AnalysisChina property: Guangzhou issues housing vouchers to those displaced by renewal efforts in move that could spur demand

Guangzhou has become China’s first tier-1 city to introduce housing vouchers to compensate residents displaced under urban-renewal efforts, a move that analysts say will boost local housing demand and ease pressure on municipal government expenditures.

The southern port city will begin issuing housing vouchers to “channel additional funding into urban renovation projects and … improve [the projects’] overall efficiency”, the Guangzhou Municipal Planning and Natural Resources Bureau said last week, outlining the city’s urban-redevelopment plan up to 2035.

Housing vouchers are a combination of monetary compensation and housing subsidies that local governments hand out to residents of run-down properties subject to demolition for redevelopment. Residents can use the vouchers to purchase new homes and enjoy varying degrees of tax benefits, depending on their relocation choices.

“Housing vouchers will help to ease the pressure on local government expenditures, as they tap an existing inventory of commercial housing instead of government-funded replacement housing,” Wang Xingping, a senior analyst at ratings agency Fitch Bohua, said in a note to clients. “This could spur demand for housing and help revive the local property market.”

Any nationwide impact on housing demand and prices will be muted, Wang said, as the stimulus measure this time targets shantytown residents in one large, first-tier city. When such measures first came out in 2014, they supported households in third and fourth-tier cities, where most renewal projects take place.

“Shantytown residents in higher-tier cities usually have decent financial and living conditions and are not in desperate need to upgrade their homes,” she said, adding that housing vouchers serve as an option for displaced households to buy new homes rather than as an obligation.