Beijing should increase penalties for abusing affordable homes scheme

PUBLISHED : Tuesday, 19 November, 2013, 5:07am
UPDATED : Tuesday, 19 November, 2013, 7:06am


A supply of affordable homes for poor people amid China's rapid development is critical to social stability. The affordable homes scheme has been beset with structural problems that have made it difficult to meet annual targets, such as dependence on local government, which uses land sales for revenue to finance social programmes and infrastructure investment. As a result local officials have resisted attempts to curb property prices. Nevertheless officials say more than four million units were completed in the first nine months of this year, on top of more than 10 million in the previous two years. And President Xi Jinping has endorsed the former government's target of building 36 million affordable homes between 2011 and 2015, which means stepping up efforts to house families priced out of the real estate market by soaring prices.

Some observers are sceptical about the claims for the number of homes completed. More worrying are concerns about misallocation of cheap homes, which raises fears that public money is helping to make well-off families even more comfortable and widening the wealth gap. Urban housing tends to be geared towards the well off, since local government, developers and banks share an interest in rising home prices. Abuse of the affordable homes scheme compounds the inequity. According to the National Audit Office, 108,400 unqualified families got affordable apartments or cash subsidies last year, and 5.8 billion yuan (HK$7.3 billion) intended for affordable housing was misused. Wang Xiaopeng of official think tank the China Real Estate Association blames low penalties for illegal conduct and weak law enforcement.

The authorities pin their hopes of stemming housing inflation on increasing the supply of cheap homes. It is good therefore that Xi has taken a personal interest, and told top officials that they must ensure the affordable homes scheme benefits people who really need to be subsidised. Actions speak louder than words, however. A shift in emphasis from sale to rental, making it harder for unqualified applicants, and easier for the real poor, to get cheap homes, was a step in the right direction. But Beijing needs to improve measures to assess applicants, and give priority to drafting a national law to safeguard the integrity of the affordable housing programme. It should impose meaningful penalties for abuse, in place of the existing derisory deterrent of a maximum fine of 5,000 yuan.