Fang Li Pen, left, and her daughter, Zhao Jun, sign documents giving them ownership of their new low-income apartment in Shanghai. (Andy Hoffman/The Globe and Mail)The Globe and Mail
Early on a Saturday morning at a crowded university auditorium, Fang Li Ping is brimming with anticipation as her dreams of home ownership in this notoriously expensive city are about to become a reality.
Beaming in front of a swarm of cameras, it looks as if she just won the lottery. And, in a way, she has.
Ms. Fang and her daughter are among 1,187 low-income residents selected to purchase affordable apartments in Shanghai through a new government housing scheme. It's an initiative that is desperately needed in this city where real-estate prices more than doubled last year amid a runaway property boom catering to the city's wealthy elite.
"We have had great difficulty buying a house," says Ms. Fang, a 65-year-old retiree. "The price is too high for us. We cannot afford the money," she says.
Ms. Fang and her daughter are emblematic of the millions of potential casualties of China's great economic ascendance and rapid urbanization that have gone a long way toward alleviating poverty in the country but also widened the gap between rich and poor.
Brushed up against China's nouveau riche, low-income workers and even middle-class professionals are struggling to afford basic housing in major cities. Now, in the wake of a series of policies aimed at cooling the rampant speculation in China's high-end real-estate market, the government is planning a massive increase in the amount of affordable housing available to low-income families like Ms. Fang's.
China has vowed to build three million affordable apartments in cities this year for low-income earners and those who currently live in shantytowns, according to the Ministry of Housing and Urban-Rural Development. Another 2.8 million units will be built in rural areas. The central government has allocated 60-billion renminbi ($9.07-billion Canadian) to ensure construction is completed on time, Jiang Weixin, China's Minister of Housing, said at a recent forum for mayors of Chinese cities.
Building affordable housing could pick up the slack in China's massive construction sector, which employs about 250 million people and is a major contributor to GDP growth. The central government has raised the minimum down payment on large homes and second mortgages, which has begun to curb runaway demand. Housing prices in China fell 0.1 per cent in June from the month before, the first price decline since February, 2009, and new construction is slowing considerably as both buyers and developers take a wait-and-see approach. A massive investment in new housing hopes to keep the construction sector humming as high-end developments are on hold.
A surge in new housing units could also quell the threat of unrest and social instability that occurs when hundreds of thousands of migrant workers converge on China's major cities such as Beijing, Shanghai, Chongqing and Shenzhen each year.
"People are piling up in Chinese cities. I wouldn't have said this five years ago, but there are slums in China. There are places you go where people don't have housing as they should. They don't have proper hygiene because they don't have fresh water. It's hidden and it is a failure of the public sector," says Jonathan Woetzel, director, greater China practice, for consultants McKinsey & Company in Shanghai.
In China, renting is exceedingly unpopular and owning property is viewed as the ultimate safe investment. China is taking a lesson from Hong Kong, where the real-estate market has long been pointed to as a bubble, but has managed to stay aloft, thanks in part to an adequate supply of social housing for low-income residents.
Still, China's government has tried to implement affordable housing on the mainland in the past, only to have the plans fail due to corruption and a lack of funds from local governments.
Just one year after China's real-estate market was overhauled in 1998 to permit the ownership of private property, the government vowed to "make great efforts to build affordable houses for low- or middle-income households." By 2006, however, a wave of criticism had enveloped the programs. Owners would sell low-income houses quickly for profit, and BMWs and Mercedes were soon seen parked in neighbourhoods that were supposed to be for affordable housing.
Corruption, namely the granting of affordable-housing units to government officials, has also been pervasive. In the coal town of Xinzhou this year, nearly all of the 1,517 apartments at a complex designated for social housing were reserved for government officials, many of whom sold their units for a quick profit.
The units at the Shanghai low-income development that Ms. Fang and her daughter are purchasing, however, have very strict restrictions on who can buy them, according to Luo Jiong Ning, the sales manager for Chengtou Corp., the government-backed company that is building the project.
"The household income per person revenue must be less than 2,300 renminbi ($348) per month per person and their current household must be smaller than 15 square metres per person. Household savings can not exceed 70,000 renminbi. These are the regulations, and they are very strict. If you don't meet them, you can't apply," he says.
Under the new plan in Shanghai, owners can't sell the apartments for at least five years. When they do, the government receives 70 per cent of the profits while the owners get the rest.
Mr. Luo concedes his company will make far lower profits building the low-income development than it would by building a high-end complex. However, the government has guaranteed that Chengtou will earn a profit of at least 3 per cent on its investment.
"We are a government-backed company, so we have to take on this task. Without it, our society costs will rise too much. For the living expenses, for the real estate, there will be too many costs," he says.
For Ms. Fang and her daughter, a restaurant worker, low-income housing represents the only viable option to home ownership these days. They had previously owned an apartment in Shanghai - a 25-square-metre flat that housed three generations of the family - but the apartment was given to Ms. Fang's son shortly after he was married.
By luck of the draw, Ms. Fang and her daughter have won the right to choose the first apartment. They select the largest available, a spacious 89-square-metre, two-bedroom unit. The price is 480,000 renminbi ($72,500). Ms. Fang says she could never afford to buy such an apartment in the regular market.
"It would be at least double," she says, pausing for effect.
"At least."