DESCRIPCIÓN DE LOS PROBLEMAS EN LA SECCIÓN 8 ½ pulgadas

In 1978, China’s central government established a national economic reform and an opening- up policy, aimed at transiting the planned economy to a market economy (Gao, 2010). Alongside economic reform, housing reform was regarded as one of the chief indispensable components (Wang and Murie, 1996; Li and Yi, 2007). Based on existing studies concerning housing reform in China, Figure 2-2 below graphs the development of market-based housing

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system, visualising the timeline of China’s housing market, showing how it developed over the previous decades (Wang and Murie, 1996; 19999; 2000). In relation to what was presented in Figure 2-2, the key milestones of the housing reform were summarised in Table

2-1, illustrating the main actions associated with the housing reform between 1978 and 1998,

and delivering an understanding of the housing reform process.

Figure 2-2: Timeline for Housing Market Development and Housing Reforms in China (From 1949 to present)

(Source: Author’s Own Diagrammatic Representation)

Table 2-1: Key Actions Comprising the Housing Reform: from 1978 to 1998

Date Objectives and Actions

1980 Speech by Deng Xiaoping, ‘urban households are allowed to construct their own houses; allocated houses are to be sold; rentals for allocated houses should be adjusted; low-income households are to be subsidised, housing allowances to be granted for housing purchase’

June 1980 The ‘Proposals on The National Construction Works’ promoted the commercialisation of housing in urban areas, through the sale of allocated houses, and increased numbers of rental properties.

1982 Four cities selected as pilot cities to launch the housing reform: Siping, Changzhou, Zhengzhou, and Shashi.

1982--1985 Homebuyers allowed to pay one-third of total housing costs to obtain the allocated houses, while their employers would be required to subsidise the residual two-thirds. At this stage, instalments were proposed as a payment method, requiring one-third of the housing costs in one lump sum.

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The instalment plan was modified, allowing employees to pay 30 per cent of total housing costs in the first instalment; the residual part was then to be paid off in instalments within a set duration of 10 to 15 years.

1991 HPF was firstly introduced to Shanghai.

The Second Session of The Nationwide Housing Reform Conference raised rentals for public housing.

1992 Beijing and Guangzhou launch the HPF system.

1993 In the Third Session of The Nationwide Housing Reform Conference: the main target of housing reform at this stage was selling allocated houses, and the building of market-priced houses, as well as the allocation of public houses to a small number of groups.

1994 The official document, ‘Decision on Deepening the Reform of Urban Housing System’ further

clarifies that the target of the housing reform was establishing a new urban housing system in accordance with the transition to a market economy, including promoting housing communalisation, engaging in building houses, improving living standards, and satisfying the increasing housing demand for urban households.

The Economical and Comfortable Housing scheme (ECH) proposed: targeting low-income households.

1998 The state council promulgated ‘the Circular of the State Council on Further Deepening the Urban Housing System Reform and Accelerating Housing Construction’ (No. 23 [1998] of the

State Council), indicating that housing allocations should be completely terminated after the second half of 1998, supplying economically affordable houses, and establishing an organised housing and housing finance system.

(Source: Author’s Own Diagrammatic Representation)

With the introduction of the housing reform, the government has been employing a gradual experimental approach, adapting programs over time to meet their aims. As shown in Figure

2-2, the period spanning 1978 to 1988 was a trial stage in terms of implementation of the housing reform. It involved a three-stage reform by experiment, selecting some cities as trial cases, to transit houses from the classification ‘welfare subsidy’ to a market-based good 6 (Wang and Murie, 2011; Huang, 2004).

Firstly, it has been suggested that the sale of publicly allocated houses at one-third of the building’s cost per square metre, based on the dimensions of a typical publicly allocated

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house was approximately 56 square metres. The cost of a typical house was equivalent to 10- 20 years of an employees’ income (Wang and Murie, 1996). The cities of Xi’an and Nanning were selected as pilot case studies. However, the selling price was deemed too high for the majority of potential homebuyers to afford, and the payment method was not flexible, as there were no instalment plans, hence the implementation of the reform occurred at a slow pace (Wang and Murie, 1996). Additionally, there were some terms and conditions associated with the purchase of public houses, requiring that houses could not to be resold, due to ongoing state-owned homeownership; this thereby reducing the attractiveness of their purchase for potential homebuyers. These steps were formally rescinded in 1982, because it was recognised that they did not sufficiently further the housing reform.

Secondly, in order to stimulate the demand for purchasing publicly allocated houses, a second stage of the experimental reform was launched in 1982, providing housing subsidies to employees as a form of housing assistance to obtain publicly allocated houses. At this point, additional cities were selected to conduct further pilot studies (see Table 2-1). The breakthrough aspect of this stage was that homebuyers were expected to pay just one-third of total housing costs, while employers were required to subsidise the residual two-thirds. Moreover, homebuyers were encouraged to pay the housing costs in ‘one lump sum’, through the incentive of an authorised property-tax-reduction for a period of 5 years (Wang and Murie, 1996). This action differentiated these changes from those in the first stage, mitigating the financial difficulties encountered by most homebuyers, and thereby accelerating the transition from public-allocated houses to market-orientated houses. In addition, the existing tenants of public-allocated houses were also allowed to purchase the house they lived in, although the house size designated for a family of three was under 45 square metres (Wang and Murie, 1996). On this basis, 10.9 million square metres floor spaces had been sold in the trial cities in 1985, equivalent to around 200 000 units (Wang and Murie, 1996, p.975). The second stage of the housing reform could therefore be considered to have progressed successfully, contributing to accelerating the growth in the homeownership rate, but also inducing heavily financial difficulties for subsidies providers.

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In the third stage of the experimental reform, a formal official organisation was established to oversee the housing reform regulation. In addition, further opportunities were added for home purchasers, providing not only housing subsidies, but also introducing payment by instalment scheme. As regards the housing subsidy, in 1987, Yantai, the pilot city, issued coupons for housing subsidies, equivalent to 23.5 per cent of tenants' monthly income (Wang and Murie, 1996). However, the coupon was exchangeable for housing costs only. Building on the actions of the housing reform introduced in the previous stage, people who had already been allocated public houses were encouraged to purchase those houses at a discounted rate; i.e. 50 per cent of the market value (Lee, 2000). Meanwhile, an instalment plan was proposed, allowing employees to pay 30 per cent of the housing costs as a first instalment; with the residual part paid off in instalments over a specified duration of 10 to 15 years (Wang and Murie, 1996). This action marked the dawn of a new finance market in China, because it was the first time that the concept of instalment plan had been introduced and adopted in the housing market, helping those with difficulties making a one-off payment.

By the end of 1988, the three-stage experimental housing reform had been launched successfully into the Chinese housing market, covering 1604 cities and 300 towns in total across the nation (see Table 2-1). The success of the experimental stage of the housing reform accelerated its transformation from a public-allocated housing system to a market-orientated housing market, generating invaluable experience as a basis from which to guide further reforms. Meanwhile, the government and work units were no longer considered responsible for housing allocations, which reduced the financial burdens arising from the housing allocation (Lee, 2000).