China to cap annual urban rent increases at 5 per cent to rein in runaway prices and make homes affordable to job seekers

Rental charges in urban areas will not be allowed to rise by more than 5 per cent a year, the Ministry of Housing and Urban-Rural Development said
Vice-premier Han Zheng has pledged to avoid using property as a tool to boost the economy

China property

Pearl LiuandLam Ka-sing

Published: 6:19pm, 31 Aug 2021

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China’s government plans to put a lid on rental charges in the nation’s cities to rein in runaway housing costs, after years of draconian crackdowns have failed to make urban housing more affordable for the millions of people who enter the job market.

Rental charges in urban areas - defined as population centres with more than 500,000 residents, ranging from Tier 1 to Tier 4 - will not be allowed to rise by more than 5 per cent in a year, the Ministry of Housing and Urban-Rural Development announced ahead of a briefing themed “Housing for All” in Beijing.

“New immigrants to our cities and many young people cannot afford to buy houses or rent homes in good locations,” which is disheartening for school leavers and new entrants in the labour market, said Vice-Minister Ni Hong, adding that 70 per cent or urban immigrants and low-income youth are renters. “Only when the young people have hope does the country have a future. The [government] places a great deal of [priority] in solving the housing difficulties faced by new immigrants in big cities.”

The latest move follows a raft of administrative rules and crackdowns enforced across dozens of Chinese cities since at least 2016, as the government sought to rein in runaway rental and sales prices in the country’s white hot residential property market. Chinese President Xi Jinping, who had famously declared that “homes are for living in, and not for speculation,” has emphasised affordable housing as a key tenet of his pursuit of “common prosperity,” as the Communist Party marks its centenary in the world’s most populous nation.

Hundreds of unfinished apartment buildings at the Top Luxury Mansion project ion the Shanxi provincial city of Yuncheng on September 18, 2016. Photo: Simon Song

China’s government has spent many years trying to ease growing concerns about runaway property prices and to deflate any signs of property bubbles. Housing affordability, for both buyers and renters, has been a constant irritant in the government’s list of policy priorities, as it struggles to douse speculation in the US$2.7 trillion housing market.

Vice-premier Han Zheng has pledged to avoid using property as a tool to boost the economy. China has also tightened funding channels including bank loans and trusts as part of a campaign to reduce risks, and authorities are revisiting the idea of imposing a property tax.

Homebuyers looking at models of apartments in Yichang city in central China's Hubei province on 25 July 2015. Photo: Imaginechina.

The average price of new homes in China fell by about 8 per cent to 10,348 yuan (US$1,600) per square foot, from January, according to data provided by E-House China Research and Development Institute. However, prices in urban centres defied the drop and continued to rise, with the Chinese capital reporting a first-half increase of 3.3 per cent from last year.

“We will accelerate our plan to improve the housing scheme and steadily implement a long-term real estate mechanism in urban renewal and rural development,” said Wang Menghui, the minister of housing and urban-rural development. “In the 14th five-year plan period [from 2021 to 2025], we will underscore affordable rental homes and further improve the affordable home system, boost the supply of such homes to achieve the goal for everybody to have a home to stay.”

This article appeared in the South China Morning Post print edition as: Beijing sets 5pc limit on urban rent increases