Q: China used to allocate housing to city residents as a welfare benefit, but this has been reformed so that people can now buy their own homes. What policies has the government adopted for private housing purchase, and what measures has it taken to help those who can't afford to buy a home?

A: For some time since the founding of the People's Republic in 1949, China practiced a system to allocate public housing as welfare benefit to urban dwellers, which on the whole ensured accommodation for all, though with a low per-capita living space.

The commercialization of housing distribution is indispensable to China's transition from a planned to a market economy. In 1998, China launched the reform of public housing system, replacing the old, welfare public housing distribution with provision of cash allowances for home purchase. So far, over 80 percent of the purchasable public housing has been sold and the housing privatization rate has reached 72.8 percent. Meanwhile, a new housing supply system has taken initial shape. Progress has been made in the construction of affordable housing, the low-rent housing project has just started, secondary housing market is opening up, real estate intermediary service and property management industry have developed rapidly, and a service system for real estate market has been established. With real estate investment rising significantly, the residence-centered realty business has emerged as a pillar industry in the national economy.

According to the experiences of developed countries, a house is a relatively expensive commodity. The likelihood of everyone owning a house remains tiny even in a well-off society. There are bound to be some low-income families and impoverished people who can't afford to buy homes. In order to ensure everyone is accommodated, China has adopted a series of measures in light of its own conditions:

First, the housing provident fund (HPF). It is a compulsory housing savings plan with employer matching, which is exempt from income tax. The HPF system is designed to help ordinary wage earners with little purchasing power to own their own homes. It is considered a housing security system that can benefit most of the salaried class. Besides their savings funds, a purchaser can apply for a preferential housing loan rate when buying a house.

Second, partially market-based housing security system. By various means, including reducing the land acquisition fee, offering land subsidies and tax reductions, local governments encourage real estate developers to build affordable and low-rent housing to meet the needs of low-income families.
 
Third, non-market housing security system. This is designed to help those who can't even afford to buy a so-called affordable house. The government supplies them with a low-rent dwelling. As for those who are too poor to even rent, the government provides relief funds to solve their housing problems.
 
China's housing reform, which features the HPF system and the construction of affordable and low-rent housing, has improved the housing conditions of urban residents, boosted both investment and consumption, and fueled job market. By the end of 2003, the per-capita living space of China's urban and rural residents had reached 23.7 and 27.2 square meters respectively. Habitat environment has further improved.

Yet, as a country with such a large population and limited land resources, China can only afford to ensure housing for a majority of its people at a relatively low level. We can't compare our housing conditions and security status with those of the developed countries. Given the country's limited resources, even when we are living in a more well-off society, we won't encourage people to purchase luxury items. Thus the basic principles in our housing policies remain to save energy and land.

A low-income family in Fujian looks out from the balcony of their new apartment provided by the local government. The National People's Congress of China has passed legislations to offer low-rent housing to needy households in urban areas.