China Housing Reforms Research Paper

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China's Urban Housing Development -- a Shift from Welfare Housing to Home Ownership

The challenge of housing in China has been on the national agenda for more that four decades now. A lot of efforts have been directed by the government to help solve the challenge and it has substantially achieved a significant mileage. This paper will delve into the policies informing the urban housing reforms, the evolution that the housing reforms has undergone over the years, the challenges it faced, the current situation of China in terms of housing and also discuss the trend that are prevalent in China and what the government is currently doing to ensure the dream of housing for every China citizen is achieved.

Overview of housing reform agenda

The landscape of China as a whole has been undergoing several changes and shifts in the political, social and the economic aspect of it. This prompted massive changes in infrastructure and the housing sector was one of the areas that were significantly affected, with massive shifts in the way the general population was housed and the policies that guided housing of the growing population. The crisis in housing of the urban population in China was predominantly responsible for the shift from the welfare housing system geared towards providing low-cost housing in urban areas established with the coming into place of the People's Republic of China in 1949. In this system, the government built houses and them allowed the citizens to occupy them at a nominal rent charged per month. In the mid 1950s there was a socialist transformation and the housing sector was no longer able to support itself, the fees was reduced and henceforth the after construction expenditure could not be met (Yang Z. & Chen J., 2014:Pp15).

The Housing Reform: Stages and policies

Chine experienced a fresh beginning in the housing sector which saw the significant change of the urban housing system moving from the welfare housing to the trend of home ownership. This began in December 1978 when the Third Plenum of the Eleventh Central Committee was convened in Beijing. It was ta this point that China began to move away from the centrally planned economy and that included the housing sector which was highly centralized in the stringent socialist regime. The housing sector was a very important sector to the government and even in the process of decentralizing the economy and allowing most of the economic aspect to be dictated by the market demand, it was extremely difficult for the government of China to expressly let go of the housing sector. Hence, they carried out several experimental projects towards commercializing the housing sector and the urban public housing in specific. In 1980, China's paramount leader, Deng Xiaoping indicated that there was need for liberalizing the housing sector to compete in the market driven economy. He indicated that the individual China citizens were to be allowed to own homes through purchasing, building their own or even purchase the old homes from the government projects and be allowed to pay for them over a ten to fifteen years grace period. He also indicated that there would be an upward adjustment of the rent fee in the public sector houses, a factor that was geared towards encouraging people to buy or even build houses of their own rather than renting one since the financial implications would be the same. However, in line with this increment, he suggested that the low income bracket citizens will have to be subsidized (Liu Z. & Mei C., 2013:Pp9-10). The new housing policies were aimed at encouraging a closer relationship between the private and the public sector as the private sector was effectively being introduced into active participation in the housing construction.

The declaration by Deng Xiaoping was a landmark turning point for the public housing system that had been in place for more that 30 years and it gave room for more policies thereafter that would see the actual implementation of the changes that were desired in the housing sector. It gave way for the subsequent experiments and policies in the bid to shift the public housing system from the welfare structure to the market driven ownership of houses. Several cities were subject to experiments with the aim of using them as the pilot projects for sale of the public sector houses and also reorganizing housing production to ensure there is enough returns in the housing investment. These measures to transition from the previous system to the home ownership ran on experimental basis between 1980 and 1988, and since this time the public sector has always kept a leading role in the housing sector with the private housing occupying approximately 19% by 1990. This was not a very significant shift since in 1982 it was pegged at 17%, however, the significant change was that the work-units started to have more control over the public housing than the local authorities.

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The ideology of privatization of the housing sector was a noble initiative, however, the government still felt that the socialist regime was the best in providing social equity and allowing the complete privatization of the housing sector and absolute lack of control would drift the system to a capitalist one which would be detrimental to their people. This made the central government weary of instituting and implementing fundamental structural changes in line with property rights. This made the government to focus more on improving on the efficiency in the public sector through allowing the people and their organized groups to take control of leasing rights over the public property. This indicated that the central government in pursuit of the economic reforms, was more geared towards marketization of the housing sector over the privatization. The government was making efforts to introduce competition in the market among private players but without necessarily privatization of the public property. To achieve this, the central government encouraged the state agencies and the locally owned enterprises to get into competition with each other, albeit still retaining the ownership of those enterprises or owned by the local government.

Some of the significant shift in policies experienced in this period included the mass selling of the public houses hitherto belonging to government at the building cost alone without adding any other additional costs on the building cost. The public housing sales were also highly subsidized to those who wanted to buy them, and for those that remained to be rented had their rents increased steadily each passing year with an aim of encouraging the citizens to buy them instead of remaining in them as tenants. In 1984 the concept of real estate was officially and legally recognized to encourage more people to build houses and sell and even of their own, however, since the socialist approach to property ownership was still predominant, even these houses were built and purchased in groups in most instances (Hui X., 2009).

This first attempt to urbanization of housing did not work very well for the government due to the conservative approach that it was given. The ten years of experiment changed little in China housing landscape. There was housing shortage in the urban regions, the allocations of the public property was skewed towards the influential families and the rich people, the investment into this sector was minimal and the management of the public houses and property rented out was still very poor. The ever increasing rents were resisted by tenants due to the high inflation that was experienced during that time, the favoritism given to the rich families was met with criticism and instead of increasing the public ownership of houses it ended up increasing the housing expenditure in the family budgets. The experimental housing redistribution had essentially failed to take place as was envisioned.

The failures experienced in the initial ten years prompted a response that was initiated in early 1990s with the onset of the shift in ideological, social and economic approaches. The top-down approach to urbanization of housing continued and this time confirmed that marketization was the approach that would be used henceforth. The 'Socialistic Market Economy' was adopted in the 14th National Congress of the Communist party and this marked a significant change in tact in housing reforms and a departure from the planned economy. In this new marketization of the economy and housing reforms in particular, land is an inalienable part of the change hence in 1990 the law was amended to treat the previously state owned land in China and now land was viewed as a commodity. In the now market economy, the release of land use transfer saw the growth of real estate development and on the other side land and housing speculations grew. This speculation caused the economy to overheat hence the government had to come in and increase the levels of "macro control" to oversee and moderate the real estate economy.

In 1994, yet another significant decision was made that saw the housing reform escalated to urban housing system. In this approach, there….....

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