60b for cheap homes might not be enough to get local govts on board

08:16, July 19, 2010      

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The central government has allocated over 60 billion yuan ($8.85 billion) for the construction plan of 5.8 million units of affordable houses, the State-run People's Daily reported over the weekend, citing the country's housing minister.

But analysts say local governments may be unwilling to give up the massive revenue they get from housing deals.

All the cities must speed up affordable housing construction, and allocate all the units to lower income families in a fair and open way, said Jiang Weixin, Minister of Housing and Urban-Rural Development, at a conference in Harbin.

"The central government's 60 billion fund will most likely be spent in the central and western parts of the country where the economy is underdeveloped," Li Zhanjun, a department director at E-house China R&D Institute, said Sunday. But "local governments still have little enthusiasm for affordable housing because they make less money from them."

No less than 10 percent of local governments' income from land sales must be spent on building affordable housing projects, according to the low-income housing fund management guidelines released by the Ministry of Finance at the end of 2007.

"Some governments may not follow the guidelines because they squeeze their land sales profits," Li said.

But Jiang Weixin said the Ministry of Housing and Urban-Rural Development will spend two weeks in August monitoring the construction in different cities to make a clear rewards and penalties system.

Affordable housing has another downside—location.

Li Desheng, a 75-year-old man whose son was just laid off, wants to buy an affordable house. But nearly all the affordable houses in Beijing are far away from the city. "That's a real pain in the butt," Li said.

In April, the State Council launched a series of measures to keep down housing prices amid concerns. Completing construction projects of 5.8 million affordable houses this year was one of the policies.

Source: Global Times


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