Shenzhen faced with affordable public housing dilemma after tech capital ditched Hong Kong property model
- The southern Chinese city has reduced its reliance on land sales for revenue, but a shortage of land appears to be both a blessing and a curse for Shenzhen
- The city has the ambition of building at least 1 million affordable homes by 2035 to accommodate young, talented professionals as well as low-income groups
When Shenzhen first decided to copy Hong Kong’s land sales model to boost its revenue in the 1980s, they cited 19th-century German philosopher Friedrich Engels to justify the move which at the time challenged China’s constitution that banned land transfer.
“Abolishing private ownership of land does not require abolishing land rents; rather it requires submitting land rents to the society,” wrote Engels, who died in 1895, suggesting that selling land use rights would not challenge state land ownership, but would allow the state to utilise land rents.
But it also led to the creation of the most unaffordable housing market in China, with the average house price reaching as high as 50,000 yuan per square metre (US$4,600 per sq ft).
Compared to other major Chinese cities, including Beijing and Shanghai, Shenzhen’s land reserve is much smaller at less than 2,000 sq km. Shanghai, in comparison, has a land reserve of 6,000 sq km.
The shortage of land appears to be both a blessing and a curse for Shenzhen. Among the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, it is the least reliant on land sales for revenue. Last year, the city sold 103 billion yuan (US$14.7 billion) worth of land, accounting for just 11 per cent of its revenue. By contrast, neighbouring Guangzhou generated more than 80 per cent of revenue from land sales, while Hong Kong received nearly 20 per cent of its revenue from land sales during the 2018-2019 financial year.