China plans 36 million affordable homes: lessons for Australia http://theconversation.com/china-plans-36-million-affordable-homes-le...

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AU Australia

9 December 2013, 6.22am AEST

China plans 36 million affordable homes:

lessons for Australia
Rebecca L.H. Chiu
Professor, Department of Urban Planning and Design, The University of Hong Kong at
University of Hong Kong

Nicole Gurran
Associate Professor at University of Sydney

The sudden dismissal of Australia’s National Housing Supply Council last month suggests we
may be entering a new housing policy vacuum. This is bad news for aspiring first home
buyers, whose numbers have slipped to record lows (now just 12.5% of all buyers).

At a time when major intervention will be needed to correct Australia’s systemic housing
affordability problems, how are other nations addressing this issue?

We could do worse than look to China, where the government has committed to deliver an
extraordinary 36 million affordable homes between 2011- 2015.

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This target is being

addressed through an eclectic
range of projects run by local
government authorities, such
as the City of Beijing.

Beijing’s population is
growing rapidly, nearly
doubling from 10.8 million
people in 1990 to 19.6 million
in 2010, plus a mobile
population of a few million
more.
Affordable housing in China is usually clustered into fenced
This massive population housing estates of 1000 to 4000 dwelling units. Rebecca L.H.
growth had been fuelled by Chiu
an internal migration of 7
million people from other parts
of the country to Beijing, inevitably leading to housing shortage and affordability problems,
with house prices climbing at an alarming rate. The worst affordability problems have been felt
by the migrant population moving to Beijing from other urban and rural parts of China, and has
affected both skilled and unskilled migrants alike.

Due to cultural factors and the government’s policy of eliminating visible homelessness, the
affordability problem is somewhat hidden within overcrowded and substandard housing in
“urban villages”, where low income migrant workers seek accommodation. Unlike the
fashionable “urban villages” of Sydney or Manhattan, China’s urban villages are the new
slums.

These villages are usually characterised by illegal extension or unregulated infill development
to meet demands for low cost accommodation and to create income for rural communities
under economic transition.

Housing affordability a middle class problem

Housing affordability problems for the upwardly mobile middle class is a relatively new
phenomenon in China, as it is in Australia.

Prior to 2000, housing reforms implemented by the Chinese government enabled occupants of
state rental housing to purchase their homes at very low prices. But at the conclusion of the
reform, all employees had been expected to rent or buy housing from the market directly until
the change in housing policy in 2011.

When house prices escalated in the major cities it stifled the housing aspirations of educated
young entrants to the workforce, and brewed social discontent. The high housing price also
weakened the competitiveness of large Chinese cities such as Beijing to attract skilled and
experienced workers.

This led to the announcement in 2011 of a bold target for providing 36 million affordable
homes over the next five years.

The target is to be achieved through a combination of direct and indirect government subsidy,
new regulatory controls on housing provision, as well as increased redevelopment efforts.
Municipal governments – such as the City of Beijing – are charged with designing their own
schemes under the general directives mandated by the central government.

In Beijing alone, the target is to produce 200,000 affordable units annually. Half of these are to

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be subsidised housing for

sale or rent, and private
housing under price or size
control for sale, to middle and
low income workers and their
families.

Beyond new
housing

There are three specific

affordable housing initiatives
of note in Beijing. The
government directly funds a
modest Low Rent Housing
Scheme that targets
low-income families. The
remaining two schemes that
are of greater scale - the
Public Rental Housing
Scheme and the Economical
and Suitable Housing
Scheme - rely mainly on
private sector resources. Subsidised rental housing for low-income earners in
Guangzhou Rebecca L.H. Chiu

Under the Public Rental

Housing Scheme, the government acquires private housing at market rates and to re-let at
lower prices to eligible households which are usually moderate income skilled workers.

Under the Economic and Suitable Housing Scheme, all housing projects are tendered out to
developers. To ensure that prices are affordable, the government provides free land and tax
exemption but stipulates a gross profit cap of 3% for all projects. Crucially, access to
government land combined with tax exemptions reduces the financial burden for construction
firms, overcoming a significant barrier to housing development.

All housing units are subject to size control. Eligibility to purchase one of these homes is
defined by income and asset levels and residency status, restricted to registered permanent
residents of the City of Beijing.

A five year resale restriction is mandatory, with local governments having the option of being
the first buyer after this period. This allows for the government to “recycle” the dwellings
through the affordable housing sector.

The subsidised housing projects are usually high rise blocks of five to 20 storeys, clustered
into fenced housing estates of 1000 to 4000 dwelling units. Their appearance is not
significantly different from that of lower-end market housing, but their sizes are smaller. Rental
units range between 35 to 60 square metres, and the sale units hover around 60 square
metres, capped at 90 square metres for larger families. There is a mix of internal layouts to suit
different family sizes and needs.

Most affordable housing projects are situated in newly developed, outer urban areas of
Beijing. Recreation space and facilities are generally better provided than other daily
necessities such as shops, services and transport.

What can Australia learn?

Following the axing of the National Housing Supply Council, Australia’s housing policy

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appears to rest on the hope that urban planning reform by the states and territories will prompt
a surge in new housing production, ultimately correcting the shortage of homes affordable to
low and moderate income earners.

Yet the experience of China shows that significant overall housing construction is not sufficient
to deliver affordable homes for low and moderate income earners. Rather, specific intervention
has been needed to secure affordable outcomes within the wider housing development
process.

No schemes are perfect and there are concerns about the location and quality of some
affordable housing projects in Beijing.

Nevertheless, with housing affordability regarded to be of national economic and societal

importance in China, the range of hybrid solutions for enabling and supporting new housing
supply could offer important lessons for Australia.

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