Introducing Public-Private Partnerships for Affordable Housing in China

Abstract

Though China is taking many steps to offer affordable houses to the public, the gap between the demand and supply for such affordable houses is still huge. Rapidly growing demand for affordable housing has encouraged large Chinese cities, faced with housing imbalance, to invest in developing affordable properties. As a result, the Chinese central government has started to encourage local governments to use Public-Private Partnerships (PPPs) and private capital to supplement the funding deficit. There is also an on-going debate regarding the need to establish prerequisites for institutions to meet in order to achieve effective PPPs. In this paper, we examine what the current institutional environment is in China and how China is meeting these prerequisites for effective PPPs. We also examine the main programs on affordable housing and propose a potential field for using PPPs. We draw the conclusion that PPPs are more favorable for renting-oriented type projects than owning-oriented projects. In this context, the advantages of the PPP model for China's renting-oriented affordable housing programs are would be the provision of private financing, the enhancing efficiency by involving private sector experts and the statement of bundling constructions and maintenance and operation work in the contract, which motivates the private sector to build properties up to standard for its cost efficiency from the whole project perspective.