Re-settlement and Public Housing Insurance – Property Development

Re-settlement and Public Housing Insurance – Property Development
Breakthough in Changzhou City, Jiangsu Province
SHEN Yongxiang
Jiangsu Teachers University of Technology, P.R.China ,213001
Abstract Based on a comprehensive analysis of the present condition of the real estate industry in
Changzhou, this paper analyzes the two problems of the industry: resettlement and public housing
assurance. In the end, advices and solutions are proposed for the harmonious development of
Changzhou’s real estate industry.
Keywords read estate industry harmonious society harmonious development Changzhou
Instruction
Since the real estate industry is a pillar industry of the national economy and also an elementary
industry concerning national economy and people’s livelihood, it requires that we should further
strengthen the direction, standardization and management of the real estate market, adapt to the
macro-adjustment and control initiatively, make adjustments in the development strategies in time, and
study and solve the problems emerging in the course of development. This is also the key for
maintaining a sound and rapid development of Changzhou’s real estate industry. In Report to the
Seventeenth National Congress of the Communist Party of China, a higher requirement has been made
for constructing s harmonious society. The report has pointed out that, in accordance with the general
requirements for democracy and the rule of law, equity and justice, honesty and fraternity, vigor and
vitality, stability and order, and harmony between man and nature and the principle of all the people
building and sharing a harmonious socialist society, we will spare no effort to solve the most specific
problems of the utmost and immediate concern to the people and strive to create a situation in which all
people do their best, find their proper places in society and live together in harmony. How to achieve a
harmonious development of real estate industry under the direction of the Seventeenth National
Congress has become the most important task for the benign circulation and harmonious development of
Changzhou’s real estate industry, even of the overall economy of this city.
I. Analysis of the present condition of Changzhou’s real estate industry
A. Investment in real estate industry maintains a rapid increase, showing a good tendency for
development
From 2001 to 2006, the average increase rate per year of investment in real estate in Changzhou
reached 36%, a little higher than the 35.8% increase rate of Jiangsu Province as a whole. So overall it
shows a good tendency of rapid development. In 2001 the development investment was 32.7 hundred
million yuan, an increase of 7% from that of 2000. Beginning from the year 2002, a mushroom increase
occurred in real estate industry. In that year the development investment was 41.02 hundred million
yuan, an increase of 28% from that of the previous year; in 2003 the development investment was 52.7
hundred million yuan, an increase of 29% from that of the previous year; in 2004 the development
investment was 97.90 hundred million yuan, an increase of 85% from that of the previous year,
reaching a peak during the “Tenth Five Year Development Plan”; in 2005 the state publicized the policy
to stabilize house prices, and investment in real estate in Changzhou dropped dramatically, investment in
that year was 114.72 hundred million, an increase of 17% from that of the previous year; in 2006 the
development investment continued the rising tendency in 2005, monthly fluctuation was the least
compared with that of the last two years. In 2007 the development investment was 171.04 hundred
million, an increase of 50% than that of the previous year. Investment in real estate enjoyed a relatively
stable and rapid growth. A start of sound and rapid development was realized for the “Eleventh Five
Year Development Plan”.
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B. Sale of commercial housing keeps going on prosperously and the prices develop stably.
First consider the space in commercial housing sale. During 2001 and 2006 (2003 excluded) the
increase rate in space sale remained in decimal numbers. The total space sale of 2001 was 2.17 million
square metre, and in 2002 it was 2.48 million square metre, with an increase rate of 14%. The increase
rate of the space sale of 2004 and 2005 were 15% and 79% respectively. According to statistics, the
space sale in 2006 in Changzhou reached 4.79 million square metre, an increase of 13.5% than that of
the previous year. If the type of commercial housing is considered, it can be found that sales of
commercial residential buildings accounted for the main part of commercial housing sale, with its
percentage remaining above 85%.
Second consider the total sales of commercial housing. Total sales increased at a faster rate than
space sales. The lowest rate of -3% occurred in 2003, and highest rate of 165% occurred in 2005. During
2001 and 2005 the average increase rate reached as high as 36.9%. The total sales of 2006 increased
23% from that of the previous year, its increase rate apparently were higher than that of the space sales
of the same period (13.5). The fact that total sales increased faster than space sales means that the prices
for commercial housing are rising. On the other hand, the fast increase of total sales also reflects the
rising prices of commercial housing in Changzhou.
Third consider the selling price of the commercial housing. The prices have been going on stably in
recent years. From 2004 to the end of September in 2007, the increase rate remained at about 6% (the
increase rate of 2005 was 11%).in 2005 when the state publicized the policy on stabilizing house prices,
the increase rate fell a little. Overall, in 2007 in the urban area the deal prices of commercial housing
rose by 5.03%. The deal prices of commercial residential buildings rose by 1.07% only, lower than the
average deal prices of nearby cities (Nanjing 4.4%, Wuxi 4.2%, Yangzhou 4.8%); influenced by the
increase in deal volume in urban area, the deal prices of commercial housing for business rose
significantly, by 16.58%. In 2006, in the seven districts of the city, the average deal prices of
commercial residential buildings showed a tendency of “four rising and three falling”. The average deal
price of commercial residential buildings in Wujin District was 3247.45/ , an increase of 22.72%
than that of the previous year, making it the district with a highest rising rate in commercial residential
building prices in that year; the average deal price in east city district was 3677.85/ , a drop of
15.75% than the previous year, making it the district with a highest dropping rate in that year. But as the
base price was relatively high, the absolute increment was still quite high, thus great pressure was
imposed on the purchasers. Commercial residential buildings are an important part of commercial
housing. Changes in the rising rate of its prices are basically in accordance with that of the commercial
housing.
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C. Supply of commercial housing keeps growing, and the housing structure becomes more
and more reasonable.
1. The completed building area of commercial building keeps increasing. In recent years, the
completed building area of commercial buildings in Changzhou has kept increasing, jumping from 1.92
million square metre of 2001 to 5.20 million square metre by the end of 2005, to 3.98 million square
metre by the end of 2006. It increased by 106%, with an average annual increase rate of 17.66.
2. Newly-opened building area keeps increasing. In 2001, the newly-opened building area of
commercial building in Changzhou was 2.33 million square metre; in 2004 the figure rose to 5.73
million square metre. During 2002 and 2003, the increase rate remained above 50.0%. By the end of
2005 the increase of the newly-opened building area dropped dramatically, with an increase rate of -16%;
in 2006 the newly-opened building area rose again, the year’s total newly-opened building area reached
8.40 million square metre, with an increase rate of 74%. The newly-opened building area began to rise
again, and enjoyed a relatively rapid increase.
3. The supply structure of commercial residential buildings is becoming more and more reasonable.
Take the case in 2006. Look at the new supply structure of the different house-types in Changzhou: 9000
units of commercial residential building below 90
were ratified for sale, 2.6 times as many as the
previous year of the same period, and accounting for about 18% of all the new-ly completed buildings of
the same type in this year. This percentage was 6.4 percentage points more than that of the previous year
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in the same period; while 55000 units of commercial residential building above 144
were ratified for
sale, approximately the same as the previous year, and accounting for about 11% of all the new-ly
completed buildings of the same type in this year. This percentage was 6.3 percentage points less than
that of the previous year in the same period.
D. The real estate industry is playing a more and more important role in economic and social
development.
The growing rate of the increase value of the real estate industry is higher than that of the three
industries and GDP in Changzhou, and its proportion is on the rising. The real estate industry has a long
production chain and is closely related to many other industries, such as the steel and iron industry and
the cement industry, and many trades in the tertiary industry. Its multiplying effect benefits many
industries and related trades in the upper and lower reaches. Directly or indirectly it can guide and
influence the growth speed and quality of economy. From 2001 to 2006, the increase value of
Changzhou’s real estate industry grew by 15% in average, the speed was higher than the three industries
(13.6%) and the local total output value (13.9%) of the same period. Its proportion in the tertiary
industry rose from 9.5% to 11.7%, and in local total output value, from 3.5% to 4.2%. This adequately
shows the important role of the real estate industry as a pillar industry in Changzhou’s economic
development.
The growth of the real industry has played an important role in improving the living environment
and perfecting the city functions. The real estate industry is an important section of national economy; it
is also closely related with people’s lives. Since housing entered market, the growth of the real estate
industry has played an important role in improving human living environment and city functions.
According to the result of a sample survey, by the end of 2006, the building area per person in the urban
area of Changzhou had surpassed the 30
-standard for a comparatively well-off standard of living.
People’s living conditions in both urban and rural areas have been greatly improved. The growth of the
real estate industry has contributed greatly to the modernization of Changzhou city. The city takes on
new looks every day, the living environment has become fresh new. People are glad to see that the city
has grown higher and more beautiful. The roads have become lighted and high-rises are seen here and
there. A modern metropolitan is looming before people’s eyes in a more and more clearly-defined
outline.
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E. Housing assurance system is improved, and housing difficulties for low-income people are
beginning to be dealt with.
According to statistics, in Changzhou in 2006 the construction area of economic housing were
490000.06 , an increase of 32.1% than that of the previous year of the same period; completed area
was 130000.46
; sale area 190000.17 , 2102 units, the average deal price was 2028.11/ , an
increase of 16.1%, 21.2% 8.3% respectively than that of the previous year of the same period. In 2006,
525 families moved into low-rent houses in Changzhou. Among them, 291 families got houses for
reduced rents, 4 families got houses with furniture; 230 families received subsidies for rent, a total of
1350000.37 was distributed. In the light of the requirement to steadily increase low-rent houses,
Changzhou government removed certain limits for application. Previously, only families with
low-income insurances (monthly income below 208 per person) and families with special difficulty
certificate could apply for low-rent houses, now families with a monthly income below 420 per
person can also apply. For those low-income and middle-to-low income families who are not qualified,
but who can not afford to purchase economic housing, a public renting system has taken shape in
Changzhou. Public rent houses are ordinary houses whose property right is owned by the state. They are
let to specific families or people at a rent close to the market level. Priority is given to low-income
families; the middle-to-low income families are the next for consideration. Moreover, according to the
statistics from the city construction bureau, beginning from 2006, Changzhou government will build one
million square metre settlement-housing in order to provide housing for the families whose houses have
been resettled. By the end of 2006, the area of the settlement-housing under construction in the urban
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area had amounted to 460000.5
settlement-houses.
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Up to now 3000 qualified families have moved into
II. Major problems in the growth of Changzhou’s real estate industry
A. Problems in resettlement
By the end of September 2007, altogether 5489 units of residential houses needed to be resettled,
construction area in resettlement was 850000.05 . 831 units have been resettled, accounting for
15.1% of the total number. The completed construction area in settlement was 210000.8 , accounting
for 24% of the total area. 655 cases of administrative adjudication were taken up, among which 594
cases have been concluded, 146 cases have been applied to the court for execution, 2.7 times as the
previous year of the same period. 63 cases have heard before court, 3.1 times as the previous year of the
same period. 25 cases have been executed by the court. The problems in the resettlement in Changzhou
are mainly seen as the following:
1. Expectations for compensation are in disagreement. On one hand, the demands of the household
to be resettled are too high. They often hope to better their living environment once and for all through
compensation in resettlement, but often it is difficult to meet such demands; on the other hand,
according to Resettlement Administrative Regulations for Urban Area, the compensation for the
household to be resettled are too low. Thus they have great pressures in buying new houses; often it is
beyond their ability to shoulder such heavy economic pressures. Therefore it is quite difficult for the two
parties to reach an agreement as to the sum of compensation.
2. Compensations are not distributed in time. As the party who is to resettle households (Party One)
is limited in capital, especially when this Party One happens to be developers, he always delays the
payment to the last moment, hoping to pay the party who is to be resettled (Party Two) with money
recovered in the sale of commercial housings. The delay often is quite long. Although most people in
Party Two are not aware of the time value of the capital, they can no longer buy their expected houses
when the developer finally pay them the sum of money as originally agreed, as the prices of the real
estate are rising to fast. When Party Two demand to reevaluate the prices for compensation, conflicts
arise. Sometimes direct conflicts with the developers and even casualties may happen. Now some people
in Party Two make frequent visits to Beijing to appeal to the leadership for intervention, and the
problems have not been completely settled.
3. There are gaping gaps in evaluation prices. On one hand, due to the dishonesty of the evaluation
organization or other reasons, the original houses of the Party Two are often under-evaluated, while the
new houses built by the developers are over-evaluated. Thus huge price differences emerge; on the other
hand, the developers (as Party One) have an insatiable desire for profit. In order to lower the prices per
unit for the resettlement houses, they often design houses which are too large, consequently the Party
Two have to make up the huge price differences at their own expense.
4. The location of the resettlement houses are quite out of the way. Some resettlement houses are
quite far away from the original places. When Party Two move into the new house in the resettlement
area, it is very inconvenient for them to go to work in the city or do business. A lot of time is wasted on
the way, and at the same time they to spend more money on transportation. Living expense increases
greatly for them. Moreover, facilities are inadequate in the surrounding places of the resettlement area.
Living quality drops significantly for them. As the life of the Party Two is much influenced, they are
reluctant to be resettled. Inevitably, the work of resettlement will meet with many troubles.
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B. Problems in public housing assurance
In modern society, the problem of housing is actually the problem of public housing assurance.
That is to say, the problem of housing for the middle-to-low income group is basically the problem of
the relationship between the income of this group and the housing prices. Government should solve the
housing problem for this group through all kinds of public housing policies. Currently in Changzhou,
housing assurance is mainly realized through economic housing and low-rent houses.
1. Problems in public housing policies
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In Changzhou in 2006, the construction area of economic housing was 490000.06 ; completed
area was 130000.46 ; sale area was 190000.17 , 2102 units; the average deal price was 2028.11/
. Clearly the investment in economic housing is far inadequate for the majority middle-to-low income
group. In Plan for Housing Assurance in the Urban Area of Changzhou City 2007—2011 , it clearly
provides that government should make sure that the total amount of economic housing developed each
year is no lower than 10% of total amount of resident houses developed in that year, and the total area is
no less than 500000 . This plan serves as a guarantee for developing economic housing. But the
housing assurance needs large amount of money, and the money should be managed in a special account.
Special money used for special purposes. Also it should be submitted to audit and public supervision.
2. Problems in the policies for low-rent housing
a. How to design an exit mechanism for people in low-rent housing. These people are disqualified
for enjoying the favorable conditions of low-rent housing when their economic conditions are bettered.
How to confirm the change in their economic condition? and how to design the exit mechanism when
the change happens? These are problems for study.
b. How to raise money. As the low-rent housing system is social security in nature, it is not
commercial. Therefore it needs financial support from the government. But government money is also
limited. So how to raise enough money to secure low-rent housing becomes the key problem.
c. How to secure sources of low-rent housing. The following problems should be studied: how to
build low-rent houses? How to dsitribute low-rent houses to qualified people? How to ensure the
standard and quality of low-rent houses? How to avoid runaway in cost and area as has happened in the
construction of economic housing?
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III. Advices and countermeasures on the harmonious development of
Changzhou’s real estate industry
A. Make and revise regulations so as to make them more effective; coordinate the interests
of all parties in the real estate industry.
With establishing a harmonious society in view, the local government and the department in
charge of real estate industry should be policy-maker, supervisor and executor; developers, investors,
and purchasers will be the ones to be benefited by the policies. As for the middle-to-low income people,
they are the weak groups who depend on policies to maintain equality and justice. A relationship of
mutual-benefit should be kept among all the parties concerned. In other words, while the interests of the
strong groups, including government, developers, investor, etc., are increasing, the living conditions of
the weak groups, the middle-to-low income people, will also be improved. So the situation should be
like this: government is also an “economic entity”, it manages to get enough revenue from the real estate
market. Then this revenue is put into effective use, and a harmonious and orderly development of the
whole society will be achieved.
B. Transform government function, standardize the making of regulations for real estate
industry.
The market activities should be standardized, which include the qualification management of the
real estate developing enterprises, the process of developing, sale, and even of consumption. At present
some enterprisers have not undergone strict qualification examination. They lack capital and don’t have
the ability to develop and manage real estate. They make a living just by speculating on land and louhua
(a kind of future house); some even make huge profits through illegal means. In the process of
developing, such problems as illegal management and usurpation of land are prevalent; in the process of
sale, such phenomenon as “fangtuo ” (the persons who are employed by the sales agent to set traps for
possible purchasers), delay in delivery, shrinking of the house space, lack of facilities are quite
commonly seen; in the intermediary services of real estate trade, such problems as contract cheating,
false information, over-charging have surfaced in great number; in consumption problems are just as
numerous: problematic property management, frequent quarrels over real estate, helplessness of the
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consumers with their complaints, etc. All these market micro-economic activities need to be
standardized by related laws. Therefore basic real estate law is in urgent need, so as to put and end to
lawless, chaotic situation. In making laws, the functional department of the government should take the
actual situations into full consideration, not just depend on the guidance of legal organizations or
theorists.
C. Establish a rational house price gradient on the basis of urbanization strategy.
In the development of Changzhou city, we should finish tidying up the city layout by taking the
increase of land value as an opportunity. Move to the outside of the city those trades and job
opportunities that are not fit for city development. Establishing multi nucleus and satellite industry base
is helpful for the city’s sustainable development, helpful for pushing on the development of the
surrounding regions by their radiation effect, and also relieve the pressure from lack of lands. It can also
produce better situations for the peasants who have lost their land and the middle-to-low income people,
so that live a happy live, thus contributing to the harmonious development of the whole city.
D. Bring government’s administrative function into full play, and strengthen management on
real estate industry.
Raise the conditions of market entry for real estate enterprises to an appropriate degree; increase
the strength and market competitiveness of the enterprises. In strengthening government guidance and
management in establishing real estate enterprises, it is recommended that the practices and experiences
of other cities’ (like Huzhou city in Zhejiang Province) be taken as a reference. For the
newly-established real estate enterprises from now on, the same qualification standards should be also
applied to the technological personnel. Meanwhile, from now on result of the annual examination of the
present enterprises should also be graded by the standards of the second-class enterprise, a certain period
of improvement and adaptation can be given to them. Although it may cause some negative influences
on attracting investment from overseas in the local real estate development, in the long run it is more
advantageous for the real estate enterprises to increase their strength and overall level and to improve
their ability in resisting market crisis; also more advantageous to develop local real estate industry.
Meanwhile, government should actively direct these enterprises to establish and improve modern
enterprise system, making every possible effort to provide direction and service for these enterprises.
References
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The Author can be contacted from Email:[email protected], [email protected]
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