China to grant tenants equal rights with home owners to boost rental market
China is to formulate laws to guarantee tenants equal rights and interests in public service with home owners step by step, an official with the Ministry of Housing and Urban-Rural Development, China’s regulator of construction activities, told Xinhua.

Previously, only home owners were entitled to most rights and interests provided by local public service institutions. So, if the young generation could not afford to buy apartments, they basically had no choice. And, with a poorly regulated rental market, tenants are often left vulnerable to illegal intermediaries and arbitrary clauses.

In mid-July, Guangzhou, the capital city of southern China’s Guangdong province, first issued a plan to ensure “equal rights for tenants and owners”, under which tenants who hold Guangzhou hukou or high vocational qualifications could enroll their children in nearby elementary or middle schools. Meanwhile, the first ever sale and rental ordinance is opened to the public for collecting comments, in a bid to regulate the market.

People rush to buy homes because if they are not home owners, they are not entitled to important public services like education. If tenants gain access to the same rights and interests as owners, we could more effectively stop people from speculating on the housing, according to Cui Junjie, associate professor at the Institute of Political Science and Law, Capital Normal University.

The Chinese government started to encourage the development of rental housing from last year. Beijing, Shanghai and Guangzhou all embarked on the initiative. The Shanghai municipal government vowed to supply 1.7 million units in the next five years, 0.7 million of which are designed as rental housing, 0.55 as subsidized housing, and only 0.45 as commercial. It is predicted that first-tier cities would prioritize development of home rental market in the future in a bid to rein in gains in the already sky-high housing prices.

The market is expected to be big. China, with a migrant population of 245 million, would have around 7 million college graduates entering the job market annually. In the major Chinese cities, the demand for rental housing has been mounting.

Xinhua reported that based on preliminary statistics, the market share for sizable rental housing companies is merely 2 percent, far behind the average 20-30 percent in western countries.

Realtor Lianjia Real Estate forecasts that the industry would see rapid development in the future 5-10 years, with market volume scaling to RMB1.6 trillion in 2020 and amounting to RMB 4 trillion by 2030.

It is reported by Reuters that the promising niche market is now attracting interests of both foreign private equity funds and Chinese real estate developers. US private equity firm Warburg Pincus has invested $500 million in so-called “white-collar apartment” manager Mofang, which started its business in 2010 and now operates 30,000 rental units across China.

Also Greystar Real Estate Partners LLC, the largest apartment manager in the United States, says it is looking for opportunities in major Chinese cities.

The Chinese government is trying to solve the problem of insufficient supply of rental housing. The Ministry of Housing and Urban-Rural Development collaborated with eight other departments to issue a circular recently, instructing local governments in big cities to help relevant state-owned enterprises transform into rental companies. “In order to better leverage the leading role of SOEs in stabilizing rent and increasing the effective supply of rental housing,” said the circular.

Wei Yukun, who recently graduated from the Communication University of China, has just rented an apartment through Ziroom, the rental apartment platform of Lianjia Real Estate.

“Over half of my classmates have found apartments through Ziroom. Thanks to its Haiyan program targeting college graduates, we’re relieved of the deposit money,” he told Xinhua. Affordable prices and convenient procedures help young people like Wei to find cozy places to settle in big Chinese cities boasting the planet’s most expensive homes.

Chinese developers China Vanke and Longfor Properties are also betting big on the youth apartment market. Vanke aims to add 150,000 rental units to the market in the coming two years, while Longfor is looking at growing by 15,000 units each year. 

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