Promoting the private rented sector in metropolitan China: key challenges and solutions

Abstract

The private rented sector (PRS) plays an increasingly important role in accommodating young people and migrants in China’s metropolitan cities. However, the PRS in China is still underdeveloped, as evidenced by, e.g. a low degree of professionalisation, lack of basic rental laws and regulations, and poor housing experiences of tenants. The purpose of the current article is to identify the main challenges towards a well-functioning PRS, as perceived by Chinese local governments, landlords, and tenants, and to propose possible solutions to cope with these challenges. After reviewing both academic and grey literature and exploring the results of our previous research, we found that these challenges result from three main root causes, i.e. power imbalance between landlords and tenants, inadequate institutional arrangements, and path dependence on the past productivism model. Based on the analysis, a number of recommendations were proposed, including formalising the PRS, introducing regulations, setting minimum housing standards, and increasing public school availability to enhance equal citizenship rights between renters and homeowners.

KEYWORDS: :

• Private rented sector
• challenges
• solutions
• rent regulation
• housing inequality

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In this paper, metropolitan cities are defined as those with an urban population of 5 million or more, which is in line with the definition of ‘especially big cities’ (teda chengshi in Chinese) by the State Council. As of 2020, there were 21 metropolitan cities in China, seven of which have an urban population of more than 10 million and are known as ‘super big cities’ (chaoda chengshi). The four most developed cities (Beijing, Shanghai, Guangzhou, and Shenzhen) are termed ‘first-tier’ cities.

2 The 1998 Land Administration Law stipulates that urban land is owned by the state while rural land is collectively owned by the villagers. In many Chinese cities, there are still collectively-owned land plots surrounded by urban land.

3 Notably, China’s political system is a top-down hierarchy where the central government only sets a broad policy guideline while the local governments adapt the guideline to local conditions (Ahlers & Schubert, 2015). Therefore, the policies proposed by the central government usually do not provide specific measures to be taken (e.g. how much tax should be deducted), and local governments implement these policies or initiatives differently.

4 Land plots that are used to build rental housing can be divided into at least three categories based on the procedure the plots are auctioned. The first category is ‘for-rental-only’ (chunzulin) land, which means only rental housing can be built on the land plots. The for-rental-only land plots are mostly acquired by the local-governance-owned companies because of the long payback period (CRIC, 2022). The second is ‘self-retained’ (zichi) land, which means a certain portion of the housing units should be held by the developer itself and used for private rental housing while the rest of the land can be used for commodity housing. The third category is ‘ancillary construction’ (peijian) land, which means a certain portion of the housing units should be affordable rental housing. Private developers are generally more interested in acquiring the latter two kinds of land plots because owner-occupied housing is more profitable than rental housing.

5 It is named ‘double centralized’ because the policy stipulates that local governments should centralize the announcements of land provision (less than three times each year) and centralize the organization of land bidding activities.

6 The reason why owner-occupied housing is an important source of revenue for the local government but rental housing is not, is multifaceted. First, as mentioned above, the price-to-rent ratio in Chinese metropolises is extremely high, which means ‘build-to-rent’ is far less profitable than ‘build-to-sale’. As a result, developers are not motivated to acquire land to build rental housing. Second, it is difficult for developers of rental housing to offer a high price for land because rental businesses generate income over a long period of time, rather than just once like house selling.

7 Securitization is ‘the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities’ (Jobst, 2008).

Additional information

Funding

This work was supported by China Scholarship Council; The Science and Technology Commission of Shanghai Municipality.