DEVELOPMENT OF HOUSING PROVISION SYSTEM IN URBAN CHINA.doc

DEVELOPMENT OF HOUSING PROVISION SYSTEM IN URBAN CHINABingkai Zhu081395323MSc Urban Real Estate Management and DevelopmentSchool of the Built Environment, Heriot-Watt UniversityAugust 2009DECLARATIONI, Bingkai Zhu, confirm that this work submitted for assessment is my own and is expressed in my own words. Any uses made within it of the works of other authors in any form (e.g. ideas, equations, figures, text, tables, programmes) are properly acknowledged at the point of their use. A full list of the references employed has been included.Signed: Date: .Table of ContentsDeclarationiTable of ContentsiiList of TablesvAcknowledgementsviAbstractviiChapter 1 Introduction 11.1Background11.2 Aim and Objectives 21.2.1 Aim21.2.2 Objectives31.3Research methods31.3.1Qualitative methods31.3.2Quantitative methods41.3.3Case studies41.3.4Sources of data51.4Limitations61.5Structure6Chapter 2 Context of research: housing and land reform82.1Introduction8 2.2From 1979 to 199482.3From 1994 to 1998102.4From 1998 to present122.5Land reform in China122.6Conclusions13Chapter 3 Commercial housing after 1998153.1Introduction153.2Commercial housing153.2.1Commercial housing investment153.2.2Commercial housing demand and supply163.2.3Housing affordability183.3Central governments regulation on commercial housing203.4Diving forces of Chinas once-over-heated commercial housing market233.5Conclusions25Chapter 4 Chinas social housing264.1 Introduction264.2Policies of affordable housing after 1998264.3Problems of affordable housing274.4Social rental housing304.5Housing for migrant workers in cities334.5.1Different housing forms for migrant workers334.5.2Problems of migrant workers housing344.5.3Governments regulation on migrant workers housing354.6Conclusions36Chapter 5 A case study of Qingdao385.1Introduction385.2Commercial housing385.2.1Commercial housing investment385.2.2Housing demand and supply405.3Governments regulation on housing415.4Social housing435.4.1Affordable housing in Qingdao435.4.2Social rental housing465.5Conclusions47Chapter 6 Conclusions496.1Research findings496.2Limitations526.3Future research recommendations52References53List of tables Table 3.1 Total fixed capital investment and commercial housing investment (Billion Yuan)16Table 3.2 Annual floor space under construction and space completion (m2)17Table 3.3 Housing sales (m2)18Table 3.4 Price income ratio in major cities in 2004 (New stock) 19Table 4.1 Developers housing investment and floor space under construction28Table 5.1 Commercial housing investment in Qingdao (Thousand Yuan)39Table 5.2 Housing construction and sales (Thousand m2)40Table 5.3 Housing price index41AcknowledgementsI would like to thank all those who have been involved during the course of this piece of work, from the people who have played a large part in the research to the proof readers. I would particularly like to thank my dissertation supervisor, Professor Ya Ping Wang, for his invaluable advice on this dissertation.To my classmates who have helped throughout the course and the support of my flatmates who have supported me.I would also like to thank Andrew Duncan Millar for his help and tutelage in understanding the ways of the English language.Finally, I would like to thank my family for their support any invaluable guidance and encouragement along the way.Abstract Housing in China has been considered as a pillar industry that can boost the national economy since the beginning of full housing commercialisation. The aim of this paper is to find out how the Chinese government has adjusted housing polices in order to establish a multilayer housing provision system since 1998 when direct housing distribution was phased out by the State of Council.Through reviewing the policies issued by central government after 1998 and analysing the data from the National Bureau of Statistics, this paper discovers that there were dramatic changes in policy with regards to commercial and social housing, two forms of housing provision. Since 1998, commercial housing has undergone tremendous growth whereas social housing has been in decline. Various policies have been issued by central government to regulate Chinas overheated commercial housing and to require that local government provide low income groups with social housing. Although the Chinese government has devoted itself to establishing a market-orientated housing provision system, it relies heavily on administrative measures to regulate the housing market. These administrative measures were not very successful in bringing Chinas housing market to a level of sustainable development as expected by central government because there is a conflict of interests between central and local government. Housing systems in Qingdao are focussed upon in this paper to investigate how the two types of housing provision have evolved at city level and how municipal government implements policies from central government to regulate their housing market.Keywords:China; Housing provision system; RegulateChapter 1 Introduction1.1 BackgroundHousing provision in urban China has undergone profound transformations since 1979, in the wake of political turmoil since the establishment of Peoples Republic of China in 1949. Under the previous command economy system, work units provided many social services to employees, including housing. “The system was based on an implicit social contract- in return for accepting low wages, workers received many basic services at a fraction of their true costs”(Rosen & Ross, 2000). Housing, which was considered as part of socialist welfare rather than commodity, was mainly constructed by work units who then distributed it to employees. The tenants paid little more than nominal rents which hardly covered basic costs of maintenance, depreciation and management. The private building industry was effectively eliminated during early years of socialist system and the private rental sector was systematically brought under control of the state (Wang, 1992). Problems such as insufficient investment, housing shortages, unfair distributions and poor repairs were the most commonly identified (Wang & Murrie, 1996)Lumbered with housing obligations towards their employees, government and enterprises were eager to free themselves from financial burdens through housing reforms. The central government took a pragmatic approach to housing reform by trial and error (Wang, 2001; Wu, 2001).The 1979-1998 periods had been characterised by housing privatisation and commercialisation (Chiu, 1996; Huang, 2004a, 2004b; Logan, Bian and Bian, 1998; Wang, 1995, 2000; Wang and Murie, 1996, 1999, 2000), which aimed to replace direct housing distribution with monetary distribution. Various pilot programmes had been carried out in Chinese cities to encourage urban residents to buy commercial housing. These programmes were combined with reforms on public housing rents, which were considered as the main obstacle to housing reform. Housing provision in this period was made up of commercial housing and public housing, with public housing the dominant form.It was not until 1998 did the State Council make an announcement to stop the traditional in-kind housing distribution by work units by the end of 1998 and sitting tenants were encouraged to buy houses they had occupied(the State Council, 1998). However, this decision “ran into delay and opposition almost immediately” (Rosen & Ross, 2000). Deadline was ignored and two years “grace time” was extended in some places.The policy in 1998 aimed to establish a multilayer housing provision system with affordable housing accommodating the majority of households. In reality, however, housing market has been dominated by commercial housing after 1998. The growth of commercial housing has been so fast that housing prices in many Chinese cities are beyond peoples reach. As a result, the affordability becomes a problem and central government has introduced a variety of polices to regulate housing market.This topic was chosen because the housing industry is a very important part of real estate in China. With the acceleration of Chinas urbanisation, the housing sector will spur national economy more significantly.Different studies on Chinas housing reform have been published by scholars both within China and abroad since commencement of housing reform. However, most of these studies mainly focus on the period between 1979 and 1998 and little attention has been given to the performance of housing market after 1998 when direct housing distribution was abolished. This paper examines the development of housing provision after 1998 and how government has regulated housing after a market-orientated housing system was established.1.2 Aim and Objectives1.2.1 AimThe aim of this study is to find out how the Chinese government has adjusted its housing policies in order to establish a multilayer housing provision system since 1998 when work- unit based public housing distribution was phased out. It will focus on the key features, main achievements and outstanding problems.1.2.2 Objectives(1) To review the development of urban housing reform policies and the establishment of new multilayer housing provision system in cites.(2) To examine the development of commercial housing and assess the impacts of central government policies, and discuss the issue of affordability.(3) To examine the development of social housing and investigate how Chinese government has been involved in social housing provision.(4) To investigate, though case study, how different housing provisions have worked at local level and how municipal government has implemented central policies(5) To discuss whether these policies had regulated the housing market effectively as expected by central government. 1.3 Research methodsIdeally, the research should be conducted through carefully designed fieldwork in Chinese cities. Because of time and resource limitations, this dissertation is mainly based on literature, national and local statistics. Both qualitative and quantitative methods are employed in this study.1.3.1 Qualitative methods Qualitative methods used in this paper include interview and policy document analysis. Interviews used are mainly focused interviews, or unstructured interviews, which mean that after introducing a theme or topic, the interviewees, are free to talk in their own terms. By reducing the constraints usually incurred in structured interview, it is easier to understand the subjects point of view. Another qualitative method used in this research is document analysis, which consists of primary and secondary sources. “Primary sources are those that come into existence in the period under research; contemporary written reports or material collected by those who witnessed or were engaged in the execution of a particular event. Secondary sources are someones interpretation of the event based on their consideration of the primary source.”(Robertson and McLaughlin, 1996) From this point of view, the government policies belong to the primary sources and documents based on these policies are secondary sources. This paper mainly relies on policies issued by central and local government. 1.3.2 Quantitative methodsBoth primary and secondary data are used in this study. Statistics from the government are treated as primary data as they were engaged in the execution of a particular event (Robertson and McLaughlin, 1996). The data derived from the statistics in other studies are secondary data. 1.3.3 Case studiesA case study is identified in this paper as an example to investigate the development of housing provision system at city level. In China, central government is the initiator of policies. But it is the local government that implements these policies. If these policies are to be successful, they depend on strict implementation by local government rather than central government. As a result, Qingdao is chosen as a case study to illustrate housing provision on city level. Qingdao is considered to be a regional economic centre in China. Qingdaos housing market has experienced tremendous growth and therefore it even draws attention from central government. The development of housing market in other parts of China is more or less similar to that of Qingdao. In this case study, documents, like government statistics, are the main source of data. From this point of view, case study is more a strategy of doing this research than a method.1.3.4 Sources of dataThe types of data and documents this paper has referred to include:(1) Books and JournalsThere are a vast variety of books published on housing reform in urban China since the beginning of housing reform. The Ministry of Housing and Urban-Rural Development (formally as the Ministry of Construction) has organised different projects on housing and some of their studies have been published. In the housing reform, various pilot programmes were conducted in Chinese cities and lots of results were published. These books provide comprehensive account on housing reform in China. However, all the books this paper has referred to are written in Chinese. The housing reform has draw attention from many scholars abroad. Some of them reviewed the policies issued by Chinese government and some of them carried out research on their own on different aspects of housing reform in China and published their research on academic journals. This paper has referred to journals like Environment and Planning, Urban Studies, Urban Affairs Review, etc to do the literature review.(2) Government Publications and StatisticsThe key sources of information for this paper are from government publications and national statistics. Laws and polices related to housing reforms are kept in the government documents. The Ministry of Housing and Urban-Rural Development and The