In February and March, the Shanghai government leveled dozens of acres of two- and three-story slums just south of the city’s historic Bund district. The shantytown, a few hundred meters from the Huangpu river that divides the metropolis, was home to some local Shanghainese, but the cheap rents pulled in thousands of migrant workers hailing from across China. The prime location also no doubt attracted major property developers eager to build on one of west Shanghai’s last significant plots of riverfront land. It was only a matter of time before the old houses were torn down.
The demolition has made many winners. Landowners in deals such as these walk away with great sums of money. The developers will hope to make an exponential return on the original investment in the land. Government officials in that jurisdiction probably took home a pretty penny in transaction fees.
The losers were undeniably the migrants who lived in the rickety slums. Life in a Shanghai shantytown, which might be devoid of heating and plumbing, is by few measures comfortable. But cheap housing such as this underpins migrants’ lives in a place where the average monthly rent can easily surpass a monthly wage and increases in property prices regularly outpace growth in incomes.
Last year, the average price of land in Shanghai increased by nearly 20% year-on-year for months on end, yet the National Bureau of Statistics said this month that migrant workers’ wages climbed by just 13% year-on-year in 2013. Staying above water can be difficult.
However, there is hope for some of these migrants – and for about 100 million of the 250 million workers that live in China’s cities without the proper documentation.
In March, as the last brick walls of the Shanghai slum were knocked down, the central government set a rough timeframe for phasing out the hukou system, under which rural migrants are barred from accessing welfare benefits in the cities in which they work. By 2020, the plan says 100 million workers and other permanent residents will receive urban hukous.
Urban hukou status opens the door to a suite of resources for migrants. Without it, they struggle to gain access to basic health care and schooling for their children. Crucially, they’re also excluded from China’s affordable housing program, a central government scheme that subsidizes the rent on modern housing for poor urban hukou holders. The program is the centerpiece of China’s effort to integrate rural workers into urban economies, where it’s hoped they will earn and spend more money, and eventually drive China’s economic growth.
For those on the hukou short list, this is encouraging news. The government has earmarked US$19.2 billion for affordable housing this year alone, an increase of 14.3% on similar programs last year. By 2020, it also plans to renovate urban slums that currently house about 100 million people.
Moving such a crowd into stable urban housing during the next six years is an ambitious plan. But that still leaves more than 150 million migrants to fend for themselves in the big cities and no solid timeframe for assisting them. The government has remained quiet on the fates of those left out of the sweeping reforms because they lack the resources to get the required papers.
Local governments and property developers already find themselves under intense pressure in dealing with current hukou holders, let alone those who don’t have them yet.
“The demand for affordable housing of those with local hukous is so great that local governments will not care too much about migrants [without hukous],” says Kam Wing Chan, a professor at the University of Washington.
The challenge is coming up with the houses at the right price.
The affordable housing program is facing a debilitating bottleneck in supply. Starved of funding, local governments have few avenues to fund urbanization initiatives. With the central government passing the buck of urbanization reform to local governments, they in turn have passed some of the responsibility for building affordable housing to property developers who can ill afford to do so at present, says Youqin Huang, a professor at CUNY Albany.
Property developers are often required to designate 5% of new residential properties as affordable housing. However, these projects routinely fall short of covering the costs of development, leaving companies at a loss. At the same time, the same firms are in the midst of a liquidity crisis. Housing prices are slowing and property investment is declining – even nose-diving in some regions. Developers often skimp on the low-income projects, rendering them “low-quality and vacant,” Huang said.
If local governments are barely able to provide new hukou holders with suitable homes, migrants without hukous hardly stand a chance.
Far from providing shelter for many migrant workers, the massive plan to renovate shantytowns could leave many of them struggling to find new accommodation. Under the new plan, when a shantytown is demolished, affordable housing should be raised in its place. This should put many migrants with hukous into stable homes. But workers without hukous will be forced from their humble slums with no replacement in sight. They are often unable to afford the market rates on commercial rentals.
Even low-quality affordable housing isn’t a certainty on the slums that are torn down. Local governments, which by some measures generate 60% of revenues from land sales, simply can’t afford to allow for cheap housing to be built on pricy land; they will still try and maximize the value of their assets. This is likely the case with the Shanghai shantytown demolished a few months ago.
After two decades of urbanization driven by economic growth, the majority of Chinese migrant workers find themselves at yet another crossroad without a clear path toward integrated city life.
These workers have spilled into urban centers from provinces near and far, peddling fruit and vegetables, powering factories and – beam by beam – raising some of the world’s greatest skylines. But they don’t take part in the life of the cities they build, instead living on the fringes of society and increasingly, the hard, industrial edges of conurbations like Shanghai.
By Kam Wing Chan’s count, many migrants will never integrate fully into China’s cities. The plan the government put forward this year is “largely the same as the old one,” Chan said. Leaders in Beijing have simply drawn from and synthesized older urbanization plans to form the new one.
At the pace marked out by the government, Chan says comprehensive reform to the hukou system could take up to 50 years. Many migrants might as well consider their outsider status permanent.