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Shanghai Housing Relief Project, Shanghai, China

China

Categories:

Poverty Eradication: - access to credit -income generation Housing: - access to housing finance -affordable housing -land tenure and security Level of Activity: Metropolitan Ecosystem: Coastal

Summary
Housing congestion has been a long-standing problem for Shanghai's residents. In 1985, according to norms and standards established by the Ministry of Construction of the PRC, 899,800 urban families, representing nearly half of the urban population in Shanghai, were suffering from housing congestion. This ratio was the worst of the nation. In 1987, as proposed by Mr. Jiang Zemin, the Mayor of Shanghai by then, the Shanghai Municipal Government established the Municipal Joint Office for Relieving Housing Congestion (known as Shanghai Municipal Housing Relief Board). The aim of this special office was to relieve housing congestion for families whose living space was less than 4 square meters per person. The objective of the Municipal Government was to resolve the long-standing issue of housing congestion of urban families living with less than 4 square meters per person by the year 2000. With the help and efforts made by the board and assistance from other partners, this objective was reached one year ahead of schedule in 1999. With the transition from a centrally planned economic system to a market-oriented economy, Shanghai's housing relief policy is evolving towards a low-rent housing system designed to guarantee access to decent and affordable housing for low-income families and families in need.

Narrative
SITUATION BEFORE THE INITIATIVE BEGAN In 1987, Shanghai had an urban population of 7.1 million. Of the 1.8 million households living in the urban center, 216,000 had a living space of less than 4 square meters per person and 16,000 of those had a living space of less than 2 square meters. Most of these households also lacked direct access to water and sanitation making the housing situation on Shanghai one of the worst in the country. The prevailing nation-wide housing policies and practices were to provide "free housing" through the employer or work unit with salaries kept deliberately low. Housing availability depended on the economic performance and efficiency of employers and work units. Profitable units were thus able to purchase or build decent housing for their employees. Inefficient enterprises resulted in poor housing conditions for their employees. Overall, the housing situation in Shanghai reached crisis proportions. The search for solutions was further limited by the lack of instruments enabling individuals to purchase or rent housing, the lack of mortgage lending and of capital financing mechanisms. ESTABLISHMENT OF PRIORITIES A key step in establishing priorities was the setting up of a transparent system and criteria for determining target families and households. This was done using the following criteria, which were highly innovative in China at the time: A-Household income and relative poverty: Household income criteria is determined through a comprehensive consideration of various factors including the city's average annual income, minimum construction area per capita, real estate prices, the ratio of household income and house market price, etc. The calculation of the household income criteria is based on the following formula and is adjusted yearly: HIC=HUPxCA/(HI/HAP), where HIC: Household Income Criteria HUP: House Unit Price CA: Construction Area HI: Household Income HAP: House Aggregate Price Annex I provides the figures for household income criteria and minimum floor space criteria for 1997. B-Access to credit and poverty reduction: For those families suffering from the most severe congestion (less than 2.5 square meters per person), Shanghai Municipal Government provided free alternative housing involving 2.4 million square meter of living space for 47,029 families. For those families with less than 4 square meters per capita, housing decongestion was implemented in four ways: . Offering a one-time subsidy in the form of discounted prices for target families at an average price of US$180.00/square meter, or approximately 40% less than market price; . Waiving Contract Tax (6% of total price before 1997) on the purchase of housing by qualifying households. This tax has since been reduced to 0.75% as of August 1999; . Waiving Business Tax (5%) and Investment Adjustment Tax for developers (5% until 1999 and abolished in 2000) agreeing to devote part of their housing projects for relief use; and . Reducing down payment to 30% of the aggregate price for qualifying households

purchasing relief housing. The remaining can be paid through a termed mortgage loan jointly funded by banks and a provident fund at an interest rate at least 1% lower than the prevailing commercial interest rate for mortgage loans. FORMULATION OF OBJECTIVES AND STRATEGIES The overall objective of the Shanghai housing relief project was to provide decent housing to all urban families with less than 4 square meters of living space per person by the year 2000. Since its inception in April 1987, Shanghai's housing relief work went through two phases. Phase I was designed to relieve housing congestion for those families with less than 2.5 square meters of living space per person. Phase II targeted those with less than 4 square meters per person. A key strategic consideration was the integration of housing relief projects with overall improvements to the living environment and with urban renewal. Relief projects were thus planned in close connection with Shanghai's urban renewal programme involving the replacement of 20 million square meters of old housing stock. This enabled the relief projects to provide qualifying households with affordable access to basic utilities (water, electricity and gas), sanitation, waste collection and disposal and social services (kindergartens, schools, health and social services). About 10% of relief housing were directly provided by other housing projects. Principles of eco-design were also applied including the use of environment-friendly building materials and a minimum of 35% green space. Another key strategy was the formation of partnerships and the active participation of a multitude of stakeholders and actors. Partnerships were formed for the purpose of mobilizing capital financing on the one hand, and with all actors responsible for landuse planning, building design, construction management, utilities and the provision of social services, on the other. These partnerships were essential to timely and efficient implementation and cost control. The active participation of resident associations and the people directly concerned by the relief projects was sought to better match supply with demand and to ensure smooth transition and relocation. MOBILIZATION OF RESOURCES The capital required for housing construction was mobilized from bank loans, funds from the Housing Provident Fund, money generated through the sale of old houses, employers' housing construction funds, cash contributions from qualifying households and targeted subsidies from both municipal and district governments. Criteria for obtaining support were formulated and adjusted every year based on income levels (high, medium and low), household size and household income index used for calculating housing provident fund contributions. All families meeting the above criteria were registered and their files established. In terms of human resources, the Municipal Government set up a joint conference for housing relief work chaired by the ViceMayor in charge of housing. This joint conference was assigned the responsibility for coordinating all the key issues relating to relief work, such as planning, land, house availability, capital, etc. The joint conference included the Shanghai Municipal Housing Relief Board, responsible for daily operations pertaining to housing relief work. Offices were set up throughout the city in 150 bureaus and over 4,500 units with a total of more than 15,000 full-time staff.

The first phase of Shanghai's housing relief project was entirely financed by the Municipal Government. This involved a budget of US$424.96 million to acquire housing that was distributed free of charge to the 15,221 most needy families (under 2 square meters of space per capita) and to 31,808 families with less than 2.5 square meter of space per person. Phase II which was based on cost-sharing involved a total budget of US$109.5 million with the Municipal Government contributing US$ 16.87 million (15.4%), the Housing Provident Fund with loans totaling US$78.74 million (71.9%) and the Housing Relief Board with capital investment totaling US$13.91 million (12.7%). PROCESS Owing to the scale and the number of households suffering from housing congestion, lack of capital was the biggest problem. Therefore, a phased strategy was adopted, giving priority to those suffering most from congestion. The families living in space of less than 2 square meters and 2.5 square meters were the first to be relieved. Most of this phase was entirely funded by the Municipality and based on grants. Due to the limited municipal funds available it was necessary to find all possible ways and means of reducing costs. The Municipal Housing Relief Board conducted large-scale surveys and investigations throughout the city to locate and acquire suitable houses for relief use. At the same time, it concentrated its limited resources to constructing as many houses as possible with strict cost control mechanisms. After relieving all the families living in less than 2 and 2.5 square meters per person, new relief policies were formulated and adopted. The implementation of these new policies in Phase II, targeting families with less than 4 square meters per persons involved cost sharing by the beneficiaries. These relief solutions were, however, temporary in nature. The Municipal Government at a time of severe imbalance in matching housing supply and demand implemented them with a view to relieving the most severe aspects of urban housing congestion. Even though new ways were developed and perfected for relief work and construction during these first two phases, the policy was clearly unsustainable in the long run. Both the administrative and capital costs involved were placing considerable strains on the municipal budget and the policy was distorting emerging market mechanisms. After completing the relief work targeting families living in areas less than 4 square meters per person, new policies were adopted focusing on the provision of housing for lowincome groups, the use of targeted subsidies and alignment with market interest rates. RESULTS ACHIEVED During the period 1987-1999 housing congestion was resolved for 119,158 households. This included 15,221 families whose living space had been less than 2 square meters per person; l3, 808 families whose living space had been less than 2.5 square meters, and 72,129 families whose living space had been less than 4 square meters per person. Of the total number of relief families, 3,575 were single female-headed households. The project resulted in the construction of over 6 million square meters of housing, and benefited a total of about 500,000 people. The average living space per person of the target households increased from less than 3 square meters 12 years ago to over 7 square meters in 1999. These results were recognised by the Ministry of Construction in accrediting the Shanghai Municipal Housing Relief Board "National Model Office for

Urban Housing Relief" and "Best Practice of Achievement Exhibition of Living Environment in China". In 1995, Shanghai housing relief projects won the Habitat "Scroll of Honour". In 1998, the Municipal Housing Relief Board was given the honorable title of "Model of Housing Relief" by the Shanghai Municipal Government. SUSTAINABILITY Promoting housing as a basic right: Shanghai's housing relief work represents a process of implementing progressively more sustainable forms of urban development and shelter provision. Financial sustainability: During the first phase, and in recognition of housing as a basic right, carefully targeted grants and subsidies, based on clear and transparent criteria, were used to eliminate extreme congestion and to reduce poverty. Thereafter, the use of capital and mechanisms of cost recovery was carefully managed and fine-tuned to improve and promote financial sustainability. Quality control was a major feature of the project to ensure good quality construction and low maintenance costs. At the same time, funds were raised through commercial real estate development for higher income groups, thus reducing the financial pressure on the Municipal Government. Promoting social equity: From the social perspective, housing relief was provided to a broad cross section of the urban population, covering members of work force, the elderly and the retired as well as private house owners. Qualification for relief was based on need and the urgency of need and excluded no one. The criteria used were applied in a transparent manner, ensuring gender equality and equal opportunity for those in need. Attention was given to diversification, making sure that target families had ample choices in terms of location and house typology. This was especially the case for 3,575 single femaleheaded households to whom location and access to schools, day-care centers and shopping for daily necessities is particularly important. Environmental Sustainability: Environmental issues were given full consideration. New housing construction design was required to promote harmony with nature, and the rational use of land. New houses were built largely with environmental friendly material and renewable resources, and fully serviced in terms of utilities, garbage and sewage disposal. LESSONS LEARNED The lessons learned from each phase of Shanghai's housing relief work were incorporated in subsequent phases and in Shanghai's overall housing policy. These lessons fall into four broad categories: (a) The housing distribution system has shifted from low-cost house allocation and provision to the sale of housing to low-income residents made affordable through discounted prices and/or preferential interest rates. This ensures that housing for lowincome groups and the needy doesn't distort the market. It also provides for a much broader supply and choice of housing typology and housing solutions, promotes social inclusion and avoids the creation of "ghettos". (b) Housing relief needs to be fully integrated within the overall context of urban

development. Inner-city and old-town rehabilitation was combined with housing relief efforts, thus integrating relief work with the rebuilding of old areas and the improvement of urban infrastructure and other facilities. (c) Cost-sharing and home ownership is more effective and sustainable than renting public housing. Beneficiaries, their employers and work units become stakeholders in the process. They are no longer just the recipients of housing as a product but get involved in housing as a process, including land use and real estate development. Based on the lessons learned from the housing relief project, the Shanghai Municipal Housing Relief Board is presently engaged in formulating and implementing new policies and practices based on the concept of affordable rental housing, thus broadening the instruments and options available both to the Municipal Government and to the public. TRANSFERABILITY Shanghai is the first city in China to have conducted housing relief work. Shanghai has accumulated considerable experience in multiple aspects of relief work. This experience is now being fully promoted by the national administration in the form of new policies and new instruments (housing loans, mortgage facilities, etc.). The shift in policy from low-cost housing allocation to cost-sharing by government, employer and residents and the strategy of integrating housing relief with urban renewal and rehabilitation have since been adopted by cities all over China. In 1993, the China's Ministry of Construction issued a special notice for all cities of the nation to learn from Shanghai's experience in housing relief work. To date, similar policies and strategies have been adopted and promoted by major cities such as Beijing, Guangzhou, Wuhan, Chengdu, Qingdao and Dalian. Study tours by representatives and officials of other Chinese cities are conducted on a regular basis. These study tours are not just for other cities to learn from Shanghai but also provide opportunities for exchanging views on emerging issues and trends and to discuss new policy options and responses.

Key Dates
Apr. 27, 1987: Startup Stage, establishing the Municipal Joint Office for Relieving Housing Congestion Sept. 30, 1988: Exploratory Stage, completing housing relief for families with less than 2 square meters per person Dec. 5, 1992: Development Stage, Completing housing relief for families with less than 2.5 square meters per person Dec. 31, 1999: Expansion and completion stage, completing housing relief for families with less than 4 square meters per person.

References

The achievements and experience acquired in Shanghai housing relief projects have been reported in the following publications: 1. Better Living in Shanghai, by ASHALI VARMA, THE EARTH TIMES, APRIL 15 30, 1996, VOLUME IX, NUMBER 6 2. Warmth, Is Deeply Felt Here, by Ka Dao, OPENING DRIVE, Volume 7, 1999, Page 19 3. Goodbye to Dovecote - Chronicle of Shanghai Housing Relief Projects, by Qiu Xia, Xinmin Evening, May 28, 1999, Page39 4. Relief Results Surprise the World, Three Steps Win Its People - On Shanghai Housing Relief Projects, by Wang Song, Zhu Hai, China Reform, April 23, 1999, Page 3 5. A Monument Built with Love -Chronicle of 12 years of Shanghai Housing Relief work, 6. By Wu Jichun, OUTLOOK WEEKLY, Volume 3, 1999, Page 19 7. A Love for Its Residents - On Relieving 120,000 Troubled Families in Shanghai, 8. By Wu Mingfei, Jiang Wei, People's Daily, Feb. 14, 1999, Page 1 9. Buildings provide relief - Ample flats built for house-hungry families, 10. By Chen Qide, Shanghai Star, January 12, 1999, Page 4 11. An Active Exploration of New System for Housing Relief in Shanghai, by Li Siming, Wen Hui Daily, Dec. 29, 1997, Page 10 12. Shanghai Relieved 80,000 Families in 10 Years, By Le Ying, Liberation Daily, April 30, 1997, Page 1 13. Pleasure at the Houses Built - On 10 Years of Shanghai Housing Relief, by Huang Rong, 14. People's Daily East China News Special Report, April 25, 1997, Page 10

Contact
Mr. Li Siming Street Address: 3F, No. 170 Jiang Xi Road (Central), Shanghai, China Postal Code: 200002 Tel: (8621) 63501758 Fax: (8621) 63211598 E-mail: lxz@mail.shcei.com.cn Type of Organization: Local Authority

Nominating Organization
SHANGHAI MUNICIPAL HOUSING RELIEF BOARD Mr. Li Siming Street Address: 3F, No. 170 Jiang Xi Road (Central) Shanghai, China Postal Code: 200002 Tel: (8621) 63232162 Fax: (8621) 63211598 E-mail: lxz@mail.shcei.com.cn Type of Organization: Local Authority

Partners
SHANGHAI PROVIDENT FUND MANAGEMENT CENTER Mr. Yuan Yizhong Address: 18F 569 Jinling Dong Road, Shanghai, China Postal Code: 200021 Tel: (8621) 63840388 Fax: (8621) 63842588 Type of Organization: Foundation Type of Partner Support: Financial Support SHANGHAI MUNICIPAL FINANCE BUREAU Ms. Chen Guangying Street Address: NO. 60 Jiujiang Road, Shanghai, China Postal Code: 200002 Tel: (8621) 63219610 Fax: (8621) 63234279 Type of Organization: Local Authority Type of Partner Support: Financial Support