All very grand to plan 36m homes ... but show me the money

PUBLISHED : Sunday, 13 March, 2011, 12:00am
UPDATED : Sunday, 13 March, 2011, 12:00am

Several ingredients are required to make a social programme work - enough determination to redress a problem, enough money, enough co-operation among different government agencies and enough resources from civil society.

However, despite the eloquent marketing pitch by housing and urban development officials at the annual session of the National People's Congress, some factors are still missing from their plan to build 36 million affordable homes in the next five years.

Reservations and criticism greeted the plan immediately, both outside and inside the Great Hall of the People, with most asking how Beijing could match its ambition with available resources.

Officials say 10 million homes will be built this year, costing 1.3 trillion yuan (HK$1.5 trillion). Another 10 million will be built next year, presumably costing no less.

But only 500 billion yuan is to be drawn from central and local government coffers this year, with the remaining 800 billion yuan expected to be contributed by non-governmental organisations and companies.

From the briefing by officials from the Ministry of Housing and Urban-Rural Development on Wednesday, one can sense the central government's eagerness to press local authorities to pay more, in land and financing, and to pay it quickly.

But local governments have already failed to allocate enough land for the 5.8 million affordable homes planned last year and might fail again if asked to pay more this year.

Understandably, affordable housing is not the only priority for local governments. Each of them has a very long to-do list for the next five years and items that require capital commitments.

How can the central government ensure that all local governments are going to act as expected? And even if they all do, how can they be expected to come up with similar contributions? There can be a huge gap in financial capability between one province and another, as some NPC deputies have rightly pointed out. Some poorer provinces, such as those in the central and western regions, are witnessing particularly rapid urbanisation. An influx of industrial investment will soon give rise to demand for new housing.

But where can the local governments find the matching financial resources?

If they don't, and if they cannot get any help, they could resort to lying to the central government and the public, misappropriating funds pledged for other purposes, exploiting local taxpayers and private companies or downright corruption.

On the national level, raising and spending 1.3 trillion yuan a year is no small task. Technically, it would be unthinkable for Beijing to leave the greater part of it to less capable local and non-official sources without providing a unified financial umbrella.

It would not make sense if such a major national programme was launched without leveraging one of the world's largest banking systems and financial markets.

For quite a few years, people have been talking about the need for a relatively sizable programme of affordable housing to balance the ever more expensive commercial housing market - and to enlarge the supply of cheap, government-subsidised homes.

It is unfortunate that now, as Beijing finally musters the courage to expand the subsidised housing scheme, its implementation strategy still contains so many big holes. The biggest are the potential shaky relationship between the central and local governments, a lack of capital and land provision, and the absence of modern financial expertise and instruments.

There are many other social programmes in the 12th five-year plan. But what is the use of good intentions if they're not matched by practical solutions?

Nothing is more damaging to government credibility than a social programme that is hastily thrown up, only to be aborted halfway. Remember the tragedy of the Great Leap Forward in 1958?