbourhood where they had lived since 1969.
Literally translated as "goldfish pool", Jinyuchi in downtown Beijing had
neither goldfish nor a pool, just an expanse of decades-old concrete blocks
hastily built to accommodate the rapidly growing population of the Chinese
capital. There the five Xues occupied a 20.7-square-metre apartment. "When my
sister would come to visit for the Spring Festival, we had to put her up in the
kitchen," Xue Yuanchun recalled.
The family moved into a new, more spacious flat measuring 128 square metres
in January 2003, just before this year's Spring Festival. Xue Yuanchun's sister
arrived as usual, but this time, a guest room awaited her. Jinyuchi is now home
to a brand new residential estate of 41 multi-storey buildings, where living
space averages 27.6 square metres per person. In the past, 10 people would have
shared the same amount of space. "We now have both goldfish and a pool," Xue
said, referring to the ornamental fish swimming in a 1,000-square-metre pool at
the centre of the estate.
Altogether, 3,000 families benefited from the Jinyuchi housing project, a
showcase of the housing reform that has been taking place all across China for
well over two decades. "Housing for the needy" is the point of departure for the
reform and its end result. Now China's urban population enjoys housing space of
22 square metres per person on average, up from a mere 3.6 square metres back in
the early 1980s.
When the late Chairman Mao Zedong proclaimed the founding of the People's
Republic of China 54 years ago, the Soviet-style planned economy was the only
ready blueprint for the country to follow in striving for national
reconstruction. In Chinese cities, housing became a fringe benefit for staff
members of government institutions and industrial workers, which amounted to a
social welfare programme as virtually all industrial enterprises in China were
owned by the State. Housing was distributed according to official rank or job
seniority. Rents were nominal, barely enough to cover the expenses of housing
repairs. Believe it or not, a room of a dozen square metres cost just two or
three yuan - less than one US dollar.
This way of distributing housing was once lauded as a "superior benefit of
socialism". As time went by, however, factories - as well as government
institutions - found themselves pressed into a corner. According to Hou Ximin,
deputy director of the Housing and Real Estate Department at the Ministry of
Construction, factories had to spend up to 40 per cent of the funds allocated to
them annually by the government on building and repairing housing.
A woman walks past a wall painted with the
words "Buy A Home In Beijing" outside a real estate construction site in
Beijing. [Reuters]
Neither was it possible for the government to provide enough housing for its
citizens, given the nominal rents paid all over China. The housing shortage
became increasingly acute. Families of two or even three generations sleeping in
the same room were not exceptional. "Moreover," said Hou Ximin, "corruption was
inevitable, as in many cases housing was distributed according to rank."
Commercialization trend
This state of affairs began to change after Deng Xiaoping, the late chief
architect of China's reforms, took over at the end of the 1970s. The
reform-and-opening policy China adopted under Deng's leadership was designed to
eventually create a "socialist market economy". "Under a market economy, housing
is bound to become commercialized," Hou said.
Deng's policies have changed China beyond recognition, but some legacies of
the planned economy will not disappear overnight, including the old practice of
housing distribution. "People had got used to depending on the government to
provide living space, and few ever considered buying their own homes," Hou
explained. "Moreover, the vast majority of China's wage earners did not have
enough ready cash to make such a purchase. Banks, for their part, were not yet
extending home loans to individual citizens."
Real change came in 1994, when the government called for the "housing
accumulation funds" to be established. The new policy obliges an employee to
deposit 5 per cent of his or her monthly wages into the fund as set up by his or
her "work unit", while the employer contributed an equivalent amount. With the
fund as the guarantee, the employer or employee may apply for bank loans to
build or buy homes. "The policy enables the government, employers and
individuals to share the capital investment in housing construction," Hou said.
By the end of 2002, the programme covered 65 million Chinese, of whom 20
million had bought homes. Housing accumulation funds set up across the country
involved a total of 413 billion yuan (US$49.9 billion), 151.9 billion yuan
(US$18.35 billion) of which was used to help people purchase homes.
The process was an initial step towards privatizing housing owned by the
public sector. This was followed by a genuine breakthrough when, in 1997, the
government decided to stop the distribution of housing owned by "work units" or
local governments. Since then, people have been encouraged to buy homes on the
open market instead of waiting for their employers to provide them with
accommodations.
The policy boosted the development of China's real estate industry. By the
end of 2002, residential buildings with a combined floor space of 3.4 billion
square metres had been built, equal to the total built during all four decades
prior to 1997. In addition, 500 million square metres worth of older buildings
had been rebuilt or renovated. Official statistics show that individual citizens
accounted for 94 per cent of those who bought homes in 2002. The same year also
saw an increase in home loans extended by China's commercial banks from 19
billion yuan (US$2.3 billion) in 1997 to 825.8 billion yuan (US$99.8 billion).
Back in Jinyuchi, Xue Yuanchun and his family were compensated with 160,000
yuan (US$19,330) when their old apartment was pulled down to make room for the
new residential estate. With that money, plus a loan of 280,000 yuan (US$33,830)
borrowed from the Industrial and Commercial Bank of China, they bought the
apartment they live in now. The loan is being paid back in monthly installments
of 900 yuan (US$110) over 20 years. "That will hardly be a problem for us," said
Xue Yuanchun, who works at a hospital. The family earns about 6,000 yuan
(US$725) a month, including Xue and his wife's salaries and his parents' old-age
pensions.
Housing for the needy
Villas and Western-style townhouses have been springing up in Chinese cities,
the target buyers being those who have got rich under the reform policy -
merchants, industrialists and film, TV, sports and pop stars. Nevertheless, said
Hou Ximin, housing for the needy remains the top priority in China's housing
reform.
Workers at a
construction site in Beijing. Housing for the needy remains the top
priority in China's housing reform. [China Daily HK
Edition]
Back in 1998, the government launched a nationwide programme to help
low-income families buy homes. Under the programme, apartments officially rated
as "inexpensive but comfortable" were sold for 1,240 yuan (US$150) per square
metre in 2001, about 60 per cent of the asking price for apartments sold on the
open market. The developers of such housing enjoy reductions in or exemptions
from 21 different taxes, with the profit margin limited to no more than 3 per
cent.
Families living below the poverty line and in overcrowded homes may apply to
local governments for low-rent housing. In Shanghai, 4,820 families occupying
living space of fewer than six square metres per person on average applied for
low-rent housing from October 2001 to June 2003. Of these, 4,312 had their
applications approved and, as a result, their room to manoeuvre increased to 16
square metres per person.
Policy privileges are also extended to families like the Xues in Beijing who
have had to give up their old dwellings to facilitate the construction of new
housing projects. The family of five was entitled to 90 square metres sold at a
"reduced price" of 1,480 yuan (US$180) per square metre. Then, for the extra 38
square metres of space, the family paid 4,500 yuan (US$544) per square metre, at
the "price for commercial housing".
Accommodating change in the west
Construction of low-rent housing is a priority in western China where the
most needy people live in out-of-date, low-quality homes often without tap water
or toilet facilities.
Per capita living space is often less than the national average of 20 square
metres in western regions where the underdeveloped economy has reduced living
conditions to a much lower level than in central and east China.
The latest official survey shows that per-capita floor space in 21 major
cities in the west is only 17 square meters. Poor families in western cities,
four per cent of urban residents, dwell in old or unsafe places, such as
clay-tempered shelters or old buildings without kitchens and toilets, or simple
plank cabins.
The Chinese government would spend one billion yuan (US$120 million) each
year on building low-rent homes in western cities or rent subsidies for the
poorest families, said Wen Linfeng, an official with the Ministry of
Construction.
Three leading western cities, Chengdu, Xi'an and Kunming, had made successful
attempts in setting up low-rent systems. Chengdu, capital of Sichuan province in
the southwest, last year paid housing benefits to the 580 lowest-income families
whose annual earnings were below 6,500 yuan (US$780).
The city planned to extend the benefit to 1,000 more households this year,
and had enacted regulations governing the renovation of older and poorer
districts with unsafe housing and bad sanitary conditions, said a local public
house property bureau official.
In Xi'an, capital of Shaanxi province in the northwest, a total of 264
low-rent apartments, or 14,000 square metres in total floor space, were
completed at the end of the last year and have all been rented out.
Li Zhiyong, a laid-off worker in Xi'an, and his family were among the first
group of families to move into new apartments.
"The house is better than we have expected, with simple interior decoration,
a tiled floor, and a decent toilet. We can finally live a secure life," Li said.
The low-rent system had become an essential part of China's social security
systems, together with medical insurance, pensions insurance and the minimum
income subsidy, Liu Zhifeng, vice-minister of construction, said.
The implementation of the system in the west would help maintain social
stability, promote economic growth in minority regions and ensure progress of
the country's Western Development strategy, he noted.
Yet the system was still in its infancy in most western cities, and fund
shortages were common, according to Wen. And a large number of urban families
still do not have their own homes or sufficient living space in 166 cities of 12
provinces and autonomous regions, Wen added.
Experts suggest that central and local governments should set aside money to
guarantee funds to run the system, which should focus on subsidies, with a
supply of low-rent housing in reserve as a means to boost rental markets and
encourage needy families to seek better homes.