State Media Blames Housing Crisis on Corrupt Government

The following post is a translation of this article by Xie Yuhang in the China Youth Daily, which was forwarded to us by Bill Bishop of Sinocism, Digicha, and Twitter fame. In his words:

It is remarkably candid, and accurate, and got distributed on the big news sites. This does not look like something that slipped through, but rather all part of the campaign around trying to finally take real steps to rationalize the housing market, and help the masses. But we’ll see…

He has also written a much more in-depth analysis of the article, which is here.


Note: I have no background in economics and don’t completely understand all of this stuff, so Bill Bishop and Kaiser Kuo both helped in this translation. Any mistakes are mine, though, not theirs.

Although the welfare housing system has been ordered stopped, the covert housing welfare that exists for government employees ((i.e., the government provides housing or housing stipends to employees)) has not stopped, and has become its own system. Some central government offices in Beijing not only have ample financial resources for housing welfare, but their prices are not even twenty percent of the market prices. And not only can local officials get a share of ownership in existing houses/property, but they even build new houses in the name of renovation and housing reform. Moreover, in the construction funding process the construction area [can] go way over the allowable quota and even illegally violate construction regulations, stringing together a line of villas. (China Securities Report, 4/28)

Housing is meant to be a one of the basic necessities of life, but at present it has become a very common problem. If the people want to realize their dream of having housing, they must count on the government to move. If government employees could feel the pain caused by these housing problems, that would give them the impetus to do something. But housing welfare for government employees is widespread, and it allows them to distance themselves from the housing market. Whether housing prices are high or low has little effect on their housing, so we must take useful steps to get them to do something. We can’t rely on their senses of responsibility or their consciences.

If the law has banned it, but civic organs are doing it openly, then that is public corruption! This kind of corruption not only destroys the government’s incentive to regulate the housing market, it gives government employees a vested interest in the continued rising of housing prices. Because government employees can get houses easily, the value and profit potential of their property increases as the amount of property they have goes up.

The existence of corruption impedes national efforts to safeguard the housing [market] ((The Chinese term 保障房, which I have translated variously here, refers to a set of government regulations designed to control the construction of housing, as well as sale and rental prices, etc.)). Commercial prices are so high they’re untouchable, so a lot of people have placed their hopes in [the government] safeguarding the housing [market]. And while it’s popular right now to talk about protecting the housing market, this hasn’t really helped the common people much either, and the reason is again corruption. As commercial prices rise, the profit potential for those in power through rent-seeking rises. There has been a mass of construction in the past few years, which should bring housing prices down, but for the corrupt officials who’ve been bought by businessmen and control interests in the housing market, what reason is there to bother with “safeguarding housing” ((See above.)). Money is owed on “safeguarded housing” all over, and in addition to the connections with the GDP and land finance, corrupt officials are also partly to blame.

“Safeguarded houses” are going up and down, but they aren’t being built for the common people who can’t afford a place to live, and many of them are being used to feather the nests of the corrupt power-holders. Recently, the media has been reporting on the Xinzhou situation in which its first housing price control program was cut apart and the housing sold for profit. The government there used the only pricing control program for the benefit of local cadres, so there was a lot of impetus for officials to build, and the officials were actively mobilizing people and capital. Most of the officials cutting apart this cake already had houses, and since fixed-price houses could be resold for massive profits, the cadres made a lot of money. “Safeguarded housing” isn’t a special case, low-income housing and fixed-price housing have also been taken over by government officials, so it’s clear to see who “safeguarded housing” is really “safeguarding”.

>What’s even more infuriating is that the nation’s safeguarded housing policy has been used by some conscienceless government departments to impede the interests of the poor. For example, a certain city bought unsold housing as “safeguarded housing”. They sent huge sums on housing priced at 35,000 RMB/square meter, and most of the housing is between 150 and 220 square meters. If the interest of the poor were really being taken into account, then the government’s limited funds should have been used to construct as many inexpensive houses as possible, so that poor people could afford them. This would be in the interest of a large number of people; how many people become consumers as a result of the sale of extremely high-priced commercial property? This is quite obviously using poor people’s money to help commercial developers […] It keeps prices high, prevents more people from being able to afford “safeguarded housing”, and influences the commercial housing market.

Because of corruption, government property market control policies have been built on stilts, they cannot be long-lasting. Every time a new policy is announced, a new way to counter it is also discovered. Because these countermeasures always prevail, [we know] there is corruption. Hoarding [property] is a frequently-used trick by developers, but if they weren’t being instigated by government departments, how could they be so brazenly unscrupulous? “The highest fine for commercial property hoarding is 10,000 RMB” is the masterpiece of some local government department. Recently the central government touted the so-called “most severe” new housing oversight, but the policy hadn’t been out for long when the media began reporting that some banks were offering “unsecured mortgage loans” “fifty-day exemptions on the [required] waiting period” and other methods of consumer credit that become housing loans. Regulatory policy will also be subject to interference by corrupt officials, from those who speak out in favor of high housing prices to those who will stop at nothing to prevent the lowering of housing prices, so one can clearly see the kind of impact corruption has on regulatory policy. The existence of corruption has led to public funds being illegally used for buildings, boosting the housing bubble; the Shanghai pension scandal is just one illustration.

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My post commemorating translator D.C. Lau yesterday totally stepped on Chris Hearne’s excellent translation of another Zhang Wen article: “China is Sick.” Check it out!

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