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.