Affordable Housing in China

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Affordable Housing in China

Since 1978, the Chinese government has pursued various economic and housing reforms to expand private property rights in housing and to promote home ownership through the commercialization and privatization of urban public housing. This has involved terminating the old system of allocating housing units through public-sector employers and establishing a more market-based system of housing provision. The government now provides affordable housing by subsidizing commercial housing purchases or by offering low-rent public (social) housing to middle- and low-income families. At the same time, it relies on the private commercial housing market to meet the needs of higher-income groups.

Recent Housing Reform and Outcomes

China’s housing policies experienced a drastic change in 1998 when the central government ended direct housing distribution to employees through the former danwei or employer-based system. According to government plans, the affordable housing system targeted at middle-income households was established to provide support to nearly 70 percent of urban families. It also introduced housing cash subsidies to new employees and set up a Housing Provident Fund—a compulsory housing savings system to provide subsidized loans to employed homebuyers. Low-rent public housing is provided by the government to low-income urban households, while commercial housing is provided by the market to meet the needs and demands of high-income families at the top 15 percent of the economic spectrum that have access to mortgage financing (Wang 2011).

This housing reform has resulted in a vigorous and fast-growing urban housing market and greatly improved housing conditions for urban residents. For example, the floor area per capita in urbanized areas increased from 6.7 square meters in 1978 to 28.3 square meters in 2007, and the home ownership rate reached to 82.3 percent in urban China in 2007 (Man, Zheng, and Ren 2011)....