House Sweet Home
The past National Day “golden week” marked an unprecedented low for China’s housing market: At least 19 major cities suffered an average daily deal decline of 51.4 percent over the same period of the previous year. In first-tier cities, the figure fell by up to 70 percent—a worrisome contrast to 2016.
Since 2016, China’s first- and secondtier cities have experienced a new round of rapid growth in housing prices coupled with major investment speculation, and the housing prices in some of the first-tier cities nearly doubled in a year. To address rising housing prices, governments of many Chinese cities have introduced a series of policies such as limiting purchasing and sales and raising the minimum down payment. Since mid-july of this year, cities including Beijing, Guangzhou, Wuxi, and Zhengzhou have launched policies to expand tenants’ rights. In just two months, the topic became popular among stakeholders as well as the focus of water cooler conversation.
Alleviation for School Estate
This March, at a press conference held by the Information Office of the State Council, an official from the Ministry of Housing and Urban-rural Development proposed the idea of gradually granting tenants equal rights to purchasers in basic public services.
In mid-july, the municipal government of Guangzhou, capital of Guangdong Province, led the country by issuing an action plan to accelerate the development of the housing rental market in the city with the idea of “offering the children of qualified tenants equal rights to public services such as enrollment in a nearby school to safeguard the equal rights of all residents.” Guangzhou has remained at the forefront of China’s reform and opening up for decades, so its lead role in this realm is fitting.
“When the news broke, property owners in our community went crazy immediately,” said Guo Leilei, a 38-year-old home owner who had just moved to the residential area that was built in the 1990s. A year ago, Guo bought a two-bedroom apartment at a price of more than 40,000 yuan (about US$6,030) per square meter. This rate is nearly 10,000 yuan (about US$1,507) per square meter higher than houses of the same condition in the neighboring community. However, she moved to the community primarily for the school district so her six-year-old son would be accepted to one of the province’s top primary schools.
“I would have just rented a house here if I had known such policies were coming; I sold a bigger house to move here,” she complains. Later, however, she found that the so-called “equal rights for tenants and owners” is not as simple as it sounds.
In fact, admitting tenants’ children into nearby schools is not the new system. According to the regulations, a lease contract is an accepted proof of residence, which can indeed be used to get a student admitted to a local school. This also requires other conditions such as one of the parents must be a local permanently registered resident or hold a green card for talented personnel. In addition, the number of
vacancies is limited— students must accept the “overall arrangement” according to the actual situation, so it can be very difficult to enroll a child in a prestigious school.
“At this stage, it’s not completely realistic to reach the goal of granting equal rights to tenants and owners due to the massive inflow of population to urban areas,” opines Ren Xingzhou, a researcher with the Institute for Market Economy under the Development Research Center of the State Council. “The most difficult part is the insufficient supply of quality public resources, especially the apparent shortage of educational resources in many communities.”
Competition for Talented Personnel
As first-tier Chinese cities, Beijing, Shanghai, Guangzhou and Shenzhen have enjoyed the country’s best resources, which is a major reason behind the soaring property prices in those cities, making it hard for many young graduates to settle there.
“In recent years, the skyrocketing housing prices in first-tier cities have pushed many of my best graduates to choose jobs in second- and third-tier cities because they can hardly afford housing,” remarks Professor Cai Nian from the School of Information Engineering under Guangdong University of
Technology. “The goal of giving tenants and purchasers equal rights in big metropolises is to retain young talent.”
This year, first- and second-tier cities including Wuhan, Changsha, Chengdu, Xi’an, Jinan, Nanjing, Hangzhou, Zhengzhou, Qingdao, Xiamen, Tianjin and Chongqing have promulgated detailed rules and policies to safeguard tenants’ equal access to public services. “The integration of such rights and household registration policies reflects competition for talent particularly in big cities,” comments Zhang Hongwei, director of Shanghai Tospur Real Estate Consultation Company. “One of the goals of such policies is to retain talented people in a city to help it perform better.”
Before the introduction of such policies, first- and second-tier cities such as Beijing, Shanghai and Shenzhen were providing specialized apartments for young talented people to alleviate housing pressure.
The municipal government of Shanghai, for instance, provided apartments specifi- cally for scientifically innovative talents aged 20- 40, including recent university graduates, hi-tech personnel, leading figures in science and technology and operators of start-ups—the powerhouses most responsible for accelerating a city’s scientific and technological progress and economic growth. The government aims to meet their accommodation demands, which is a major factor in their lives. The implementation of equal access to public services further safeguards the interests of tenants.
Buy or Rent?
As one of the first group of 12 pilot cities to carry out home rental reform, Hangzhou officially released new policies for tenants on August 30, according to which, over the next three years, new rental housing will account for 30 percent of all new housing, and rental companies will be subsidized and supported by the government. It is foreseeable that more and more rental housing will enter the market under the guidance of government policies. In 2017, the surge of housing prices was effectively curbed through a series of measures to limit housing deals such as elevating the purchase threshold, increasing the availability of housing and encouraging renting. Considerable credit for this victory was given to the implementation of the “equal rights” policy due to its long-term vision for institutional arrangement. Is buying property still desirable after the implementation of the “equal rights” policy? Yes, of course.
Since ancient times, Chinese people have firmly believed that a family cannot lead a content life without its own home. Everyone would prefer to buy a home if they have a choice.
“It is impossible to make everything 100 percent equal, especially considering how limited quality educational resources are,” comments Zhang Hongwei. “Still, renting seldom brings a sense of belonging, a feeling deeply rooted in our hearts.”