The Effectiveness of the Affordable Housing Programs in Guangzhou and Shenzhen

1       Abstract

Affordable housing has become an issue within developed and non-developed countries, and China is not an exception. Therefore, to remedy this situation, the central government of China has put several policies in place in regards to making the houses more affordable. However, most of these programs have also faced challenges, and this affects their implementation as well as the effectiveness and sustainability of these projects.

To ascertain the effectiveness of the affordable housing program in Guangzhou and Shenzhen, a qualitative and quantitative approach to the study will be undertaken. Quantitatively, data on the demand and supply metrics of the program will be collected to ascertain the sustainability of the process. In the same manner, the perception of the program beneficiaries towards the program will be obtained via questionnaires and interviews.

The project will be of great significance as it will provide feedback on the effectiveness of the affordable housing programs in China and will thus aid the municipalities as well as the government in formulating long-term and strategic measures that will make the program more effective in alleviating the housing conditions in China.

Keywords: Affordable Housing Program, Guangzhou, Shenzhen, China, Effectiveness.

The Effectiveness of the Affordable Housing Programs in Guangzhou and Shenzhen

3       Introduction

As per Tan (2011), housing is a fundamental human right as well as a need, which ought to have high priority. Moreover, he claims that housing is not a homogenous good in contrast to other commodities like clothing and food, but constitutes of numerous households in several locations. The provision of houses is among the biggest challenges that many developing and developed countries are subjected to, and China is not an exception (Zenou, 2012). Notwithstanding the efforts the Chinese jurisdiction to endorse and promote the ownership of houses, a colossal number of challenges linked to the delivery of the housing systems are still existent, thus undermining housing reform success for the past three decades (Tan, 2013). Over the past few years, major Chinese cities like Shenzhen and Guangzhou have had a 20% rise in home prices (Rapoza, 2017), and this is proof that the programs are not functioning well.

The Chinese government plays a crucial role in housing as it is involved in direct provision as well as welfare subsidies. In the year 1997, more than 80% of the populace was living in houses that were owned by the state. Since 1995, China has undertaken a plethora of housing programs in major cities like Shenzhen, Guangzhou, Shanghai, Beijing, and Tianjin (Chen et al., 2013). However, some houses are more affordable in different Chinese cities like Lanzhou (Duan, 2011). The programs entailed the Housing Provident Fund and the National Comfortable Housing Project. While the former aims at the accumulation of capital for the purchase of individual homes, the latter targets the provision of low-cost housing for low and middle-income citizens that are primarily within the urban areas (Man, 2011). The primary direction of housing reforms is to encourage home purchases by individuals. Despite the efforts that were made on selling state-owned housing via re-form, little progress has been made in regards to the overall rate of homeownership. In 1996, individual purchase of homes only accounted for 15% of all housing transactions in Guangzhou. However, it has been widely discussed that housing reforms in China have faced many hurdles like the entrenchment of the work unit system as well as the low affordability of houses (Taltavull et al., 2012). Prices are typically set too high for the comfortable housing project, and most households are unable to afford them. These types of challenges are posed by the socialist housing system of allocation in China as well as its constricted financial assistance for households. The amalgamation of these factors has led to the digress of new housing programs in China, and there is thus a need for innovative measures that tend to eliminate or decrease these constraints to sustainable housing development (Gan et al., 2017).

The primary aims of the research are to investigate the effectiveness of affordable housing programs in China, specifically in Guangzhou and Shenzhen. The efficiency, as well as the effectiveness of the housing delivery systems, necessitates sustainable housing provision for all. In this manner, this particular research quantifies the effectiveness of the current affordable housing program in China to ascertain the level of sustainability of the existing systems and thus form a basis for the formulation of recommendations that increase the effectiveness of these programs. This is a highly pressing issue that necessitates innovative remedies, and several kinds of research have been conducted to ascertain the remedies that are to be utilized. Due to the complexity and intricacy of this issue, because of numerous factors in play, it has been a challenge for both academia as well as policymakers who are looking to resolve this pressing issue. The proposed research is distinct in contrast to prior research as it incorporates several dimensions of the problem and thus takes a multi-dimensional approach to the study, as this is a multi-faceted problem. Besides, it is specific to Guangzhou and Shenzhen, which are among the two biggest metropoles in china.

The potential utilization of this research is significant as it can form the basis for solutions of the current enigma on affordable housing in China and this manner; it creates a platform under which policies for sustainable housing can be initiated thus aiding in minimizing the current issues marring the sustainable provisions of housing in Shenzhen and Guangzhou. This can also set off a chain of solutions that can be extended to other major Chinese cities as well as parts of the globe that are currently subject to the sustainable housing conundrum. In regards to the contributions towards academia, this research adds to the existing literature on sustainable housing solutions in developed and developing countries as well as the effectiveness of affordable housing programs.

4       Research Questions

• What is the level of ‘sustainability’ of the current housing programs and solutions in China?
• What are the elements that limit the sustainability of these programs?
• Are the current housing programs in place effective enough to cater to the needs of the Chinese population in Shenzhen and Guangzhou?
• How can the effectiveness of the Affordable Housing Program be improved, and what are the recommendations based on the research?

5       Literature Review

Ever since the 1998 welfare housing system reform that was market-oriented, China has made significant strides in augmenting the housing conditions for the urban residents with a limited period of time (Shi et al., 2015). Nevertheless, housing affordability still exhibits significant challenges in urban China. The current literature has depicted that a change in the provisional responsibility of urban housing from units of work to market was a precursor of the reforms that were market-oriented in the 1980s. This led to the revitalization of the urban economy of China. Even so, the Chinese post-reform urban housing framework has put a higher priority on economic functions of housing investment, while primarily ignoring the housing needs of households that have low income (Deng et al., 2011). Recently, almost all of the major cities have experienced skyrocketing prices of houses, and the mounting crisis of housing affordability (Man, 2011; Deng et al., 2009) has become a critical issue and is even a threat to political stability (Chen and Deng, 2014). As elucidated in the recent speech by the current president Xi Jinping, affordable housing policy has been connected with political significances like the necessity to promote social justice as well as ensuring the public sharing the accomplishments of development and reforms.

The discourse of the Chinese housing policy is frequently situated in the literature of the East Asia model of housing systems. It is generally held that national housing frameworks in East Asia share a significant common to utilize housing development as a way to drive urban advancement as well as economic growth (Wang and Murie, 2011). In particular, the studies have expounded on the justifications of why the provision of housing that is occupied by owners is a foundation of welfare under efficiency welfare regimes in East Asia. Through advancing asset-based welfare among owners of homes, East Asian jurisdictions anticipate that the family resource can work as social security, and the development of “asset-based security” can protect self-sufficiency and lessen the residents’ interest to create burdensome and expensive welfare states.

5.1     Major Affordable Housing Programs Today

5.1.1    Earlier Affordable Housing programs

The central government had launched affordable housing programs as early as 1998, including the 1998 Economical and Comfortable Housing’ (ECH) and the 1999 Public Rental Housing. However, during these periods, they were only availed to the employees of the public sector particularly, low-level civil servants and police officers, nurses, doctors, and teachers (Wang, 2011; Huang, 2009).

5.1.2    Recent developments

5.1.2.1   The 70/90 policy

In a bid to regulate the unit size subsequently lower the unit price, the central government passed a new regulation, which limited the units to 90 square meters in 2006. Nevertheless, at the local level, this new policy has not been able to be fully implemented. This policy was destined for failure as many developers acquired land and financed most of their projects before the new regulations. In a bid to follow new regulations, developers had to alter their whole design as well as construction schedules, and due to the fact that there were no incentives from the jurisdiction, many projects ended up being losses (Sun, 2011).

5.1.2.2   Limit Price Housing

Despite the global financial crisis in 2008, the prices of houses in China kept on skyrocketing. In this manner, the government announced a policy that aimed at those were did not qualify for the existing affordable housing programs, and are also unable to afford the housing unit at the market rate. In a bid to lower the sale prices, the local governments located these projects at sites that were unfavorable and were distant away from the city. Just like the other housing programs, this program did not gain traction because of disadvantages as unsuitable locations meant inconvenient work commutes, and this meant that many individuals had to pass on the opportunity.

5.1.2.3   the social housing stimulus program

This initiative by the government was a move that was not only aimed at attracting housing investments and create numerous job opportunities, but it was almost aimed at reducing the issues with affordable housing because of high demand (Cai, 2017).

However, although there have been several attempts at solving the sustainable housing dilemma in China, the mechanisms in place to ensure the effectiveness of the program are yet to be ascertained, and Sun (2011) claims that it is too early to assess the performance of the social housing stimulus program. Sun also claims that most of the programs had not been successful because of the strong opposition in several cities as it decreases municipal income from land as well as other sources (2011). Other researchers like Lin (2011) recommend the Singapore housing schemes as they have proven to be successful. Moreover, the local Chinese government does not provide the necessary incentives to stimulate broad-scale acceptance and adoption of their policies. The fiscal reforms of 1994 left most of the local and municipal governments with the necessity to provide almost 80% of the total expenditures of the government, but only received 47% of the revenues of the government. This imbalance has led to the reliance of the local governments on land leasing fees as sources of revenue for economic development and investments in infrastructure. Despite the need for affordable housing in China, it only currently accounts for 4% of aggregate housing stocks in urban regions.

Even though the advancement of affordable housing programs was re-accentuated in 2008, due to the lack of clear goals at the central government level, the plan was steered into several directions, and this attribution created the opportunity for speculation. In some regions, as long as the purchases were not rich, they would qualify for assistance. Moreover, since the global economic crisis, the central government relaxed the policy regulations; this slowed down the progress of affordable housing programs and in this manner, led to the escalation of prices of housing. Besides, a myriad of housing policies have been released in China on a yearly basis in a bid to combat the ever-increasing housing price conundrum (Chen et al., 2010) and because real-estate is usually a long term investment, the frequent announcement of new policies retard the progression of affordable housing initiatives. Lastly, the current affordable housing systems are only available to Chinese citizens, thus limiting the extent of the affordable housing programs (Yang et al., 2014).

5.2     Effectiveness of Affordable Housing Programs on the Global context

As known, China is not the only region that is currently struggling with the lack of affordable housing, as many developed and developing countries have also been subject to the same problem. Reviewing the affordable housing programs in those particular countries (at an international) would aid in finding possible solutions to the current affordable housing challenges in China. Different regions have specific programs that are tuned to their economic as well as demographic needs (Yao, 2014). Often, these programs take several approaches: demand-side, supply-side, and a mix of the two (Sun, 2011).

On the side of supply, households that are eligible apply to occupy the rent-subsidized or price-subsidized housing units that were built normally by the government. In the case of rentals, once a person is admitted, the benefits from the continued residence in the dwellings that are assigned to them and in case they decide to leave the dwelling, the subsidy benefits that are attached to the dwelling are forfeited, and the benefits are thus transferrable to other tenants that are on the waiting list. For the ownership of homes, once a person is admitted, the applicant usually buys the dwelling at a subsidized cost. However, the homeownership of the subsidized costs is not freely transferrable to another party. Households that are eligible typically wait for a while before being put up in the market (Zhou, 2014).

On the side of demand, the jurisdiction provides the mortgage credit or rent credit for households that are eligible. For instance, the United States Voucher programs provide housing vouchers, with which the beneficiaries can rent any dwelling units with landlords that are willing to participate in the program. Under this program, the tenants pay 30% of the monthly income of the household toward the rent, while the rest are catered for by the government (Li and Gui, 2013). For the ownership of homes, the government may provide assistance via the reduction of the mortgage loan cost or by increasing the chances of one getting mortgage credits.

Usually, past literature has often measured the effectiveness of the affordable housing programs based on the attainment of the objectives, like the number of new units created. In the same manner, it is expected that the affordable housing program should also promote healthy families as well as community goals and access to career opportunities. Sun (2011) draws on the experience and lessons from several years of housing policy and practice within the global context, and he uses several factors for the assessment of the effectiveness of both the demand and supply-side of the affordable housing programs in addressing these objectives:

• Promotion of balanced metropolitan advancement
• Helping of households in accruing wealth.
• Promotion of economic and racial diversity within the residential housings.
• Making the houses readily available and more affordable.
• Expansion and provision of high-quality housing units.

5       Research Design

5.1     Research type

This research will employ both qualitative and quantitative means of inquiry to investigate the effectiveness of the affordable housing program in both Shenzhen and Guangzhou. The utilization of the amalgamation of these two methods makes the research more comprehensive concerning the topic, and it also increases the scope of the study. The design of the study is descriptive as it tends to describe the current effectiveness state of the affordable housing program in Guangzhou and Shenzhen. Because it is constrained to the aforementioned regions, it is a descriptive spatial study of the regions.

5.3     data needs

Because this is primary research, original data will be collected from the cities of Guangzhou and Shenzhen. In particular, to measure the effectiveness of the affordable housing programs in this region, quantitative data on the demand and supply of the housing will be collected from the local municipalities, and the program will be rated in regards to the balance between demand and supply. An ideal scenario would be an equilibrium where the government is able to cater for the affordable housing demands in the region by providing adequate supply. Moreover, qualitative information that will aid in ascertaining the level of effectiveness of the program will be collected. In this scenario, questionnaires and interviews will be used whereby questionnaires will be given to individuals under the program, and interviewees will be selected using simple random sampling to ascertain the generalizability of the information. The questionnaires will assess the level of satisfaction of the individuals under the program as well as the perceived advantages they get from the program apart from the affordability of the housing. The collected data will be subjected to thorough analysis using software like SPSS and excel, and the qualitative data processed using narrative analysis.

5.4     practicalities

The project will take approximately three months from planning, data collection, and data processing. Access to the participants of the study will be made via the local government that is facilitating the program as they have the specifics on the location, pricing, as well as individuals who are registered under the program.

Some of the potential challenges would be obtaining data from the local government as they might treat this information as confidential. Were this to happen, we will utilize paid surveys to target those under the program as they will be incentivized to partake in the study.

6       expected outcomes

The significance of this research has a significant contribution towards the advancement of knowledge on the program and will provide feedback to the government on whether their strategies are effective or not and thus aid the government in making strategic decisions that will assist in making the program successful. In the same manner, the work will contribute to the academic fraternity as data on affordable housing is entailed, and the qualitative information will prove to be vital.

7       summary

In a bid to find out if the current affordable housing program in Guangzhou and Shenzhen is working or not, an inquiry process to ascertain the effectiveness of the program will be undertaken by measuring the demand and supply metrics of the program as well as the perception of the program beneficiaries towards the program.

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