When Beijing unveiled its US$586 billion stimulus package in late 2008, it said that over 20% of the cash would go toward affordable housing. The government promised to build 7.5 million low-cost housing units and re-house upward of another 2.4 million families living in slum-like conditions by 2011.
Questions are now being asked as to how much progress has been made on this US$132 billion project.
Standard Chartered economist Jinny Yan told CHINA ECONOMIC REVIEW that most signs of government support of widespread public housing projects have so far been anecdotal, although recent comments from the State Council suggest the issue is again moving up the agenda.
"It’s quite evident that [the government] is concentrating on welfare housing," Yan said. "It fits in with the whole notion of improving the social welfare net."
Similar to its previously announced policies in support of health care reform, Beijing’s ambitious public housing targets are considered fundamental to the country’s ongoing process of urbanization, raising living standards and promoting sustainable, long-term economic growth.
The State Council said in mid-December that it would ramp up efforts to curb rising property prices in some cities by doubling the initial number of homes to be built for low-income families to 15.4 million, and extending the deadline from 2011 to 2012.
However, Lou Jianbo, co-director of the Center for Real Estate Law at Peking University, dismisses it as a series of empty words.
"The statement was more of a gesture to show that ‘at least we are doing something’," he said. "There is no necessary linkage between low-end housing demand and rising property prices. The government should be building affordable housing anyway."
Lou noted that those eligible for low-income housing are financially nowhere near the threshold of commodity housing purchases.
To qualify for low-rental housing in Shanghai, the monthly income threshold lies at US$117 per household member, or US$350 per average three-person family. The average monthly Shanghai salary is US$481, while the mean price of a new commercially developed home in the city in mid-December was US$3,262 per square meter.
With these price and income differentials, why would developers even consider building affordable housing?
"A lot more needs to be done," said Standard Chartered’s Yan. "Local governments and the central government need to incentivize developers to construct housing for low-income families, perhaps by introducing subsidies to developers, but any policy implementation will take time."
Yan looks to welfare housing schemes in Hong Kong and Singapore, which suggest that public housing can be built to a sufficient scale to have a demonstrable effect on welfare and consumption behavior. "So far in China, however, the lack of incentives for local governments to develop welfare housing means that reality severely lags behind the State Council’s best intentions," she said.
