5.8b yuan misused in housing scheme

A mainland audit has concluded that about 5.8 billion yuan (HK$7.3 billion) was misappropriated from an affordable-housing programme that Premier Li Keqiang said would provide a test of the government's credibility.

Funds from 360 projects were diverted to pay back loans or make outside investments, while money designated to pay for demolitions was used to start other construction, the National Audit Office said in a report posted on its website yesterday.

The five-month audit's findings draw new scrutiny to a programme that was designed to reduce the risk of a property bubble and ease discontent among the poor.

In February last year, when Li was vice-premier, he called on the public to supervise the government's push to distribute affordable housing in a fair way.

The government invested 412.9 billion yuan last year in affordable housing, while a further 466.8 billion yuan came from bank loans, bonds and other social financing, the report said.

The real amount of money that was lost might be higher than reported, said Du Jinsong, a Hong Kong-based property analyst at Credit Suisse.

"If there's any surprise, it should be that it's so small," Du said of the abuses. "This is probably a deflated number."

Li's predecessor as premier, Wen Jiabao, pledged in 2011 that the government would build as many as 36 million affordable-housing units within five years.

The audit found that 38,900 units had been distributed in violation of the rules, and abuses included people providing false information and families receiving multiple houses.

In one case cited by the audit, a property firm in the Inner Mongolia city of Ordos spent money meant for affordable housing on advertising and sales expenses for property projects. The money was later returned, it said.

The report said local governments had paid "great attention" to problems pointed out by the auditors.

"Overall, the situation is quite good, but the audit found that there exist problems of violating the rules and substandard management in some affordable-housing projects," it said.

Before becoming premier in March, Li had championed affordable housing as a way to stabilise the housing market and boost supply.

"Fair distribution of the houses is the lifeblood for the success and sustainable development of the programme," Xinhua quoted Li as saying in February last year.

Almost 20,000 auditors were deployed to 31 provinces from November to March to check the progress of the programme, the audit report said.