Abstract
In recent years, Chinese governments have launched ambitious plans in developing public rental housing (PRH), which are almost impossible to accomplish without the involvement of the private sector. Yet, very few quantitative studies have been carried out to evaluate the financial sustainability of PRH projects in China, especially from the perspective of the private sector. This knowledge gap is bridged through the evaluation of the financial sustainability of a hypothetical privately owned PRH project in Nanjing, China as a case study, utilizing data of a state-owned PRH project and the classic discounted cash flow method. The results indicate that the studied project is financially infeasible, which means that private companies would not be willing to participate in the provision of public rental housing, if they merely focus on profits. Then, the most cost-effective optimization measure of the studied case is quantitatively selected from four possible optimization scenarios, leading to a financial balance. This paper presents the current financial status of Chinese PRH projects, thereby providing policy makers with useful references to effectively accelerate the private sector’s provision of PRH in China.
Highlights
It is well known that Chinese governments abolished their welfare housing policies and initiated the market-oriented urban housing provision system reform in 1998
This paper has evaluated the financial sustainability of a Public Rental Housing (PRH) project in Nanjing from the perspective of the private sector, based on the estimation of its costs, incomes, and tax deduction
The widely adopted agent-construction system has proved ineffective in controlling the costs of PRH projects, this system can attract the private sector’s involvement
Summary
It is well known that Chinese governments abolished their welfare housing policies and initiated the market-oriented urban housing provision system reform in 1998. HPF is a compulsory housing savings program under which both employers and employees are required to contribute a certain percentage of the employees’ wages to a fund for the latter’s future house purchase [2] The significance of this traditional affordable housing program is notable. In December 2013, the Chinese central government officially announced the merging of CRH into PRH starting 2014. Recent studies concerning the private sector’s provision of affordable housing in both developed countries and developing countries (including China) are reviewed, followed by the section where basic information of the studied project is described. In the section that follows, four possible scenarios to optimize the financial sustainability of the studied project are proposed and compared, and the most cost-effective one is selected. The last section concludes this paper with policy suggestions and possible future works
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