Local govts need to keep hands off housing loans

According to local media, many Chinese citizens have been delayed receiving their housing provident fund loans - low-interest loans local governments offer taxpayers to buy or remodel homes - even though their applications were accepted. In fact, some top-tier cities including Beijing, Shanghai, Shenzhen, Guangzhou and Kunming have stopped issuing such loans altogether as their housing provident funds run low on cash, the China Times reported on November 26.

It seems highly unusual, to say the least, that such funds are out of money, since nearly every working individual in China contributes a portion of his or her salary to their local public housing fund (in addition, their employer would also contribute matching funds) while only a certain number of individuals actually apply for provident loans. If anything, these funds should be well stocked with money.

There's only reasonable explanation for the current cash-shortage: the money in the country's housing provident funds is being used for purposes other than satisfying the housing needs of local taxpayers.

Actually, it has already become a common strategy for local governments to redirect money from their housing provident funds into infrastructure and building projects to make up for shortages in their fiscal revenue. This practice has become so prevalent in recent years that several central government bodies are considering making it legal for local administrators to use housing provident fund money to finance affordable housing developments, which typically attract the majority of diverted funds originally earmarked for provident loans. In fact, the Ministry of Finance and the Ministry of Housing and Urban-Rural Development jointly launched a pilot program back in 2009 to use housing provident fund loans to support the construction of affordable housing units.

As far as I see it, local governments have no right to access public provident funds, which are meant to be used by the working people who contribute this money in the first place. Even if municipal governments want to borrow from these funds in times of fiscal emergency, they should first gain the approval of local citizens and repay the money they use with interest added on top.

If the current situation is allowed to continue, more taxpayers will be unable to purchase a home or improve their current residence.

At the same time, more people will also be forced to take out high-interest loans from commercial banks when low-interest credit from their local housing provident fund management committee fails to arrive.

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