China Experimenting with Singaporean-style HDB Housing Schemes

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Aug. 28 – China has been experimenting in looking to solve its low cost housing market, aimed at getting low-income families on the steps of the property ladder, by piloting an Housing Development Board-style scheme in Changsha.

In the successful Singaporean HDB scheme, Singapore nationals (and other nationalities working/based in Singapore) contribute a percentage of their salary to their individual Central Provident Fund (CPF) account. A portion of this personal accumulating savings can be then used to purchase property as part of the initiative to encourage home ownership in the city-state. At the right moment, the individual can raise a mortgage with a bank, supported by their government backed savings, and obtain a mortgage to purchase an HDB apartment, built by the Singapore government. Such apartments have historically been well made and managed, and sell at premiums later. Consequently, over 87 percent of Singaporean families own their own homes.

While China also has regulations in place that require Chinese nationals to contribute to a mandatory housing fund, the provision of affordable dwellings has remained a concern as many developers have concentrated only on the luxury market. That has left large numbers of the population still unable to purchase their own housing. The scheme in Changsha, which is undergoing trials, gives low-income families subsidies on housing in specific, government-backed developments, and is extended to those living in “poor conditions” judged to be a living space less than 45 meters, as well as those who face relocation due to redevelopment projects. The local government has hoped that some low-income dwellers will be attracted to the private market, sparking a trend that will help it solve the shortage of low-priced housing in the city. The government has set aside RMB1.1 billion for subsidies and low-priced constructions.

Acknowledged as a pilot experiment in China, it is seen as the first stage in a set of incentives by the local government to assist both the slowing property market and also help get low income families onto the housing wealth ladder. If successful, the central government could roll the scheme out to other cities. Premier Wen Jiabao, who has already identified the provision of low cost housing as a major area for reform and as a top priority for the government, has called on local governments to submit plans to realize assistance in this aspect of national social housing.