A three-tier housing security system is now in place in China but there is still a lot of work to be done to temper public concern over soaring property prices, according to an expert with the Ministry of Construction.

Wen Linfeng, head of the research division with the ministry's policy research center, said China's housing security system is made up of the public housing fund (PHF), and the affordable housing and low-rent housing projects.

The PHF is the most wide-reaching housing security system in China. Under the system, each urban employee has an account with the local PHF management center and deposits a portion of his monthly salary into the account. The same amount is contributed by his employer and the money can be used to apply for mortgage loans from the PHF center.

Wen explained that the PHF works on three levels. Firstly, it forces people to save part of their income for purchasing houses. Secondly it works like a cooperation, with all members contributing to the same pool and receiving help from the fund when necessary. Thirdly, the PHF is free of personal income tax and its mortgage loans carry a lower interest rate than commercial mortgage loans.

According to the Ministry of Construction, by the end of 2005, 63.3  million employees nationwide had contributed 976 billion yuan (122 billion U.S. dollars) to the PHF, which approved mortgage loans worth 459.9 billion yuan (57.49 billion dollars) to 5.24 million people.

Affordable housing project is another part of the housing security system. Under this system, the government encourages the building of houses affordable to middle and lower-income groups by providing cheap or free land or tax rebates for developers.

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