Global Policy Forum

Chinese Pin Hopes on Affordable Housing Pledge

China's leaders are on high alert following the wave of revolutions spreading across the Arab world. Premier Wen Jiabao has pledged to double the amount of affordable housing stock over the next five years. Nevertheless, China faces a growing number of issues related to extreme inequality and price rises in food and oil. Policy makers are concerned that if wealth isn't distributed more equally, political instability may rise.

March 7, 2011


Owning a home is central to the Chinese dream, but for Beijing residents like 30-year-old Zhang Xinyuan, just getting an apartment seems like a dream that may never become reality.

A teacher at a prominent university in Beijing, Zhang is a member of the country's growing middle class. But her salary of 80,000 yuan ($12,179) a year has not kept up with the pace of rising property prices.

Rising discontent over housing prices among middle class as well as poorer urban Chinese has led the government to roll out a number of affordable housing schemes.

But the plans have been riddled with uncertainty, and have done little to soothe people like Zhang, who squeezes into a 5 square meter room while she saves for a down payment.

"The affordable housing scheme has given me some hope to be able to buy an apartment," Zhang said.

"But the chances of actually getting one are quite small, because the government has very strict standards on who should get them, and the procedures are just endless and complicated."

Indeed, a number of Beijingers declined requests to be named for this article, since they had fudged their financial circumstances in order to qualify for the scheme.

Chief among their complaints was that the income level required to qualify for affordable apartments is too low to qualify for bank loans to buy them.

About 85 percent of Chinese urban families can't afford to buy a new city apartment at current market rates, according to the Chinese Academy of Social Sciences, a government think tank.

If Zhang's pending application to buy subsidized affordable housing is approved, she will be able to buy an apartment on the outskirts of Beijing at 30 percent of the market price.


Affordable housing will be high on the agenda at China's annual National People's Congress in March, reflecting widespread frustration over housing among Chinese citizens and the media.

Premier Wen Jiabao pledged earlier this month that the government will build 36 million units of affordable housing by 2015. He pledged 10 million units of additional affordable housing this year.

Last year, planners pledged 5 million units of affordable housing would be constructed, but there is no official data on how many were completed.

Land supplies for affordable housing projects reached about 65 percent of the original target last year, according to the Ministry of Land and Resources.

The central government has made affordable housing a "political task" and threatened to demote local government officials if they fail to meet the targets.

But analysts are skeptical on whether the government can really create more affordable housing. Developers are reluctant to construct blocks for sub-market returns, and prime land tracts are still being snapped up for commercially lucrative projects.

"Money is an issue, how to finalize the funding for affordable housing projects is a big challenge. Who will develop and build these houses is also a big problem," said Huang Yu, dean of the China Index Academy.

"Local governments don't have the capacity to do that, and many government-backed construction companies do not have enough qualification and experience. Another important challenge is land supply."

Even the definition of what exactly is considered affordable housing in China is cloudy, said Michael Klibaner, head of China research with property developer Jones Lang Lasalle in Shanghai.

"There is very little transparency on this topic. Lots of different types of development get lumped into 'policy' housing, including small- and medium-sized affordable housing which is commercially developed," he said.

In one project in Beijing, Vanke has developed a tract of formerly industrial land. It offered some apartment blocks at below-market prices of 5,000 yuan a square meter to low-income buyers in return for the right to sell the rest at market prices of about 30,000 yuan a square meter, a sales representative said.

To tame discontent, China has taken a slew of measures since 2009 to rein in the red-hot property market, including raising down payments and mortgage rates, and limiting the number of homes that one family can buy. The cities of Shanghai and Chongqing began experimenting with the country's first ever tax on home ownership in late January.

Nonetheless, average home prices in Beijing were up more than 25 percent year-on-year in January at nearly 23,000 yuan per square meter, according to the China Index Academy.

For Zhang, that means it will take nearly 10 years just to afford the down payment for a 100 square meter apartment in Beijing.


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