Abstract
In the last three decades, the People’s Republic of China (PRC) has managed to replace its welfare-based urban housing system with a market-based housing provision scheme. With such significant housing policy changes, the PRC has successfully expanded urban home ownership and impressively increased per capita housing consumption. The housing market has become one of the major pillar industries in the country’s economic boom. However, affordable housing development has been greatly lagging behind the ever-increasing housing needs of a large lower-income population in the country, while housing price bubbles cast a shadow on sustainable economic development in the PRC. The main reasons for such challenges include the inefficiency of financial tools to regulate the housing market; and the discrete interests among the central government, local governments, and real estate developers. Within the context of the ongoing global financial crisis, it is even more critical to balance the PRC’s housing development, both to address the people’s housing needs, and to maintain sustainable growth.
Highlights
The People’s Republic of China’s (PRC) real estate boom has become one of the major factors promoting economic growth in the country
Through its “Decision on the Deepening of Urban Housing System Reform”, the government diversified the housing supply system into three parts: high-income families are expected to purchase housing at market prices; mid- to low-income families are qualified to purchase affordable housing at “full-cost price” or “standard price”, defined as “the summation of three times the average annual income of double-earner families and the estimated total housing superannuation contribution made by the work unit to the household” (Chiu 1996); and for low-income families, rental price would further increase to about 15% of average household income in 2000
According to the National Statistics Yearbooks (NBSC 2009, MLF 2007), citizens in the biggest cities in the PRC often find the ratio between housing price and their household annual income at around 20
Summary
The People’s Republic of China’s (PRC) real estate boom has become one of the major factors promoting economic growth in the country. Unlike the mature real estate markets in most western countries, the real estate market in the PRC is still in its infancy and lacks efficient self-control and government regulations. This is an outcome of urban land reform in the PRC that has been advanced by the government in a stepwise manner of “trial and learn.”. This paper attempts to review the PRC’s housing reform measures in the past three decades, to comment on the problems in its housing development process, to analyze the impact of the ongoing global financial crisis on the PRC’s housing policy, and to recommend policy changes to support sustainable development in the country.
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