Lack of funding threatens China's affordable housing plan

10:29, June 29, 2011      

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China plans to build 10 million affordable homes in 2011, which is more than any other year. By the end of May, construction had started on 3.4 million affordable homes, accounting for more than one-third of the total and much higher than that of the same period of last year.

The construction of affordable housing will not only improve the people's lives but also promote China's economic development. On the one hand, new affordable homes can divert certain people's attention away from commercial residential housing in the short term, curb the unreasonably high property prices, protect the right of residence of low and middle-income earners and help reinforce the effects of real estate control measures.

On the other hand, they can promote the development of related industries, such as the steel, cement and electricity industries; stimulate consumer demand; ensure reasonable economic growth and reduce the costs of economic restructuring.

Therefore, the CPC Committee and the State Council have attached great importance to the construction of affordable housing and consider it a "solemn commitment" to the Chinese people. Certain local governments have included it in the performance evaluation of officials. As the leading force in the construction of affordable housing, governments at all levels should enhance their consciousness of responsibility and make institutional innovations to ensure the smooth progress of affordable housing projects and achieve the desired goals.

The scale, the force and challenges are unprecedented. The affordable housing project for 10 million affordable homes requires an annual investment of about 1.3 trillion yuan, and the government has invested a total of 103 billion yuan. According to sources, the funding gap of affordable housing construction in Shenzhen reached 10 billion yuan and many places, such as Shanghai, Jiangsu province and Hunan province, even sold "part of the property" of affordable homes. Many places suffered the "construction bottleneck" of affordable houses that are caused by fund shortages to varying degrees while ushering the "construction wave" in the third quarter.

The government is indispensable for solving the problem of fund shortages. The government has further increased financial support to local governments, and various local governments also need to focus financial resources for affordable housing construction.

The Chinese government recently opened the financing platform for local governments to construct affordable houses to allow local financing platforms to facilitate affordable housing construction. This may be the key to achieve the goal of the full operation of the affordable housing construction in 2011 by the end of November. On this basis, achieving further coordination between government will and the market operation rules is equally important.

According to the recent data from the Ministry of Housing and Urban-Rural Development, 70 percent of domestic top 100 real estate developers have not participated in affordable housing construction. This implies that the government should further develop the financing mechanism for the affordable housing program in order to attract the wide participation of social capital.

The government should allocate more social security funds to affordable housing construction in order to expand the source of funds. The government should also adopt fee and tax break policies to encourage the participation of real estate developers and should step up the research on the implementation of a series of pilot incentive measures in order to work out specific policies to prompt the participation of real estate developers in affordable housing construction in exchange for the priority of securing commercial housing development rights.

In fact, in addition to fund raising, the entire process of affordable housing construction needs the broad participation of society. Openness and transparency is vital to the affordable housing program. Disclosing the information on the use of program funds, quality control and the distribution of affordable houses in time and putting such information under the supervision of people from all walks of life will not only increase the credibility of the affordable housing construction but also create transparent and fair market conditions for the participation of the society.

Accelerating the pace of the affordable housing construction has boosted stock prices of listed real estate developers involved in the affordable housing program. This perhaps implies not only the capital market's "sensitivity toward the housing policy," but also the high public expectations for the affordable housing program. In a sense, the affordable housing construction is not only an economic issue but also a political issue. The government can only make the affordable housing policy cover more low-income households by expanding channels, innovating mechanisms and tackling various problems related to affordable housing construction.

By People's Daily Online

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