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Debate: Urbanization

(China Daily)
Updated: 2010-08-16 08:01
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Debate: Urbanization

What does the rampant demolishing of houses to build modern structures entail? Two experts lock horns over this important issue, which affects almost every person in this country.

Chen Huai

Old houses have to go for greater good

Extensive urbanization has been going on in China for the past 10 years. According to what some Ministry of Housing and Urban-Rural Development officials say, all houses built before 1999 that is, half the existing buildings, will be razed in the next two decades.

China's urbanization drive has four goals: improvement of the housing guarantee system and building more low-rent houses; solving the housing problem of migrant workers; renovating the cities' dilapidated and old buildings; and improving people's living conditions.

Since three of the four stages of China's urban development were under unusual historical conditions, houses built during those periods need to be demolished. Houses built before 1949, when China was still a small-scale agricultural economy and fighting foreign invaders and tyrant nationalist rulers, do not meet today's urban development requirements. All such houses, except those with historical value such as the Huangpu Military Academy near Guangzhou, have to be replaced with new structures.

The residential quarters built for workers in the 1950s are one of the two main types of structures that came up between 1949 and 1979. According to the National Bureau of Statistics, 2.8 million such "shanties" have been earmarked for demolition this year. Houses built in the 1960s and 1970s, when the country was preparing to fend off a possible attack from other countries, were only for short-term use. Many of them were built with only a few community kitchens and toilets, and have to be razed.

Houses built between 1979 and 1999, when China lifted millions of people out of poverty, can be used for another 10 to 15 years, though even they don't meet the requirements of long-term urban development. Hence, they have to be demolished between 2021 and 2030, when people are expected to have more economic power and thus demand better living conditions.

The government has met most people's housing needs in the past three decades. But there's still a lot of room for improvement, because on average an urban family has only 60 square meters of living space. Besides, some people in cities still don't have a house of their own.

To improve housing and living conditions, the government should focus on two fronts. First, it should expedite the construction of low-rent houses to meet the housing demand of about 150 million migrant workers and 200 million farmers in and around small towns. Second, it has to help the needy to improve their living conditions.

China's real estate industry can thus look forward to at least two decades of development and profit.

The government has issued a set of policies over the past three months to check skyrocketing housing prices. But its aim is not to check housing demand from rising, but to curb speculation by property developers. It has retained its loose monetary policy, which was part of its $586-billion economic stimulus package. This means real estate developers can still get bank loans at a low interest rate and the housing market boom will continue. It takes five to 10 years to develop a fully functional community. For example, only a few people moved into Beijing's Wangjing neighborhood in the first 10 years of its development. Today, the area is seeing the fastest house prices rise in the city.

But different grades of houses have different percentages of occupancy. Houses built for ordinary middle-class people may have an 80 percent occupancy rate. But apartments built for higher-income groups might have just 60 percent occupancy, with the rate for villas falling further to about 30 percent.There's a sharp conflict between skyrocketing housing prices and the relatively low incomes of the people. Western countries have undergone similar experiences, and China is expected to solve the problem in the short term.

China's has been a great economic success story. Its cities have seen the fastest growth of white-collar workers in the world in the past decade. It may take another 20 to 30 years for China to resolve the conflict between high housing prices and relatively low incomes of the people. But it will still be the fastest among all industrialized and urbanized countries.

The author is director of China Urban-Rural Construction and Economic Research Institute, affiliated to the Ministry of Housing and Urban-Rural Development. This is part of the speech he delivered at a recent public housing forum.

Wu Fulong

Will we demolish half of our cities?

The director of China Urban-Rural Construction and Economic Research Institute, affiliated to the Ministry of Housing and Urban-Rural Development, Chen Huai, has said: "Houses built before 1999 will be razed within 20 years." He says this means about half of the existing houses will be demolished.

If this were true, the speed of demolition would only be comparable to what French civic planner George-Eugene Haussmann did to Paris after 1852 - within two decades entire neighborhoods were razed to create new boulevards and build new buildings.

Chen's claim initially evoked widespread concern over the poor quality of Chinese residential buildings. But in an interview with a Xinhua News Agency reporter later, he clarified: "What I said, 'demolishing half the houses in 20 years', has nothing to do with the quality of the buildings and the time limit of their use. What I meant was the condition of houses built during some special historical periods." This clarification should relieve people of safety worries, because Chen did not say that existing houses are weak. Instead, he means they have "obsolete styles".

Since China began its housing reform, there has been a dramatic improvement in people's living conditions and an increase in their living space. Of course, the old fashioned tongzilou (single-corridor housing) can no longer satisfy the upwardly mobile middle class that yearns for a new lifestyle "with a piece of sky and land," or at least properly furnished modern apartments.

Some people today own not only a second home, but also a third and fourth apartment or house. On the other hand, rising property prices have raised people's concern over housing affordability. How can such a fast pace of property appreciation possibly be sustainable?

The first argument in favor of skyrocketing house prices is that China is undergoing rapid urbanization and hence the demand for new houses is rising. But when we see millions of migrant workers living in chengzhongcun, or urban villages, it is not too difficult to understand that the current housing production is irrelevant to them. They simply do not have the wherewithal to buy "properly" built houses. And it is their neighborhoods that are being wiped out and replaced by skyscrapers and condominiums.

The second argument is that property prices are shooting up because there is dearth of land in China. But the truth is, realtors are encroaching upon more and more rural land to fuel the real estate boom. More and more middle-class households are buying into a real estate dream and seeing the value of their property rise dramatically within a few years. Indeed with rapidly rising living standards and even more rapidly rising aspirations for a good life, old houses are quickly becoming functionally obsolete.

But neither of the two arguments is more effective than that of a diminishing supply of houses in terms of increasing property prices. This message no doubt brought some comfort to property developers in the period of post-crisis macroeconomic readjustment. But in case you feel such a massive demolition campaign may lead to a huge waste of housing resources which could be used for providing shelter to low-income people, you should be reminded that deconstruction is a prelude to the rebirth of a saturated market.

If half of the existing houses are wiped out, it would create huge investment opportunities instantly. The urban landscape is restless, driven by the constant need of the capital for construction and deconstruction, because ironically once investment is made, it lays down an obstacle for further accumulation. This is the dialectics of capital accumulation.

The astonishing claim of razing half of the existing houses is but a dramatic expression of the internal and perplexing contradiction of housing as shelter and housing as commodity. As a commodity, obsolete property must be demolished to pave the way for a new round of accumulation. As shelter, houses might be regenerated as a valuable affordable space. The issue is thus how to regenerate the old houses by providing proper services and functional adjustments. When landed revenue becomes the major source of local governments' income, it is understandable that demolition and redevelopment is always preferred. But for the central government, the financial risk brought about by an overheated housing market is a serious issue. Different standpoints would lead to different diagnoses of and approaches toward old houses.

It is appropriate to strengthen quality control and building standards, including energy saving requirements, but wholesale demolition of houses is not justifiable. The issue is not, as Chen Huai says, about building quality, rather, it is when and in what context such a claim is made.

Concern over the high vacancy rate of existing houses has reached such an extent that the National Bureau of Statistics has had to step in to suggest that it is not feasible to gauge property vacancy statistics at the moment. But if more than half of the existing houses are to be demolished, where is the issue of vacancy? The question is: Are we seriously going to follow Haussmann to demolish half of our cities?

The author is professor and director of Urban China Research Centre at Cardiff University in the UK.

(China Daily 08/16/2010 page9)