China pledges clarity on dealing with land lease expiry issue

China’s cabinet has pledged to come up with a plan to deal with the expiry of residential land leases, a critical issue given that the country’s hundred-trillion yuan worth of property assets are at stake.

In State Council-issued guidance on property rights protection, the Chinese government has for the first time vowed to “study the legal arrangement” for how to renew expiring leases on residential land.

The contentious issue was in the spotlight in April this year with the upcoming expiry of 20-year residential land use rights in Wenzhou, which triggered a public outcry after the local government tried to charge homeowners for renewing leases.

Leases granted in the 1990s will also soon be up for renewal in Shenzhen and other coastal cities, although the more common tenure of 70 years means most of the current generation of urban homeowners will hand the problem on to their offspring.

Under Communist Party rule all urban land in China is state-owned but housing reform in the 1990s endowed urban Chinese with permanent ownership of their houses but not the land beneath them. The 40, 50 and 70 year land leases gave property buyers a degree of assurance and jump started the property industry and the overall economy over the ensuing two decades, but the issue has come into question again with some shorter term land leases to expire soon.

When the local government in Wenzhou was confronted with the problem, it asked homeowners to pay up to a third of their homes’ value to renew the land rights, sparking an outcry across China. The Property Law of 2007 says land-use rights can be renewed but doesn’t specify the criteria for doing so.