ROOM TO GROW
A long-ignored facet of the housing boom, renting is becoming popular with urbanites unable to buy. But with skyrocketing prices, a carcinogenic drywall scandal, and shady agents running amok, it's hard for China's tenants to find a place to call home
When a tenant sued rental agency Ziroom in August, blaming the high levels of formaldehyde in one of its Hangzhou apartments for her husband’s death from leukemia, Xue Jing was one of many who saw the news and panicked.
“I bought a DIY testing kit, and it told me there were abnormal formaldehyde levels in my bedroom, so I borrowed a meter and got a reading of 0.23 milligrams per cubic meter,” Xue told TWOC, quoting a figure more than twice the national maximum. The carcinogen, commonly found in varnishes and paint used in renovations and furniture by companies like Ziroom, is capped at 0.1 milligrams per cubic meter by Chinese law. “I didn’t even know this could be a problem; the agent never said anything before I moved in.”
For those in the know, it has long been an open secret that harmful chemicals are present in apartments across China—and that this is only the tip of a toxic iceberg. “Actually, all rentals have formaldehyde levels exceeding the maximum; Ziroom is just the biggest offender, and the unluckiest,” one source within Ziroom’s competitor, Xiangyu Apartments, told TWOC on the condition of anonymity.
Once a neglected rung on China’s heated property ladder, the country’s rental market got a push in late 2017 when President Xi Jinping called for homes to be built for “living in,” rather than purchased for speculation. However, as cities and state-owned banks responded by rolling out preferential land-use and lending policies, and developers rush to cash in, the rental sector seems to have not only inherited the housing boom’s
Your apartment may be poisoning you— a TWOC investigation f inds a rental business riddled with scams, runaway prices, and toxic chemicals in the walls房子是租的，生活是自己的
investment—but also its issues with speculation, poor regulation, and corruption.
Aside from the so-called “formaldehyde-gate,” this scandalridden year saw Ziroom censured again in September for evading responsibility for a hidden camera found in one of its Beijing apartments. Meanwhile, chief competitor Danke Apartments was investigated in May for a “pay-by-month” scheme that resulted in tenants getting signed up for loans without their knowledge, which they repaid in the belief that they were simply making rent each month (Danke also paid landlords monthly, meaning that the agency controlled the equivalent of a year’s rent in loans with which to expand their business).
The same practice heralded the October bankruptcy of Shanghaibased Yujian Apartments, which crumbled after taking on too much debt acquiring rental properties from homeowners, leaving landlords with unpaid rent and tenants potentially still on the hook for the loans in their name.
All this comes alongside growing anxiety that rents have simply increased too much, and show no sign of stopping in spite of the blatant disregard to tenants’ credit, safety, or health. Among first and secondtier cities, Chengdu and Shenzhen led the price surge, with the average cost of rentals increasing 31 and 30 percent, respectively, since last year; in parts of Beijing, rent jumped 10 percent just between June and July this year. “Rent prices see astronomical increase; tenants pay with their lives!” shouted the summer’s headlines. “Pay the highest price and breathe the most toxic chemicals!”
In August, a Beijing homeowner revealed that an apartment he planned to rent out for 7,500 RMB per month was eventually listed at 10,800 RMB per month, after Ziroom and Danke tried to “outbid” each other for the right to lease the unit. More mysteriously, Hu Jinghui, then vice-ceo of real estate agency 5I5J, accused competitors of driving up rent prices and called for government regulation—then abruptly resigned the next day, claiming pressure from Ziroom’s parent company Lianjia.
For tenants, it’s a depressing cycle of shady bargains, high fees, and not knowing where to turn to help. “All that the agent gave me were green turnip plants to ‘suck up the chemicals,’” says Xue. “It makes me feel very helpless.”
of Chu Min’s roommates were still in their rooms when the demolition crew came one early morning in September.
“I saw a plastic card being slipped inside our door, breaking it open. A member of the residential committee came in, followed by policemen, and a crowd of workers, who said they’ve come to tear down [illegal] apartment subdivisions,” he says. “Some of my roommates, who hadn’t gone to work yet, got smothered in falling dust as their walls were knocked down.”
For those caught up in the summer’s scandals, it may be hard to imagine that “branded apartments” (品牌公寓) such as Ziroom’s were once touted as a solution to an abusive industry where experiences like Chu’s were the norm. A Us-educated “overseas returnee” with no prior experience renting in China, Chu left his first apartment in Beijing because his agent pressured him to pay rent ahead of its due date, and moved into what he believed was a fourbedroom loft. “It got subdivided into nine bedrooms. I’d been completely scammed.”
Chu had fallen for a classic baitand-switch by “shady agents” (黑中介), a term for unlicensed, fly-by-night operations that typically pose as tenants to obtain apartments from homeowners or other agencies, make modifications to the unit, and sublease it, often with various illegal fees tacked on. “In reality, all agents subdivide apartments so they can rent them out for more money,” Chu says,
“and if I want to move out, they’ll say I broke the lease and forfeit my deposit. It’s also not clear if I’d still be on the hook for the loan they took out for me.”
Other underhand ploys involve agents delaying repairs, cutting off utilities, or claiming that the unit will be demolished or repossessed by the owner; tenants are then offered a less attractive apartment, and forfeit their deposits or even their rent when they (predictably) refuse. “Then, once they’ve gotten rid of the tenant, they’ll repeat the process with another,” says Chu, calling the practice “apartment laundering.” When problems arise, unlicensed agents also simply disappear. Their scams are difficult to prosecute because they are considered “individual subletters” rather than corporate parties under a lease.
Unscrupulous brokers have been a feature of China’s real estate history since at least the eighth century— when they were called yaren (牙人) and banned from the capital—but the modern crisis is related to the building boom that began with the commercialization of China’s housing policies in 1994. By 1998, the State Council had formally abolished the housing distribution system, and many cities began to develop their land into new housing projects to boost their GDP and absorb the inflow of industry and migrant populations.
It wasn’t long before collectivism had swung in favor of a cultural obsession with homeownership, fueled by an economy that offered few other surefire investments or social safety nets. This is especially true in firsttier cities: home-ownership is usually a prerequisite for obtaining a local household registration (hukou), as well as other social resources, such as desirable schools. Public housing is also almost inexistent—instead, almost all new developments are for profit, contributing to runaway price inflation.
There is no official study for the vacancy rates of Chinese apartments—that is, the percentage of purchased properties that are neither occupied nor rented out—though most unofficial studies since 2013 have put the figure between 20 to 30 percent. For absentee landlords, agencies play a crucial role in finding tenants and looking after their spare investment properties. “I’m unable to go deal with the tenants myself, but with an agent, I basically don’t have to worry,” said Beijing homeowner Mr. Feng, who has already moved back to Shenyang, but has no plans on selling.
China lags in providing legal protection for either tenants or landlords; nor are there authorities such as rental boards that deal specifically with rental properties and leases. The obligations of the renter, agent, and landlord to respect their lease are broadly outlined under the PRC’S Contract Law. However, no city or province has comprehensively addressed matters such as who is legally entitled to lease or sublease an apartment, what fees they are allowed to collect, and the maximum by which the prices can increase by year.
In a sellers’ market, this makes renters feel compelled to pay whatever they are charged, or move out and cut their losses if they’re dissatisfied, rather than face the rigmarole of a civil action whose verdict is unlikely to be enforced. Recent graduates, with little money or legal know-how, are especially vulnerable to predatory agents and too-good-to-be-true deals; China’s lack of a consumer credit system means that rent is usually paid in three-month installments or more. Added with the equivalent of at least a month’s rent, each, in agent fees and deposit, it amounts to a minimum upfront payment equal to five months’ rent before the tenant even moves in, not counting other miscellaneous fees that an unlicensed agent may charge.
“I’ve looked at better apartments, with [more established agencies such as] 5I5J, but they ask for two months’ deposit plus three months’ rent, which is more than I can afford,” says Chu. “Small agencies are my only other option.”