Construction of public housing system in China

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本次文章的发表源于《城市中国》杂志与来自宾夕法尼亚大学的城市中国学社（Urban China Collective）的合作。宾大城市中国学社作为一个学生社团，在宾大校园以及美东地区积极搭建以讲座、会议、论坛为方式的平台，促进学者与学生在城市话题上跨领域的交流。这次与《城市中国》杂志合作发表的文章，是作为宾大城市中国学社即将在2020年2月7日举办的第二次年度会议的前期研究，作为会议议题的背景信息补充。本文翻译自《城市中国》046期《保障人居：在公平与效率的天平上》“中国公共住房体系的构建”一文，并在原文的基础上有所补充。

The issue of urban housing is a problem that every country and city must consider, but for China today, housing has become one of the main contradictions in society, becoming the fuse of urban disorder and an undercurrent that threatens stability. In the 27 years of pursuing the "socialist market economy", the dual forces of the state and the market have been turbulent in coordination and confrontation. The gap between the rich and the poor and the unfair distribution of social resources have accumulated in the housing sector. For a high-speed transition economy like China, such an empire with thousands of years of feudal culture and institutional foundations, housing not only represents a place to live and the economic relations of property rights, but also refers to family structure, neighborhood relations, cultural heritage and ethical concepts.

When the government began to advocate for affordable housing, many problems appeared. How should the relationship between the future public housing system and the market-rate housing system take shape? In the historic period when the definition of the private sector and the market economy system are yet to be determined, how should we refer to the public sector, how should we attempt to build a social security system, how can we deal with the issue of equity during the transition period from an ethical and institutional standpoint, and how can we balance the interests, needs and obligations of individuals and groups and the efficiency and fairness of the system while maintaining legitimacy within the system?

As an important cornerstone of urban public policy, the public housing system is a new landmark for social and political civilization. The establishment of the urban public housing system represents an institutional change in direct opposition to strong interest groups, a buffer zone between the central and local government administrations, and a test of social morality and public conscience. This is a protracted battle, and it is only the beginning.

Searching for the road leading to one’s wish. (Photography/ ZHU Qian)

30 year’s transition of housing problem

In 1978, Deng Xiaoping directly initiated the reform of the housing system in China. After 20 years of intensive policy reform, China finally completed a fundamental transformation from a welfare housing system to a commercial housing system in 1998. After housing was no longer allocated by the government for free, investment enthusiasm was unprecedentedly stimulated because of the promise of profitability, and housing supply was no longer a major problem for Chinese cities. For example, the average annual completed area of residential buildings in urban areas in China before 1978 was only 18 million square meters. After the reform, the annual average was 130 million square meters in 1987, 290 million square meters in 1988-1998, and reached the highest level in history in 1999-2009, peaking at 613 million square meters (including non-commercial housing). In the past 10 years, the total number of commercial houses provided by developers alone has reached 39 million, providing housing for more than 100 million people. There is no shortage of housing in the country as a whole. At the end of 2009, the urban residential stock area reached 13.1 billion square meters, and the per capita housing construction area in cities and towns exceeded 28 square meters, 4.2 times more than was available in 1978.

Housing problem has relationship with every citizen. For Chinese, dwelling is the root of working and living.(Photography/ZHU Qian)

However, the commercialization of housing brought its own series of problems. As an emerging market, affordability in residential prices has been difficult to maintain and prices continue to rise, outpacing the increase in income over the same period. Since 1998, China's urban housing income ratio (the ratio of the total price of commercial housing to the annual disposable income of households) has remained high, always above 10, and the affordability of low- and middle-income households to commercial housing is vulnerable. In fact, during the housing reform in the 1990s, the Chinese government realized that the housing problem of low- and middle-income households could not be completely solved by the market, and it instituted various measures to try to alleviate the housing difficulties for this population. However, because the Chinese government’s demand for economic growth is very strong, the consideration of residential real estate as an industry and a source of economic growth often takes precedence over the current “homeownership” social livelihood policy, leaving housing security policy to lag behind or be ignored in favor of economic development policies.

From policy to institution

Despite this emerging issue, China has established a public housing policy system covering a certain range of urban residents. Generally speaking, China's public housing policy can be divided into three main components: 1. affordable housing; 2. low-rent housing; 3. public rental housing. At present, policies and regulations are the main manifestation of the formal rules of the Chinese public housing system and have formed a housing policy system at the central and local levels. Policies are usually oriented around government goals, and often come in the form of decisions, programs, notices, and other documents by government agencies. The system broadens its horizons to include legislation, informal rules, factual mechanisms, and other relevant institutional arrangements.

Housing problem getting up and down between high buildings and relics heap. (Photography/ ZHU Qian)

Legislation on housing is an important component of establishing a public housing system. In fact, as early as 1983, the Ministry of Construction conducted a study on Housing Law and formed a preliminary draft of legislation. The contents of the Housing Law study included two parts: the first is to guarantee the right of residence; ensuring that ordinary people have their own homes, although they have different incomes. The second part is to protect the rights and interests of consumers, ensuring consumers own the house, and guaranteeing the resulting rights of use, management, disposal and income. The first Housing Law, based on the findings of the report, was supposed to raise these issues to the level of national law, but for various reasons, the Housing Law has not been promulgated.

In 2008, under the auspices of the Ministry of Housing and Urban-Rural Development, the Housing Security Law study was later renamed the Basic Housing Security Law. The media reported on November 9, 2010 that the Ministry of Housing and Urban-Rural Development of China discovered from the Financial and Economic Committee of the National People's Congress that a draft of the Basic Housing Security Law has been formed. At present, comments are being sought from all parties to revise and improve the draft. Legislation for housing security can on the one hand guide us in the direction of housing development, from the excessive pursuit of an increase in the average housing area in the past, to placing more emphasis on protecting the bottom line of everyone's living. The indispensable component, on the other hand, is to regulate the healthy operation of the housing security system, to ensure that public funds are not misappropriated, abused, and produce undesirable consequences such as corrupt rent-seeking behavior.

Affordable housing: An initial experiment

In the 1991 "Notice on Continued Active and Prudent Reform of the Urban Housing System", the State Council proposed "to vigorously develop economical and practical commercial housing and give priority to solving the housing problems of homeless and housing-poor households". This is the first time that words similar to affordable housing have appeared in government documents, and it has also established the basic meaning of affordable housing in the future. By 1994, the Administrative Measures for the Construction of Affordable Housing in Cities and Towns jointly issued by the Ministry of Construction, the Leading Group for Housing Reform of the State Council, and the Ministry of Finance proposed "the establishment of an economically affordable housing supply system with low-income families as the target of social security ". The Measures document requires that the price of affordable housing be determined at the cost of construction, sold at a small profit, and sold for ownership only. But at that time, developers were not participating in building, and affordable housing was basically funded and organized by government administrative departments. Settlement projects that started in 1995 but were suspended until 1998 are similar to future affordable housing.

An affordable housing in Yingkou City, Liaoning Province. (Photography/ AN Lei)

In July 1998, the landmark housing reform document ("State Council's Notice on Further Deepening the Reform of the Urban Housing System and Accelerating Housing Construction") proposed "establishing and improving a housing supply system based on affordable housing". However, this "supply subject" has only been realized in a few regions. In the government document ("State Council's Notice on Promoting the Sustainable and Healthy Development of the Real Estate Market") in August 2003, it claims that the affordable housing was changed from "the main body of housing supply" to "policy commercial housing with a guarantee nature", and thus "the main body of housing supply" was replaced by commercial housing. This change is considered a sign that China's housing system is finally entering a market-oriented stage. After the publication of this policy, the supply of affordable housing in various places began to slow, and has been decreasing year after year.

After many years of confusion, in November 2007, the Ministry of Construction of the People's Republic of China re-issued the "Administrative Measures for Affordable Housing", redefining affordable housing as, "The government provides preferential policies to limit the size of condominiums and sales prices. The supply of low-income urban families with difficult housing issues is a guaranteed policy-type housing. " So far, the buyers of affordable housing are limited in suite size and sales price, which defines the difference between affordable housing and commercial housing.

Affordable housing still the topic of much debate in China. One of the main points is whether the focus of the affordable housing system should be on “guaranteeing”, through the targeted supply of welfare products for struggling families, or “economic-based”, through low-priced commodities, which have not yet been clearly defined by any government action. In addition, affordable housing is often not "economical" to build for private developers. There is no uniform standard for the pricing of affordable housing, and the pricing structure is left to the responsibility of each city, leaving much inconsistency in application across the country. The price of affordable housing in many places is not much lower than that of commercial housing, and in some places, the price was slightly higher than commercial properties in the early part of this century.

How social housing program could ease the tension caused by income gap and rocketing housing price is subjected to future observation. (Photography/ ZHU Qian)

Low-rent housing: The last security line

Low-rent housing is a housing security measure specifically for urban poor families. Compared with affordable housing, low-rent housing is only available for rent and cannot be not sold. Sources of low-rent housing are diversified, and old public housing is often the main source. Low-rent housing assistance is divided into two forms: house rental and rent subsidy. Many times, only very little rent is charged. At present, the main reason for low-rent housing in China is that the government implements social security functions in the housing sector and provides rent subsidies to the lowest-income households with other non-agricultural permanent resident registrations and other special households in need of protection or ordinary housing with social security properties leased at low rent.

At the national level, the Ministry of Construction promulgated the "Measures for the Management of Low-Rent Housing in Urban Areas" in April 1999, and in December 2003 re-issued the "Measures for the Management of Low-Rent Housing in Low-Rent Urban Areas" to replace the former. In May 2006, the State Council proposed that all cities should establish a low-rent housing system before the end of 2006 and should determine the scale of low-rent housing construction. The government proposed to ensure the financing methods of low-rent housing, and in particular, the document says that each city government will use a certain percentage of the net land revenue for low-rent housing construction, and fiscal support at all levels of government must increase. The report of the 17th National Congress of the Communist Party of China in 2007 wrote "improving the low-rent housing system will help solve the housing difficulties of urban low-income families". In May 2007, the State Council upgraded the low-rent housing system to the core position of China's housing security system.

After demolition problem became acute during the process of urban spatial transformation, housing security again attracted public attention. (Photography/ZHU Qian)

However, the welfare characteristics of low-rent housing makes development and operation of the system difficult. In particular, there has been no perfect mechanism for funds and land allocation, making its development very slow. From 1999 to 2006, the total number of newly built low-rent housing in China was only about 78,000 units, and the cumulative investment was only 7.08 billion yuan. This situation has not improved until recent years. In 2007, the country's planned low-rent housing funds totaled 7.7 billion yuan, exceeding the total planned funds accumulated over the years. According to the "2009-2011 Low-rent Housing Guarantee Plan" issued by the Ministry of Housing and Construction in 2009, 5.18 million new low-rent housing units should be built in the country within three years, and 1.91 million households should be granted additional rental subsidies. As of November 2009, a total of 2.73 million low-rent housing units have been built through various methods including new construction and purchase of low-rent housing. The number of rental housing subsidy households reached 2.92 million, of which 1.58 million new low-rent housing started in 2009, and 800,000 new rental subsidies were added. The proportion of houses rented increased from 14.1% in 2006 to 48.3%.

Public-rent Housing: A new approach to security housing

Public rental housing is still relatively new, but it has developed rapidly in recent years. Shenzhen took the lead in experimenting with public rental housing for the population of other provinces in 2007. Since then, Beijing, Tianjin, Changzhou, Qingdao, Xiamen, Guangzhou and others have issued public rental housing construction plans and management measures. Chongqing claims to have built a housing security system with public rental housing as its core. Shanghai didn't begin to pursue public rental housing schemes until early June of 2010, and only formally implemented these schemes in September. However, public rental housing has been mostly in the form of talent apartments and employee dormitories.

At the national level, public rental housing is actively supported. In the 2010 State Council work report, vigorous development of public rental housing was proposed. The "Guiding Opinions on Accelerating the Development of Public Rental Housing" jointly formulated by the seven departments including the Ministry of Housing, Urban and Rural Construction was officially released on June 12, 2010. According to its content, the public rental housing supply targets mainly urban families with low-income housing. In areas where conditions permit, new employment workers and migrant workers who have stable occupations and have lived in cities for a certain number of years can be included in the supply. This document emphasizes that new public rental housing mainly meets basic living needs, and public rental housing should be constructed in complete sets. The construction area of a single set should be controlled below 60 square meters, and must be available for rental only and not sold. 

Large-scale public-rent housing project in Baoshan District, Shanghai. (Source: Xinmin.cn)

Public rental housing has its welfare and security features, similar to other types of public housing and its provision of urgently needed, stable and healthy rental housing to those who can afford it is a manifestation of social public services. But at this stage, its most prominent role is to improve the structure of the housing market, enrich housing market choices, and regulate and guide the private rental housing market especially, while at the same time guide the residential housing consumption concept, so as to curb the price of commercial housing and rent, and achieve universal housing basic institutions. 

Under the current high-cost housing market situation, if there is no way to meet housing demand affordably, it will be difficult to solve the problem. The collapse of the market could be too harmful to society and the economy. The government's development of public rental housing is, to a certain extent, a supply line of housing that stabilizes the housing needs of middle-income stratums and enriches the means and tools for regulating the housing market. When market prices or rents are high, new public rental housing will be built to divert market demand and curb house prices and rents. When housing prices or rents are slow on the market, few new public rental houses will be built, and public housing will be converted into commercial housings to keep the prices and rents at a reasonable level.

Tough Reality

Although China's public housing policy system has an initial framework, it is still at a relatively early stage of development. The problem is that the portion of the population that is supported is relatively low, and the levels of support are not high enough, and the ways of identifying a target population and determining the level of security are still questionable. At present, public housing is mainly from the perspective of supply. Although there are rental subsidies targeted at the demand side in the low-rent housing system, the proportion is small. This is inconsistent with the international trend of public housing policy from supply to demand. In addition, a corresponding public housing financial system has not been established, and long-term financing sources have not been determined, which will seriously inhibit the sustainable development of public housing policies. Although the housing provident fund has potential in this respect, it still needs extensive work. China is still in a period of economic transformation and has a background of sustained high-speed urbanization. The situation of housing security is very complicated. Considering the large regional differences in China, China's public housing policy still has a long way to go.

Since 2011, real estate market in China has experienced a few turns of swirls and has come back to stability. On October 18, 2017, President Xi Jinping stated in the report of the 19th National Congress of the Communist Party of China, “the housing should be for living instead of speculation”. This key statement is complementary to the new era of urbanization in China, and together sets the standard for the development of China's public housing in this decade.

Previously, China's real estate market spent almost every year in the struggle of whether to regulate or not. The impact of housing prices on the economy, housing prices and people's livelihood in turn bothered management and consumers. The theory of "house for living, not speculation" is based on the central government's understanding of the urbanization process and the current overall state of the Chinese economy, reflecting the experience accumulated from previous rounds of regulation and control.

A number of policies have gradually reduced the number of properties as an investment product, making it return to the original needs of living. Laws and regulations are also being promoted. Real estate properties with different ownerships also begin to be gradually rectified. Regardless it is long-term rented apartment, newly built affordable housing, small property rights house, urban village retrofit, or the relatively new “rent-not-sell” land supply, shared property rights housing, and residential houses on commercial land parcels, the purpose of polices is to control housing prices, increase supply, and strengthen the use value and social functions of housing.

Shenzhen will include some urban village housing into the affordable housing system. (Source: ThePaper.cn)

At the same time, based on the city-specific development principles identified in the "2019 New Urbanization Construction Key Tasks" released in April 2019, cities of different sizes will determine development strategies and household registration policies based on their respective conditions, with the aim of further increasing the level of urbanization, absorbing rural populations into cities, and providing new citizens with public services in cities. Housing is one of the important tasks. The goal is to provide housing for people who would like to settle but are intimidated by the high housing price, particularly in cities with a population of less than 5 million. However, some megacities still aimed to stabilize the real estate market and increase housing demand by relaxing the settlement requirement to attract more young talents. This strategy has been popular since 2017. Therefore, although the real estate bubble will not appear as much as in the previous 10 years, letting the house no longer serve as a city's economic stabilizer, but only to provide residents with residential functions, still has a long way to go.

Producer/Gehry [UCRC]+ Yijing ZHANG [UPenn]

Text/Jie CHEN+ Xin TONG[UC]

Translation/Jiehao ZHU [UPenn]+Anyang ZHAO [UPenn]

Proofread/Emily Blanton [UPenn]+Yijing ZHANG [UPenn]

Edit/Yixuan ZHANG+ Ye PAN[UCRC]

策划/崔国+张祎婧

文/陈杰+佟鑫

翻译/朱结好+赵安洋

校对/Emily Blanton+张祎婧

编辑/张宜轩+潘晔

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