A burden or a tool? Rationalizing public housing provision in Chinese cities

Public housing, a crucial component of the welfare state, is often viewed as an economic burden. We confront this conventional view and provide an alternative understanding of public housing in mixed economies. Through the lens of China, we conduct case studies and investigate the rationales of public housing provision in two high-profile, industrializing and deindustrializing cities – Chongqing and Shenzhen, respectively.

The consumptive and productive features of public housing

China's public housing

 

Today, China’s public housing system has evolved into four constituent programs: 1) Economical and Comfortable Housing (ECH), 2) Housing Provident Fund (HPF), 3) Cheap Rental Housing (CRH) and 4) Public Rental Housing (PRH).

ECH and HPF

The ECH and HPF programs were established in the 1994 housing reform to promote home ownership which would free the government from operation-related subsidies. Most ECH units are built by for-profit real estate companies and sold to eligible families – selected low- and middle-income households with local hukou – through market transactions; some are built by state-owned enter- prises for their employees. Yet, the development of ECH relies heavily on various forms of subsidies from local governments, such as direct expenditures, the provision of low-cost or free land and the reduction or waiving of fees and taxes.

HPF is a compulsory saving program that supports employees to purchase housing. It requires both employers and employees to contribute a certain percentage of the employees’ salaries to HPF accounts administered by the China Construction Bank. Sizes of HPF loans and ratios of loan beneficiaries vary greatly across cities.

Both ECH and HPF programs have been criticized for their uneven distribution of benefits, neglecting the low-income population’s housing needs.

CRH and HPF

 

CRH was introduced in 1998 as a safety net for the poorest urban residents. In response to growing inequalities, China’s central government strengthened the CRH program in 2004 and urged local governments to provide CRH. However, this program has yet to effectively address the housing problems of the poorest, largely due to local reluctance. Local governments receive little or no financial support from the central government and bear the huge fiscal burden of producing new CRH units and subsidizing rents. Only small portions of low-income households with local hukou are eligible for the limited amount of CRH units.

China has significantly increased state intervention in its latest public housing policies, promoting PRH provision. Some cities have unprecedentedly extended the benefits of their PRH programs to non-hukou migrants. Despite this optimistic turn in China’s public housing policies, the design of PRH programs greatly depends on local political agendas.

A conventional view of public housing’s roles in China: public housing as a local burden

China’s most ambitious public housing provision plan

Since 2009, mandated construction of public housing has become a national policy priority and a key indicator of the performance of municipal officials. 

However, local reluctance persists for various reasons:

  • With limited funding subsidies from upper-level governments, municipal governments are overburdened by provision costs.

  • Top-down commands disregard unevenness in local conditions, exacerbating mismatched pro- duction of and demand for housing.

Public Housing Construction during the TFY period (data retrieved from mohurd.gov.cn)

Inductive research methods

Case studies are our preferred method for three reasons:

  • We ask ‘how’ and ‘why’ questions about a real-life phenomenon that cannot be controlled or influenced;

  • Local action is crucial to policy outputs yet is incompletely comprehended;

  • We reveal implicit logic with ‘societal significance’ that is meaningful about the ‘society as a whole’

Interrelationships between public housing policy, actors and institutions

The analysis framework of cost-benefit considerations

Practices in Chongqing and Shenzhen

Chongqing’s public housing program design had four major features: the focus on PRH, the inclusion of migrants, the integration with urban expansion and the management of city-owned enterprises. Chongqing’s government heavily intervened in public housing provision and allocated public resources, especially large areas of low-cost land, to new PRH developments. It focused on reducing housing and transportation costs for low-end workers while ensuring low-cost labour for industrial productivity. Public housing projects, especially PRH for the low income, were integrated into urban expansion plans and served to facilitate productivity in a spatially coordinated manner. Chongqing had planned public housing as a key component in an economically progressive cycle of investment and return.

Since the 1980s, large numbers of rural migrants have moved to Shenzhen for higher-paying jobs. Recognizing migrants’ housing needs, Shenzhen’s villagers rapidly self-constructed cheap housing and industrial buildings for rent on collectively owned rural land. These extralegal constructions were tolerated by local authorities and became urban villages engulfed by new developments. The rapid spawning of a huge supply of informal affordable housing was timely and greatly supported Shenzhen’s initial phase of industrialization by providing a very elastic supply of cheap labour. Today, urban villages remain the major source of low- income housing for migrants in Shenzhen.

The rationale of local public housing provision

The conceptual framework rationalizing municipal decision-making in public housing provision

Municipal practices during China’s TFY period suggest close interactions between cities’ socio-economic conditions and their provision strategies. Public housing provision corresponds with the city’s need for human capital within a short term at a particular development stage. Specific provision strategies are determined according to local economic-political priorities and simultaneously influence social and spatial policies and benefit distribution. Through public housing programs, local governments seek to enable social-spatial transformations and win in intercity rivalries for human capital. Public housing is used as an instrument of city development that transcends short-term economic considerations.

Team

Siqi Zheng

MIT Sustainable Urbanization Lab, Department of Urban Studies and Planning, Center for Real Estate​

Colleen Chiu-Shee

Department of Urban Studies and Planning, MIT

Publication

Chiu-Shee, C., & Zheng, S. (2019). A burden or a tool? Rationalizing public housing provision in Chinese citiesHousing Studies, 1-44.

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