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Public rental homes lie empty

PUBLISHED : Wednesday, 23 November, 2011, 12:00am
UPDATED : Wednesday, 23 November, 2011, 12:00am

A poor take-up of public rental housing offers in several mainland cities has been blamed on remote locations, a questionable balloting system and less competitive rentals - all of which have combined to leave thousands of government-subsidised homes empty.

The Wuhan municipal government attracted just 331 tenants for the 900 public rental housing flats it offered for lease recently; while the 770 homes offered by the Hangzhou municipal government were also undersubscribed.

In Chongqing the municipal government has the reputation of being one of the most aggressive in the provision of social housing. It allows non-local residents who have worked in the city for one year to rent public housing flats, and to drum up further demand, it is now offering homes at rentals of as low as nine yuan (HK$11) per square metre - one of the lowest on the mainland.

But even these tactics have failed to generate much interest.

'To try and minimise the investment cost of building public housing, many municipal governments including Chongqing have built the units in outlying areas,' said Zhang Haiqing, senior research manager at Centaline Property Agency. 'As a result the daily travel expenses are a burden for low-income earners.'

For instance, Hangzhou's public rental housing project, Ding Qian He Xin Yuan, had generated fewer than expected applicants due to its inaccessibility, said Zhang. The project is located about a 90-minute bus ride from the city and although monthly rentals are 13 yuan per square metre, industry observers said that rate was only about 10 per cent lower than leasing rates in the nearby area.

Public rental housing is intended to cater for low income workers who cannot afford to buy government-subsidised low-cost housing, which is offered at a 30 per cent discount to private sector prices.

To qualify for a public rental housing flat, an applicant must earn between 1,000 yuan and 2,500 yuan per month depending on the city in which the scheme is located. Monthly rents range from nine yuan per square metre in Chongqing to 57 yuan per square metre in Shanghai.

New graduates and migrant workers are also eligible to apply. But a developer who did not want to be named said that rather than rent a public housing flat situated far from the city centre, most new graduates preferred to share apartments in urban centres with friends.

Until the recent price correction got under way, mainland residential prices had skyrocketed since 2009, sparking a public outcry that buying a home was becoming far beyond the reach of average families.

Wary of social instability, the central government responded by setting a target of building 36 million public housing flats by 2015, and work started this year on the first 10 million homes. About 40 to 50 per cent of these will be designated for rental, while the remaining homes will be for sale

The head of the Housing and Urban-Rural Development Ministry, Jiang Weixin, said at a National People's Congress Standing Committee meeting last month that 3.3 million social housing flats were released on the market last year, compared with 1.1 million homes a year earlier. He expected no fewer than three million flats to be completed this year.

Meanwhile, a questionable balloting system is also said to deter interest in the homes, and an industry practitioner said the lacklustre response was also due to numerous scandals about social housing flats being sold or rented to those who were well-connected with government officials.

In Hangzhou an applicant for a home under the singles category might arrange to share a two- to three-bedroom flat, with one or two other applicants due to the limited number of studio flats available for singles.

'Most will quit, however, as they worry they may not get along with the other flatmates as the successful applicant is required to commit to a three-year lease once he or she agrees to rent the public rental apartment,' said the developer.

The homes may be built by private developers, but then delivered to the local governments, which would be responsible for leasing and managing the units.

Rosealea Yao, principal analyst at GaveKal Dragonomics, a research and advisory firm specialising in the mainland economy, wrote in a report titled 'Chongqing's public housing predicament', that most public rental projects in the city were located close to industrial parks and development zones.

The government seemed to be planning much of its public rental housing as an upgrade for migrant workers, who now often live in packed dormitories supplied by employers. The flats were designed like dormitories for individual workers rather than permanent housing for urban families, said the report.

Of the 67,330 homes that are expected to be completed in Chongqing by the end of this year, 29 per cent are studios smaller than 40 square metres, while 46 per cent are one-bedroom flats no bigger than 50 square metres.

'The rental housing looks more like a way to attract investors to build factories near Chongqing rather than a programme to bring rural migrants into the mainstream of urban life,' the report said.

But the economics of public rental housing are not so great for the typical migrant worker.

The rent is about nine to 10 yuan per square metre per month, which works out at 360 to 500 yuan per month since most flats are 40 to 50 square metres. The report said this was affordable for a worker earning 2,000 yuan per month, but much less so for the typical migrant worker who earns around 1,500 yuan a month.

As a result, many migrant workers prefer to rent a bed for 100 to 200 yuan a month, she said, rather than upgrade to public rental housing that would mean tripling their current spending on accommodation.

'The government does not have a clear idea of just who it is building all this housing for, raising our concerns,' said the report.

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