Eva Cheng
Quoting the China Real Estate Association and the state-controlled China Securities News, the March 5, 2003, Washington Post reported that nearly 20% of China's housing stock stood empty (measuring about 130 million square metres of vacant floor space in September 2003) while the unoccupied rate for office space was 26%.
Three months later, China's central bank ordered the country's banks to tighten the credit that had gone to finance runaway growth in housing construction. It feared a housing bubble was forming. Early this year, both the central bank and Premier Wen Jiabao warned publicly of the danger of an overheated economy, for which uninhibited construction is a main culprit.
Meanwhile, despite an improvement in housing conditions from the late 1950s — average living space per urban Chinese has gone from three square metres then to more than eight square metres now — housing distribution is becoming less equal.
In 1986, 18% of China's urban residents had less than four square metres of living space. That ratio increased to 30% in 1992. A 1998 Hong Kong Polytechnic University study on welfare housing development in major Chinese cities estimated there were still 4 million urban households cramming into living space of less than four square metres per person.
Revolution's gains
The 1949 revolution did not prevent living space from remaining squeezed, and the quality and facilities of housing generally remains far short of Western standards. However, the previous enormous gaps between the "haves" and "have-nots" in housing have been significantly bridged. The access to shelter, however rudimentary, has become a right in China. A testimony of this achievement came in a 1991 report in Habitat International, in which Mohammad Chaichian concludes that in 1976 "the housing conditions in urban China were much better than in other developing countries".
A few years after the revolution, rural residents were provided state land for tilling and shelter. Most urban residents, on the other hand, were entitled to basic housing, mostly provided and managed by the state enterprises for which they worked or by the municipal authorities. Other basic needs, such as medical care, childcare, education and pensions, were also provided free or on a highly subsidised basis, but housing, according to China's National Bureau of Statistics, in 1995 still accounted for 60% of this social wage.
But with the so-called reform policy that began in the late 1970s, the provision of the social wage have been systematically scaled back. Housing "reform" has dealt the biggest blow to an average worker's standard of living.
Beijing's intention to re-commodify urban housing was first announced in 1980, and was followed by "experiments" in the coastal cities. By 1986, such "experiments" reached 160 large cities and 300 medium-sized towns. A 10-year plan to accelerate "commercialisation" and reduce the subsidies for urban housing across the whole country was announced in 1988. By 1990, Beijing declared it had achieved a 24% private ownership of urban shelter.
The proclaimed plan is to substitute that part of the social wage received in kind — such as housing — with an increased pay packet. The big question is how equal the substitution will be.
Lining the pockets
There are many indications that employees in non-productive sectors — in essence, the ruling Communist Party of China's apparatus and that of the state — have come out in such benefits ahead of those in productive enterprises. The former constituted the core of the privileged layers in the pre-"reform" days.
There were at least four pay rises for these non-productive sectors since 1998: 30% in September 1999, a 100 yuan (US$12) monthly rise in April 2001, 15% in October 2001 (plus an extra month of "double pay" in December 2001) and 15% in October 2002. The 2002 pay rise plan provoked so many objections from other social sectors that it was "postponed", with officials naming a "concern for the poor" as the reason.
A Royal Institute of International Affairs' June 2003 study, "Social inequalities and wage, housing and pension reform in urban China", observed that not only had non-enterprise employees been receiving higher wages, that differential became more pronounced in the late 1990s and was made worse by housing and pension entitlements.
How much have the pay rises compensated for the withdrawal of allocated housing? The situation in Beijing is indicative. Wages are higher there than most parts of China, but so is the cost of housing. The average annual wage in Beijing was 19,155 yuan (US$2314) in 2001, but the average housing price there in 2002 is 4883 yuan (US$590) per square metre. Nationally, it costs 3000-4000 yuan per square metre for budget housing and more than 10,000 yuan per square metre at the high end. But in 2000, the low-income workers eked only less than 10,000 yuan a year in salary and the medium-income earners made between 10,000 and 24,999 yuan annually. The two groups represented 48% and 44% of all households respectively.
Changes to welfare housing
To ease the affordability gap, a "housing provident fund" was first set up in Shanghai in 1991. Both employers and employees have to make a monthly contribution to the fund, set as a percentage of the employee's income. After a set period, the employee is entitled to make withdrawals from his/her account for his/her housing needs. Such schemes were promoted nationally in 1995 and are now found in at least 33 Chinese cities. Such accumulation, however, takes time to be of meaningful help.
Knowing that the newly constructed private homes ("commodity housing") were out of reach of most workers, Beijing aimed to get state enterprises to pressure their workers to buy the enterprise-provided homes they are occupying ("welfare housing"). This pressure included raising rents significantly and offering deep subsidies to encourage sales. Alternatively, enterprises bought "commodity housing" at market price and then let them or sell them to their workers at concession prices.
None of these, however, was enough. The number of tenants opting to buy out their residential units remained far short of target. A large number of state workers are technically still on the payroll, but only receive a starvation subsidy. For them, their "welfare housing" is essential for survival.
In a further push in 1998, Beijing banned new allocations of "welfare housing", insisting that subsidies, in cash or via vouchers, be paid instead for a set number of years. The extensive privatisation of China's mostly small and medium-sized state enterprises has meant that workers, if they are lucky, have been re-employed en masse under the new contracts, with the new (including housing) terms.
Forced evictions based on various pretexts have become widespread, easing the transition to "commodity housing". Rampant bribing provides incentives to remove unwanted tenants illegally. The December 17, 2003 Asia Times online pointed out "numerous" CPC officials have been ousted for property graft. They included former CPC general secretary of Guizhou province and Hebei province (Liu Fangren and Cheng Weigao) as well as a former vice mayor of Shenzhen city, a former mayor and a vice mayor of Shenyang city.
In 1998, Beijing made it clear that the rent for existing welfare housing would be increased so as to eventually match market levels. Previous plans to raise the rent levels hadn't worked well. The rent for welfare housing had been 1-2% of household income in the 1980s and early 1990s, and there was a 1994 State Council plan to raise it to 15% of household income by 2000.
When 2000 arrived, though much increased, welfare housing rent was still less than 25% of market rent. This was in large part due to the huge popular pressure not to raise rents in these houses, combined with widespread protests against mass lay-offs.
While such resistance has slowed the pace, it hasn't prevented welfare housing from becoming a shrinking enclave. According to China's census in 2000, welfare houses only accounted for 16% of all urban households. Renting from other sources accounted for another 13% of households' dwelling solution. This left 73% of households owning their homes (27% built the dwellings themselves while the remaining 46% bought them — 30% of whom bought their old work dwelling).
This has come at a price: as of 2002, more than 825 billion yuan of personal mortgage debt has been piled on the shoulders of Chinese workers to finance the purchase of shelter.
From Green Left Weekly, June 30, 2004.
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