EYESHENZHEN  /   Opinion

Head start for ambitious housing reform

Writer: Lin Min  | Editor: Jane Chen  | From:  | Updated: 2019-10-28

Shenzhen announced last week that it will provide 42,000 public housing apartments by the end of next year, and at least 1 million by 2035. “Not one less,” city authorities promised.

These apartments will be sold at as low as half of the market price and could range from 20,000 yuan (US$2,860) per square meter for apartments outside the original special economic zone to no more than 50,000 yuan for apartments located in Futian, Nanshan, Luohu and Yantian.

The city government last year unveiled a massive housing reform plan that envisages 1.7 million new homes to be built by 2035, with public housing accounting for up to 60 percent of the new supply.

To honor of the pledge for the ambitious goal, the city, which is short on developable land, is introducing innovative ways to create new supply. Zhang Xuefan, head of the housing authority, told news media last week that the city guarantees the pledged supply of new public housing by 15 channels. In addition to building affordable housing in new land lots, the city will also require new commercial housing projects, urban renewal projects and industrial projects to set aside a proportion of apartments to be sold by the government to eligible buyers at prices much lower than the market rates.

Other channels include shanty-town development and the conversion of industrial land into public housing sites. Problematic land lots that do not yet have full official approval for commercial housing development will also have the chance to get permission from the government to be developed for public housing.

Other innovative ways include building public housing on top of municipal facilities like bus depots, power distribution stations and fire stations, and cooperating with neighboring cities to build affordable housing near Shenzhen borders.

The ambitious plan means the housing shortage is expected to be eased in the years to come. However, given the city’s allure to young graduates, Shenzhen will likely see a sustained and even increased inflow of newcomers. Aside from providing large numbers of public housing for sale, the city should take further measures to stabilize home rental prices.

Home rental prices in Shenzhen have surged in recent years, posing a heavy financial burden on expatriates and migrant workers. While Shenzhen has always respected the market’s role in deciding the prices of goods and services, the city should discuss the introduction of new regulations on rental homes and look into some practices in other world cities in regulating home rent prices.

Berlin’s government in June moved to freeze rent for five years from 2020 in its latest bid to halt runaway home rental prices, which have soared 129 percent over the past decade. The legislation triggered controversy in Berlin, and a similar cap may not be legal and enforceable in Shenzhen. But rental homes should not be treated as an ordinary commodity whose prices are left to be decided solely by the market. Although not a public good, private rental homes need to be better regulated because a balance of interest between landlords and renters should be achieved, by government intervention if necessary. In market economies, the government sometimes has to step in when the market is not functioning properly or when the market is distorted by an acute shortage of supplies or malpractices such as monopoly or price manipulation.

The renovation projects of urban villages in Shenzhen have also driven up rental prices in a phenomenon similar to gentrification in the West. Despite tenant-friendly laws, a wave of gentrification brought “rent madness” to Berlin in recent years and prompted public dissatisfaction. Gentrification, which has also caused widespread discontent in some North American cities, may also lead to cultural displacement and irreversible losses of historic relics.

While talents are the driving force of Shenzhen’s high-tech industries and other high value-added sectors, lower-income earners who work in less appealing jobs help keep the city running. Shenzhen should be seen as welcoming not only to well-educated professionals, but also to those who work in more mundane professions. City planners need to strike a balance between upgrading urban villages and a popular need for cheaper rental housing.

Shenzhen has begun to introduce measures to help stabilize home rental prices, such as promising zero tax for landlords by the end of 2023 if they set their rents no higher than the reference prices compiled by the government. Tougher measures are needed if current ones fail to curb rental increases.

Affordable housing will give a new lease on life to the city’s once-renowned concept of “Once you come, you are a Shenzhener.”

(The author is head of the Shenzhen Daily News Desk.)