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Beijing Struggles to Shelter Low-Income Buyers

With the average commercial housing price in the nation's capital increasing to 4,747 yuan (US$574) per square metre last year, many of the city's poorer residents were priced out of the housing market. Still, prices are expected to continue to rise.

Fears of a bubble or burst in the real-estate market and a strong desire to own a home of their own largely explains why thousands of people line up outside new affordable housing projects several times each year to get a chance to enter a drawing for perhaps another chance to buy an "affordable home." The drawing is based on a government-dominated programme that was launched five years ago to provide reasonably priced shelter to its low- or lower-middle-income residents.

Beijing Bureau of Statistics figures indicate that the capital built 3.06 million square metres of affordable housing in 2004, which helped lower the city's average commercial housing price by 278 yuan (US$33.50) per square metre.

The bureau reported that the price of the city's affordable houses averaged at 2,953 yuan (US$356) per square metre in 2004, markedly lower than the average commercial housing price.

Bureau officials reported that although the floor space of the affordable houses sold in Beijing accounted for just 13 percent of the city's total residential housing transactions, it played an "effective" role in balancing the housing prices of the municipality, where the average housing price rose by 6.5 percent last year.

To further extend the benefits of affordable housing to a larger population, the local government said three million square metres of the low-priced housing will be constructed in 2005, the same as last year.

But, despite all the good intentions of the government, will affordable housing play its role as planned? Will the benefit of relatively inexpensive shelters be extended to the truly needy population?

Who is Buying Affordable Housing?

As a special programme designed to help ordinary wage earners buy homes, the affordable-housing plan is open to those who meet all the following three conditions only.

l   A buyer must be a registered permanent resident in Beijing proper or of a designated township.

l    hey must have insufficient living space and must not own other property.

l    The annual family income of the buyer must be less than 60,000 yuan (US$7,255).

According to a questionnaire answered by people queuing to buy affordable houses in a newly built residential community in Downtown Beijing, half of the buyers reported a monthly family income of less than 3,000 yuan (US$363). Fewer than 6 percent of those surveyed admitted their families earned more than 5,000 yuan (US$605) per month.

Many of those surveyed said the prices of affordable housing should be less than 3,000 yuan (US$363), but that current prices are somewhat on the high side considering the buyers' limited financial resources.

While ordinary wage earners are praying for an even lower price for affordable housing, some of the houses actually go to those who don't care much about the price. In Tiangongyuan and Huilongguan, two of the earliest affordable communities located in the northern suburbs of Beijing, a considerable portion of the houses sold went people who were not poor enough to live in the communities. Some home buyers owned luxury cars as well as up to three apartments in the communities.

"Lack of an effective system to check the real financial standing of the home buyers largely caused the situation," said Sun Xinxin, an official from the Construction Committee of the Beijing Municipal Government.

To ensure that affordable housing gets to the neediest buyers, the local government has taken a series of measures to block non-qualified buyers' access to the affordable communities.

The government is posting the names of the applicants for affordable housing online in hopes that the public will help screen out those who are not qualified to buy. Last year, six applicants were barred from buying homes as a result of public opposition. Sources with the Construction Committee said some government departments are discussing ways of investigating income tax records of applicants to ensure that those who need the public housing get it.

With the development of affordable communities becoming increasingly normal, developers are reducing the floor space of affordable apartments to a "reasonable" 80 square metres, in response to home-buyers' complaints that many affordable apartments are too large to be truly affordable.

In order to curb speculative buying, the local government issued a regulation last year specifying that the owners of the affordable houses cannot sell the properties at market prices within five years of the purchase of their homes. Affordable housing owners will also have to pay a considerable sum in transaction fees if they resell the home, which seems to be dampening the secondary affordable-housing market.

For all the local government's efforts to provide comfortable, affordable housing to less fortunate residents, some real estate experts are urging the government to stop creating gaps between the prices of the affordable houses and commercial residences. They would prefer that the government directly subsidize poor home buyers with cash so these people can have a wider range of choices in selecting their accommodations. Real-estate lawyer Chen Xu said the current affordable home plan still lacks transparency and the cash-form subsidy to low-income home buyers would be a better way to enhance the transparency of these dealings.

To Make the Unaffordable "Affordable"

While the affordable houses are satiating needs of some Beijing residents, finding a suitably comfortable and affordable home remains a mission impossible for urban dwellers just at the poverty line.

"Government departments should be held accountable for providing the needy or lower-paid population with accommodations," said Li Yining, a noted economist from prestigious Peking University. In a country where the government remained omnipotent for so long, such comments are widely echoed and much appreciated.

The Beijing Municipal Government began providing low-rent houses to the city's poorest residents and the families cared for by the government in August 2001.  The "low-rent" programme began in the forms of cash subsidies and rent exemptions, with the highest per-capita subsidy totalling 250 yuan (US$30) a month. Families qualified for low-rent apartments owned by the government should report a per capita living space of less than 7.5 square metres, according to the Construction Committee.

By the end of August 2004, about 2,149 of the city's poorest families had moved into low-rent apartments and had been provided cash subsidies amounting to 13.84 million yuan (US$1.7 million).  The programme helped to raise the average per capita living space of the families affected from 2.2 sq.m to 10.7 sq.m.

To better implement the low-rent plan, Ma Hongbo, from the Real Estate Department of the Capital University of Business and Economics, proposed that the government should gradually withdraw from the role of being a housing provider and resort more frequently to using money.

"It is way too complicated and time-consuming for the government departments to check the qualification of applicants for the low-rent houses on an individual basis," said Ma, who urges the government to increase housing subsidies in the cash form.

To give market forces a bigger role in sheltering the city's poor and to provide the poorest population with more choices will also help prevent the formulation of many de facto slum areas and communities in Beijing, where income disparities are already pronounced, according to Ma.

While experts like Ma are proposing smaller roles for the government in sheltering the poor population, others demanded stricter government controls over commercial housing prices.

Zheng Gongcheng, a deputy to the National People's Congress (NPC) and vice-dean of the Labour Relations and Human Resources School under the top Beijing-based People's University of China, said the real estate market is in a chaotic state because inadequate supervision has been given to stemming "unreasonably high" housing prices.

"Developers have reaped exceedingly high profits in the current chaotic real estate market," Zheng said, while urging governments to develop more low-rent, affordable housing projects to serve the needs of China's large population of low- and middle-income home buyers.