Chinese media lay into New York-listed home rental platform Danke as they urge authorities not to let exploiters get away

China’s state media urged authorities to take a hard look at the rental apartment industry after a liquidity crunch at New York-listed services provider Danke sparked an outcry from furious landlords and tenants across the country.

Danke, officially known as Phoenix Tree Holding, rents flats from landlords on a long-term basis, refurbishes them and then leases them to tenants. In what looks like an apparent cash-flow failure in recent months, the company has missed payments to landlords, employees and contractors. Tenants across the country have been evicted, in some cases violently, by their landlords, with some yet to repay bank loans arranged by Danke.

Official media including People’s Daily and Xinhua urged Danke to take responsibility for its debt-fuelled expansion that eventually spiralled out of control after the Covid-19 pandemic. They also called for tougher regulation in the fast-growing US$264 billion industry, which has benefited from a government push to develop the rental housing market, China’s sky-high property prices and an inflow of a young workforce into big cities.

“Long-term rental apartment was an innovative business model that filled a gap in the market and received favourable policies, but it has now become a cover for profiteering,” said a Xinhua commentary published on Monday. “Authorities cannot let the exploiters get away.”

Tenants and landlords should not be the ones paying for Danke’s failure, People’s Daily, the Communist Party’s mouthpiece, said in a post on its official Weibo account on Friday. The industry and regulators should review the business model, which relied on leveraged expansion, it said.

Danke’s crisis has sparked several conflicts between landlords and tenants that have been widely circulated on Chinese social media. In one case, an enraged Shanghai landlord smashed the door of a flat as well as the ceramic sink and the shower in the bathroom, in an attempt to evict the tenant. Another desperate tenant, a young female worker in Beijing, also made headlines after she told reporters of her plan to commit suicide because of the undue financial burden.

The company operated more than 415,000 flats in 13 cities as of March, according to its latest quarterly report, but has not yet made a profit.

Some city housing authorities have issued statements saying that they will follow up on such incidents. Landlords and housing estates cannot stop water, electricity and gas supply to evict tenants who have paid full rent to Danke, the Housing and Construction Bureau of Shenzhen said in a statement last week. Beijing’s housing regulator has also set up a working group to resolve disputes, according to local media reports.

The Chinese government had set a goal to accelerate the growth of the country’s underdeveloped rental housing market in 2015, as an antidote to property prices that had more than doubled over the previous decade in metropolises like Beijing.

Before the crisis broke out, the long-term rental apartment market, including hundreds of operators like Danke, stood at 1.73 trillion yuan (US$264 billion) last year, and was projected to grow to 3 trillion yuan by 2025, according to Qianzhan Industry Research Institute.

Shares of Danke have plunged 74 per cent so far this year to US$3.49 on Monday, but have picked up over the past two weeks on media reports of a potential takeover by competitors.

On Tuesday, Reuters, quoting three sources, reported that Beijing E-town International Investment and Development, a private equity firm controlled by the Beijing municipal government, is holding talks with Danke’s shareholders on raising new funds to rescue the rental firm.