Housing for rent to be built in Beijing villages#Oriental Outlook#-Sino-US

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Housing for rent to be built in Beijing villages

A surge in housing rent in Beijing has again triggered public debate this summer. Increasing housing supply is one of the important tasks for the municipal government.

Beijing is one of the 13 cities chosen by the central government to carry out a pilot program that uses the collective land for construction purposes to build residential buildings for rent, a way to increase the housing supply.

A Beijing official has recently said that the capital will add 200 hectares of collective land for construction purposes to build residential buildings for rent this year, while it has arranged 204 hectares by the end of last year.

In the 33rd issue of 2018, the Oriental Outlook magazine under the Xinhua News Agency ran a cover story on Beijing’s practices to increase housing supply while fulfilling social and economic development for farmers.

Below is an excerpt of the article.

No limit on household registration, employees and talent standards set by districts and industrial parks for entrepreneurs could apply for the specialized public rental housing, mutual property housing and allowances for rent, according to a recent guideline issued by the Beijing government on July 20.

The guideline on ensuring housing supply for talents allows district governments and park management authorities to rent the housing on collective land for a long term, experts said.

National policies have sent a clear signal for the establishment of a housing system that has multiple suppliers and channels to ensure housing supply for rent and purchase, and a focus is on developing rental housing on collective land.

On August 28 last year, the former Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development issued a pilot scheme to use collective land for construction purposes to build residential buildings for rent.

Beijing was one of the 13 cities involved in the central government’s pilot scheme. Other cities include Shanghai and Shenyang.

As early as 2011, Beijing has already started reform of the use of collective land to build residential buildings for rent, and some sample projects have been constructed, providing experience for the national pilot scheme.

Reshaping Tangjialing

Tangjialing in northwestern Beijing’s Haidian district now has beautiful communities and parks, compared with the dirty, disorderly and poor shanty living conditions about eight years ago.

Around 60,000 low-paid and unemployed people lived in buildings built by villagers in Tangjialing where only 3,000 villagers have household registration, creating potential risks of public security, fire and sanitation.

In 2010, Beijing researched on building residential buildings for rent on collective land there, and in September 2011, the former Ministry of Land and Resources approved the city to carry out the pilot.

As for the method of implementing the pilot, Lin Fusheng, the then Haidian district head, said that it would not repeat the construction mode and there would be a new innovative mode.

In 2012, Beijing’s first pilot program, or even the country’s first, was launched in Tangjialing. Four more places followed in Haidian’s Wenquan and Xibeiwang towns, Chaoyang’s Pingfang township, and Changping’s Beiqijia town.

For the first five pilot places, about 15,000 apartments over a total of 1.1 million square meters will be built, and by the end of 2017, in Tangjialing, Wenquan town and Pingfang township, 6,000 apartments have been supplied to the market.

There have been more restrictions on the collective land use compared with state land over a long period of time, said Yang Zaiming, chief lawyer of the Beijing Zaiming Law Firm.

Yang said that China’s land management law has divided the urban and rural market, and only residential buildings on the State land can be used for building homes that can be traded in the market, and the homes on collective land could not be traded.

New policies

Under the current framework of integrating urban and rural areas, new policies have been explored, such allowing buildings on government-approved collective land to be rented, but not sold.

Yang said that the tenants living in crowded places in large cities is very common, and the actual demands have finally pushed the system reform represented by the central government’s pilot scheme last August.

The pilot scheme has pointed out that it will benefit the rural land management, facilitate optimized distribution and intensive utilization of land resources, and speed up the urbanization.

To prevent the residential buildings from becoming “small property right housing,” pilot cities have launched detailed measures under the pilot scheme requirements.

The detailed measures cover project locations, application and approval process, construction fund raising, rental housing supervision and guarantee mechanism.

Beijing encouraged tenants to sign long-term contracts to rent the residential buildings, but each term could not exceed 10 years.

“It aims to prevent the conversion of lease into freehold and the buildings from becoming the ‘small property,’” said a senior official from the Beijing Municipal Commission for City Planning and Land Resources Management.

As a supply channel for rental housing market, the residential buildings on collective land have apparently relieved people’s basic housing demands to some extent, not for speculation in real estate, the official said.

From Beijing’s practices, the pilot scheme has fulfilled the functions of integrating the industrial and urban areas, and balancing people’s work and life, the official who declined to be named said.

The collective economy, such as traditional township enterprises and rural markets, are no longer suitable for Beijing’s future development, and the pilot scheme will help explore the land use and add to farmers’ income, said Liu Weimin, a senior official from the Development Research Center of the State Council.

Finding funds

Though the systemic barriers are gradually being removed, there are still many problems facing the practice of building residential buildings for rent on collective land.

“The first is lack of money,” said He Jianfeng, executive deputy general manager of Beijing Hongke Xinyu Property Investment Company, a collective company responsible for fund-raising and development of the Pingfang township program.

The total investment in the Hongxin Community in Pingfang has reached 1.1 billion yuan ($160.8 million), and all of the money need to be raised, He said.

The collective land was not in the market for sale, and therefore, the program would not get bank loans through common procedures, He said. To start the program, the Chaoyang district arranged 200 million as rent for three years.

“Fortunately, the land has been planned for construction use, has been idle for a period, and doesn’t involve demolition and removal, otherwise, it would face more financial difficulties,” He said.

The Haidian district also prepaid 89 million yuan as rent for three years for the Tangjialing program to start its construction in 2014.

In a document released in November 2017, Beijing regulated the fund-raising ways: money from collective economy, prepaid rent from property management or renting companies, loans from banks and money from state-owned companies.

Pilot programs could get loans from China Development Bank’s Beijing branch, Agricultural Bank of China’s Beijing branch, China Construction Bank’s Beijing branch and Huaxia Bank, said an official from the Beijing Municipal Commission of Housing and Urban-Rural Development.

According to the measures released by the four banks, pilot programs could get loans of a term as long as 30 years; the maximum amount of loans could reach 80 percent of the total investment; and the interest could be paid by loans.

Return on investment

The first three programs in Tangjialing, Wenquan and Pingfang could get money from the government because the government rented the whole block of the residential buildings and then will rent out to qualified applicants.

While such a rental system will not create any operational risks, it has raised concerns that the added value of the collective assets and farmers’ interests might be undermined by a mode that is not market-oriented.

The city planning official said that Beijing’s documents stipulate that the residential buildings for rent on collective land could charge market-based rent, and buildings for commercial use can also be built on such land.

Zhang Dawei, chief analyst of Centaline Property, said that the residential buildings for rent on collective land could bring an annualized return rate of 5 percent once the market-oriented rent is applied.

He Jianfeng said that the return rate was about 7 to 8 percent at the Hongxin Community program, and it will take 15 to 20 years to fully recover the cost.

In Tangjialing, villagers used their land to take a share in the pilot program, and they could get returns from the rent. And their own apartments allocated as replacement could also be rented out. A family could get up to 20,000 yuan a month.

The ultimate goal of the pilot is to give consideration to both economic and social benefits and realize a win-win result for the rural collective economy, farmers, tenants and the government, said the city planning official.

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