Ci Meng

Feiyang Chen
Jian Shi
Qing Yang
Qingyu He
Zhenyao Zhang
Tobias Colin
 Hutong Renovator Project

Acknowledgement

The completion of this project would not have been

possible without the support and guidance of the GTI
teaching team. We would like to give a special thanks to
Helen Lee Curtis for the continuous help and motivation.
We acknowledge with thanks the time and efforts you have
dedicated towards steering us in the right direction, thus
helping our ptoject to reach its full potential.

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 Hutong Renovator Project

Team
Jian Shi
City Planning Expert with professional
experience in city studies and spaces upgrades

Qing Yang
Climate Water Expert with professional
experience in climate and water (UNDP intern)

Qingyu He
Climate Consultant with professional experience
in climate change and carbon emission

Zhenyao Zhang
Experienced Consultant with professional
experience in business and sustainability
consulting

Feiyang Chen
City Planning Consultant with professional
experience in smart community-city

Ci Meng
Financial Analyst with professional experience in
investment bank and private VC

Tobias Colin
Liaison Expert with professional experience in
diplomacy and international law

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 Hutong Renovator Project

Table of Contents
1. Introduction
2. The State of the Art
a. Domestic literature review
b. International literature review
3. The Theory of Change
a. Hutong Today
b. Theory of Change to Tomorrow Sustainable hutongs
4. Cost-Benefit Analysis
a. Cost & Benefit overview
b. Description of store types and quantity
5. Deliverables and targeted impacts
a. Deliverables
i. Short Term: Initial Planning
ii. Medium Term: Renovation
iii. Long Term: Operation
b. Targeted impacts
6. Budget
a. Budget Item 1 - Project Design
b. Budget Item 2 - Preliminary Costs
c. Budget Item 3 - Completion and Settlement
7. Concluding remarks
8. References
9. Annexes
a. Annex 1: Organization website
b. Annex 2: Cost-Benefit Analysis & Revenue profit sheet

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 Hutong Renovator Project

List of Tables

Table 1: Theory of Change

Table 2: Cost & Benefit Analysis
Table 3: Revenue Profits Sheet
Table 4: Landowner Dividends
Table 5: Deliverables and
Timelines
Table 6: Targeted Impacts and
Indicators
Table 7: Total Planned Budget
Table 8: Planned Budget for
Project Design
Table 9: Charging Standards for
Consulting Services of
Construction Projects
Table 10: Planned Budget for
Preliminary Costs
Table 11: Planned Budget for
Completion and Settlement

5
Hutong Renovator Project

List of Figures

Figure 1: Principles of
balancing factors in
heritage preservation
during the urbanization
process
Figure 2: Stakeholder Split
Figure 3: Map of the Pilot
Area - Dongtang Hutong
Figure 4: Implementation
Timelines
Figure 5: The Contractual
Structure of a Project
Finance Deal
Figure 6: The Distribution
of Financing Strategy

6

1. Introduction
Beijing is a city of 22 million population and over 3000
years of history and profound cultural heritage. The
old city communities are the roots of Beijing's regional
culture and are a visual representation of the life of
old Beijing. These neighborhoods are called Hutong, a
700-year-old translation from Mongolian meaning
“water well” (1, 2 ), and are characterized by square-
shaped houses with internal courtyards, called
Siheyuan.
Many hutongs were built in the 13th century, under
the Yuan Dynasty when Beijing was the capital.
Clearly, in their 700-year history, life in Beijing’s
Hutongs has undergone tremendous changes. The
per capita land area of center districts has been
continuously compressed as Beijing's resident
population soared from 1 million in the 14th century
to 10.9 million in 1990 and 21.9 million in 2020 (3, 4).
In 2017, for example, the total area of bungalow
houses in Dazhalan area, Xicheng District, Beijing was
309,400 square meters, with a population of 54,596
people and a per capita housing area of only 5.6
square meters, compared with estimated per capita
housing area of 10 square meters in the Qing dynasty
(5).
Hutong Renovator Project
In addition to reduced living space, little progress
has been made in terms of drainage and sewage
infrastructure since the 13th century. The
traditional long hutongs and old dilapidated
courtyard houses can no longer meet the needs of
modern society. Many hutongs have been in
disrepair for a long time, and hutong public
facilities are extremely poor. For example, there is
no private water supply or sewage management
pipeline in the dwellings; several households need
to share one faucet; the hutong residents do not
have their own toilets at home, but share facilities,
and no personnel is hired by the city to clean and
manage these, which inconvenient and unhygienic.
This deficiency has created a serious sanitary issue
for the dwellers that have no choice but to use the
public toilets nearby and must restrict their daily
water usage.
This is particularly problematic for children and
their parents, women, and people with limited
mobility, such as the elderly and the disabled. The
situation gets worse in the winter when it is
freezing and dwellers need to use the facilities at
nighttime, increasing the risk of injury. Many
problems can be solved if a toilet is installed at
home. However, most of the residents who are
currently living in poor conditions in hutongs are
low-income groups and cannot afford house
renovations (6).
The UN Sustainable Development Goal (SDG) 6
targets availability and sustainable management of
water and sanitation for all humankind by 2030. To
accelerate the achievement of this goal, we
propose a collaborative funding model to upgrade
the sewerage treatment system in Beijing's
hutongs.
7

Our renovation project not only deals with the SDG 6
clean water and sanitation, but also fosters the
completion of SDG 3 good health and well-being, SDG
8 decent work and economic growth, SDG 9 industry,
innovation and infrastructure, and SDG 11 sustainable
cities and communities.
The renovation of hutongs’ sewerage treatment
system is a complex and challenging issue. China's
urban management system is predominantly top-
down, with government, market, and society as the
three pillars. District governments take the lead in
improving the space of streets and lanes, with market
enterprises and developers participating in investment
and construction, and guiding residents to participate
in joint construction (7). In the actual renovation of
streets and alleys, it is difficult to balance the interests
of all parties.
From the perspective of the government, in the
hundreds of years of Beijing’s history, the Hutong-
Siheyuan has formed Beijing's unique physical cultural
landscape, and it is part of Beijing's unique cultural
heritage. The Beijing Municipal Government has issued
policies such as the Plan for the Protection of 25
Historical and Cultural Reserves in the Old City of
Beijing and the Plan for the Protection of Beijing's
Famous Historical and Cultural Towns to plan core
conservation areas and control construction zones to
ensure the integrity of hutongs and courtyards and
their patterns. In 2017, the Beijing Urban Master Plan
(2016-2035) was approved and implemented, clearly
proposing to protect the original pattern of streets and
alleyways in the old city, to protect the traditional
architectural form of hutongs, Siheyuans, and not to
demolish hutongs and courtyards in the CityCenter (8,
9).
Hutong Renovator Project
The use of market resources to drive the overall
transformation and renewal of historic districts is an
approach often adopted in renovation practice.
Hutong itself, as a cultural heritage and Beijing
feature, is a must-see spot for tourists. Businesses
buy or rent Siheyuans along the street or in
important locations and transform them into
commercial use, which mainly covers shops,
restaurants, leisure, and entertainment. Hutong
tourism traffic guarantees the profitability of stores.
However, certain hutongs have suffered from the
cold shoulder of real estate development because of
the building height limits, difficulties in repair and
utilization, and low commercial value (10). Their
urban functions continue to decline, particularly in
terms of poor infrastructure, poor living conditions,
and dilapidated appearance.
From the citizens' point of view, what they value is
the comfort of daily hutong life. The water problem
in hutongs is rather serious. Most of the courtyards
lack toilets and water supply facilities in the
courtyards are insufficient. Basically, many families
share one faucet, which runs the risk of freezing in
the winter. At the same time, the number of public
toilets in hutongs is insufficient. For instance, there
is only one public toilet located at the east entrance
of the Zhuanta Hutong (11). Such a domestic water
system causes great inconvenience to the residents'
lives. Moreover, most of the residents are workers
with low education levels, low average salaries, and
a high proportion of retirees. Many residents do not
own their houses, leading to the low incentive for
residents to renovate their homes.
Therefore, we propose a collaborative funding
model that includes all parties and focuses on the
renovation of sewerage treatment systems in
Beijing's hutongs. In the project, we communicate
with hutong households and work with experts to
develop renovation plans. Based on cost-benefit
analysis, we look for suitable partners, such as
private companies and NGOs, and start the
renovation program. The following chapter presents
the state of the art with reviews on international
journals and Chinese literature. The third chapter
displays our collaborative funding model using the
theory of change. In chapter 4, our targeted impacts
and deliverables are discussed. The project budget
will be explained in chapter 5. Finally, this report
wraps up with a critical analysis and a summary of
the key subjects of the project.
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 Hutong Renovator Project

2. The State of the Art

2.1. Domestic literature review

2.1.1. Sustainable Development and commercialization of hutongs

The Old City of Beijing is the essence of Chinese culture, which has recorded and witnessed the development
and changes of Beijing city. Hutongs are the skeleton of Beijing's old city. Their street pattern, architectural style,
and humanistic style are rich in historical and cultural values. Its cultural characteristics and values can be
summarized into three levels: hutong culture is the carrier of Beijing culture and the cradle of folk tales while
contributing to the sense of identity and cohesion of community residents (12).

With the increasing awareness of historical and cultural values, the era of "big demolition and big construction"
of hutongs has passed. The awakening of the consciousness of conservation has made renewal and renovation
the main way of hutong construction. In recent years, many practices have accumulated a lot of successful
experiences for the renovation of hutongs, but at the same time, some problems have been exposed. Some
scholars categorize the current hutong renovation models into the following three types, which are led by the
government, the market, and designers. These models also face the following problems: insufficient
refinement, an excessive sacrifice of cultural values, and a lack of commercial vitality (13). Chen argues that the
renewal and preservation of traditional courtyards in Beijing's old city cannot be generalized, but should be
based on the "here and now" of the building according to its environment and condition (14). Johnston points
out the importance of preserving cultural heritage when developing sustainable hutong tourism. Sustainable
development must take into account more factors, such as heritages and housing (15). Some scholars have
also recognized that in the urban fabric of the old city of Beijing, the hutongs are not only spaces for access,
but also places of daily leisure and interaction for the elderly (16). Sun suggests that the elderly have key needs
in terms of access safety, legibility, public activity spaces, and memory nodes (17).

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 Hutong Renovator Project

Although the renovation of hutongs is nowadays more and more focused on sustainable development, the
main characteristics of their commercialization remain unchanged and each subject plays a notable role in the
commercialization of hutongs (18). The innate tourism value of hutongs attracts tourists, whether they are
attracted by the history of these buildings or simply by shopping, which inspires more stores to enter these
hutongs, thus facilitating the commercialization process (19). In addition, the preservation of hutongs as
historical sites attracts a large number of tourists and as more and more stores try to become part of the tourist
complex, rents for siheyuan become higher (20). Owners of siheyuan, especially those who inherited them from
relatives and could not adapt to the new facilities in it, became more willing to rent their houses for further
commercialization (21). The government also further promotes commercialization through the development of
tourism. For example, in 2012, the Beijing government promoted the commercialization of designated hutongs
by establishing tourism complexes and introducing old businesses, which further increased the number of
stores in these hutongs (22). In Nanluoguxiang, government policies and tourism led to the opening of liquor
stores, general retail stores, jewelry stores, craft stores, snack stores, restaurants, cafes, barber stores, travel
agencies, clothing stores, and hotels. The diversity of commercial enterprises meets the various needs of
tourists (23). In addition to the historical and cultural value of hutongs, the decreasing number of hutongs is a
factor that makes them commercially valuable: as many hutongs were demolished after 1949, they became
increasingly rare, leading to their increased value (24).

The contradiction between the cultural value and commercial value of hutongs has been an issue of concern for
scholars. Refining the road classification, enriching the functions along the neighborhood roads and adjusting
the road functions to pedestrian streets (25); adjusting the business space of different business formats and
locally adopting the idea of three-dimensional operation to minimize the impact on residents' life (26);
increasing the display space of urban culture and integrating urban culture and commercial street themes into
the details of the street design (27); adding a business district chamber of commerce in the management
aspect, mainly to solve the problems such as conflicts between commercial operations and citizens and the
exchange of daily business needs with the city management (28) are all positive attempts to solve the problem.
At the same time, it should also build a modern and digital new integrated service platform based on cutting-
edge technologies such as the Internet of Things, blockchain, cloud computing, and big data in the context of
the current era (29), using technology to explore a more sustainable business model.

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 Hutong Renovator Project

2.1.2 Wastewater management in hutongs

The problem of wastewater discharge is widespread in

China. A series of historical legacy problems such as
urbanization, industrialization, and unsound drainage
systems in old cities have led to the existence of black
smelly water bodies in many cities to varying degrees
(30). In the process of exploring the problem in recent
years, prominent problems such as imperfect operation
and management systems, uneven treatment coverage,
aging of some pipe network facilities, and unsound long-
term management mechanisms have mainly emerged
(31). It has been pointed out that domestic wastewater
treatment should be combined with factors such as
topography, economic conditions, population size, and
wastewater discharge to develop strategies (32). It has
also been found that factors such as education level,
annual household income, and age differences, also have
an impact on the problem, with the residents' education
level having a greater degree of influence (33).

Wastewater discharge in hutongs is a very serious
problem. Hutongs are mainly located in old city cottage
areas. Most of them can only be built with combined
stormwater and sewage drainage pipes due to the
narrow road surface, which poses a certain risk of
potential flooding (34). This combined rainwater and
sewage system often causes a certain degree of water
environment pollution to the downstream rivers during
flooding overflowing sewage (35). At the same time, the
odor generated by the sewage in the combined flow pipe
in the hutong is dispersed through the stormwater grate,
which seriously affects the environment of the hutong, in
turn inhibiting the development of its business and
tourism industry and reducing the quality of life of the
residents (36). Since it is a combined rainwater and
sewage pipe, fecal water cannot be discharged directly
into the combined pipe. The toilets in the old city cannot
go into households and residents can only go to public
toilets for toileting, which is very inconvenient for the
elderly and the sick who have difficulty with their legs
(37). Since most of the public toilets are dry toilets, they
must be emptied regularly. Compared to the narrow
hutongs, the huge excreta-emptying trucks block the
road for residents to travel and bring great
inconvenience to the traffic in the hutongs (38).
Currently, scholars are actively exploring solutions
to this problem. For example, from the perspective
of reducing combined sewer overflow (CSO),
increasing the capacity of interceptor pipes and the
construction of transfer ponds and transfer tunnels
(39), carrying out wastewater treatment plant
renovation and upgrading, increasing the capacity of
overflow pollution treatment during the rainy
season (40), etc. These measures can control the
combined sewer overflow pollution (CSO) effectively
while retaining the original combined flow drainage
system. However, in the face of the demand of old
city residents to live without going out to the toilet,
improve the current situation of the poor odor
environment in old city hutongs, and completely
avoid the pollution of combined flow overflow into
the river, the most effective way is separating rain
and sewage (41). Zheng uses modeling technology
and vertical optimization to explore the combination
of pipe ditch and hutong road drainage to achieve
rainwater and sewage diversion in the bungalow
area of the old city (42).

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 Hutong Renovator Project

2.2 International literature review

2.2.1. Wastewater management in low-income dense areas

Moreover, the beneficial impacts of a better

infrastructure are not always directly visible. Sanitation
sensibilization campaign can therefore become a great
catalyst to create the demand, as well as raise the
willingness of residents to pay for the renovation or
construction (50). Comparatively, lack of local and
government incentives and capacities, create the supply-
side deficiency (51). Both side incentives to pursue the
needed sanitation improvements could also be
increased with the new and emerging technologies for
wastewater treatment. As an example, Denmark and
Finland developed heat-pumps water treatment
technologies that can increase the incentives by creating
energy for heat and air conditioning services, therefore
generating revenue, making it more incentivizing for
residents who previously couldn’t afford them (52).

In some poor urban areas, shared toilet and shower

facilities are often the only viable sanitation option,
especially when it is coupled with high population
growth, infrastructure deficiency, and low socio-
economic status (43). Inadequate water management
often leads to adverse health repercussions (44). For
example, Jakarta’s poor water quality is proved to
contribute significantly to infant mortality (212 per
1000 births) which is much higher than other middle-
income countries in South East Asia (59 per 1000
births) (45). Sustainable Development Goal 6 aims
precisely at ensuring sanitation for all, as well as the
availability and sustainable management of water. In
the $1.7 trillion estimated budget to meet the SDG’s
targets by 2030, 44% is dedicated to urban sanitation
(46). Despite that, the construction of urban
sanitation is often not considered a priority and
neglected due to its high costs and the difficult
challenge of installing new water management
infrastructure in densely populated areas (47). In the
literature, this problem is analyzed as an issue
relating to the relation of supply and demand of this
urgently needed infrastructure (48). On the demand
side, residents’ demands in this area are usually lower
than others, making it insufficient to provoke
government action. One of the reasons is that they
don’t directly link health problems with inadequate
water management (49). 12
 Hutong Renovator Project

2.2.2 Wastewater management in historical and heritage districts

Urban revitalization and renovation of wastewater
In the urban renovation process of historical districts,
treatment infrastructure are more complicated when
it is essential to give a voice to all stakeholders such as
they relate to historical districts, full of culture and
government, local authority, community leaders, real
heritage. The outdated infrastructure of the old
estate developers, conservationists, and
traditional society have difficulty meeting the
representatives of any concerned party. This approach
standards of daily life nowadays (53). However, this
is believed to bring the best balance between
need for renovation is presenting itself more than
development needs and conservation requirements.
ever. In this context, studies show that location,
On a more theoretical level, the literature establishes
transportation, building added value, and quality of
that urban infrastructure development in historic
life are the most important factors for the success of
urban areas should be organized in harmony with the
the endeavor (54). It is therefore essential to follow
culture, the economy, the urban spatial organization,
culture-based and people-oriented interventions (55).
and the society of the specific area (62). This
Indeed, the literature considers those two
entanglement is represented in the following figure:
components of the intervention to be essential in the
specific conditions of inner-city low-income areas that
are culturally and historically significant. The culture-
based intervention doctrine believes that the
traditional urban structure of a city expresses its
values and its unique charm, and therefore, light
interventions should be chosen in order to protect it
(56). This doctrine is often combined with the idea of
people-oriented interventions which is extracted from
the theory of participation. In this doctrine,
community involvement is put at the forefront (57).
Community participation is also important to avoid
self-organized urban infrastructure that could hurt
the historical and cultural value of the buildings (58).
On the other hand, unconsulted top-bottom
government intervention can hurt the traditional life
of residents and therefore damage the heritage that
follows the historical buildings (59). This type of
intervention results therefore into a lack of attention
on the local community who is the “carriers of social
memory of this place and the intangible heritage in
the neighborhood” (60). Considering those shortfalls,
the literature favors culture-based and people-
oriented interventions, in order to balance the
historical values protection and the modernization of Figure: 1 Principles of balancing factors in heritage
the neighborhoods (61). preservation during the urbanization process
(adapted from (63))

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 Hutong Renovator Project

2.2.3. Financing method for wastewater management in heritage

districts with a low-income population

The financing method of waste water management in

heritage districts with low income population can be
organized through multiple schemes such as government
subventions, international subventions, grants, local
taxes, residents direct contribution, loans, or even
commercial partnerships. However, the international
literature establishes that in this specific context, debt
financing in the form of loans can be a more viable and
more efficient financing method than bigger schemes
such as grants (64). Moreover, loans are suited to answer
the need for liquidity and fast direct access to capital due
to the high upfront cost of that type of urban
infrastructure (65). While financial institutions are
typically reluctant for renovation loans, perceiving them
as high risk investment, the concept of One-Stop-Shop
(OSS) is however promoted in the literature to provide a
link between all stakeholders and the financial Substainable wastewater management in Beijing:
institutions (66). One-Stop-Shop are defined as “service Chinese sanitation workers
providers for buildings renovations are organisations,
consortia, projects, and even independent experts or
advisors that usually cover the whole or large part of the
customer chain from information, technical assistance,
structuring and provision of financial support (mainly
from a third party), to the monitoring of savings” (67).
This approach creates a strong link between
shareholders and helps to prevent both the potential
harm of individual residents and harm of the cultural
heritage. It helps tailor the process to the exact
characteristics of the historical district. This model is
considered by the European Commission as an “advisory
tool to inform and assist consumers in relation to
building renovations and financing instruments” (68). It is
considered by the international literature to be a
necessary medium between stakeholders to efficiently
balance the wastewater treatment renovation and the
historical and cultural conservation requirements of the
concerned areas (69).

Infectious waterborne disease caused by lack of

sanitation and wastewater management

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 Hutong Renovator Project

3. The Theory of Change

By using the theory of change method, this section will explain how a set of interventions in
our project is expected to lead to specific development change, drawing on a causal analysis
based on available evidence. This method helps us identify solutions to effectively address
the causes of problems that hinder progress and guide decisions on which approach should
be taken, considering different alternatives’ comparative advantages, effectiveness, feasibility,
and uncertainties that are part of any change process. On the other hand, this method helps
us to identify the underlying assumptions and risks that will be vital to understand and revisit
throughout the process to ensure the proposed approach will contribute to the desired
change. (70)

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 Hutong Renovator Project

3.1.1. Hutong Today

We have successfully brought stakeholders together to seek solutions to the challenges of the drainage and
sewage infrastructure in the hutong. To summarize, the renovation of hutongs’ sewerage treatment system is
still complex:

The urban management system in China is dominated by a top-down vertical structure.

Local governments are taking the lead in upgrading the streets and lanes, with market enterprises and
developers participating in investment and construction, and guiding residents to participate in joint
construction.
Confidence in the quality and safety of renovation is being questioned.
There is limited government engagement as an equivocal balance between the protection of hutong
cultural heritage and commercial development.

3.1.2. Theory of Change to Tomorrow Sustainable hutongs

The theory of change of the hutong renovator project is a rigorous yet participatory process that incorporates
the groups and project stakeholders identifying the conditions they believe have to unfold for their long-term
goals to be met. Regarding the key stakeholders’ involvement, Beijing municipal governments, companies,
IGOs/NGOs, and local dwellers are the main stakeholders and they engage in the project as the chart
demonstrates.
These conditions are modeled as outcomes, arranged in the causal framework as below:

Table 1: Theory of Change

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Hutong Renovator Project

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 Hutong Renovator Project

4. Cost-Benefit analysis
4.1.1. Cost & Benefit overview

CBA is research-based on the overall investment in the Hutong renovation project and the subsequent
benefits. Among the 40 hutongs within the scope of our consideration for reconstruction, we selected
Dongtang St as the Pilot Area for CBA calculations. This hutong is located in the southeast of Beijing’s
downtown and can be transformed into about 86 shops. The location is superior, the community environment
is relatively clean and tidy, and the state of the building is relatively primitive, which has a strong value for
renovation.

In the first year, a one-time equipment and staging fee is added to cover the cost of store layout and
equipment purchase. This fee is only included in the cost of the first year and will not be double-calculated in
the future. For each store, regardless of category, we start to pay rent the next year after the accumulated net
profit reaches 130,000 Yuan. Landlords of coffee shops (including bookstores) and restaurants can receive rent
in the second year, which is in line with our expectations. According to current estimates, all house owners can
begin to receive rent after the fourth year at the latest (Table 1).

Regarding rent: It's common sense that rents vary in different locations. At present, the rent for the bustling
hutong area is about 120 RMB per square meter. Cafes and restaurants are priced uniformly according to this
standard; Street Shops and Studios also need to be in areas with high traffics, but the space requirements are
relatively low, places that can accommodate about 10 people at the same time would work. The rent will be
slightly reduced in this case, about 100 yuan per square meter is sufficient; the location requirements of the
bed & breakfasts are not high but require larger spaces. Our team found two suitable locations for homestays
in quiet areas that are not facing the street, each with an area of about 250 square meters. The rent for a bed &
breakfast in the entire project is 80 RMB per square meter, but the initial renovation cost and equipment and
staging fee are very high. At the same time, because of the large units, the overall rent is also the highest of all
types.

18
 Hutong Renovator Project

Table 2: Cost-Benefit Analysis per category of investments

19

4.1.2. Description of store types and quantity
While communicating with professionals with
experience in hutong transformation, we realized
that coffee and bookstores are the mainstays of
hutong shops. Because Hutong is located in the city
center, in addition to tourists, people who work in
the CBD business district will come to the cafes or
bookstores in the Hutong to have quick chats or
small meetings on weekdays, and school students
will also come to study or entertain. The functions of
coffee shops and bookstores are similar, although
the decoration styles are different, the revenue
costs are the same, they can be classified into one
category. The total number of coffee shops and
bookstores is 21, which means there will be one
coffee shop/bookstore in almost every four stores.
The existing bustling Hutong commercial street
Wudaoying has an average daily passenger flow of
about 2,000 people, and it can reach 4,000 people
during holidays (71). As the demand for catering is
huge, this number is realistic and effective. In
addition, coffee shops can be bars at night, it can
not only generate income but also enrich local
people's nightlife. Coffee shops and bookstores may
have the highest profit margins among all
businesses.
The restaurant has high requirements for the family
area in Hutong, with an average area of about 150
square meters, only about 27 eligible families can be
converted into restaurants. There are also many
types and styles of restaurants. In addition to the
special Beijing cuisine, there are other Chinese
regional cuisines, and there will also be foods from
different countries to cater to foreign tourists.
Although there will be a certain difference between
catering income during the week and the weekend,
and the cost is relatively high, overall, the
restaurant's income is among the best.
Hutong Renovator Project
Street shops include souvenir shops, vintage shops,
clothing shops, and other types of gift shops. These
shops have relatively low space requirements. About
30 square meters can meet the demand, so the cost
of opening a shop is relatively small, the labor
requirements are not too high either. We can hire
the unemployed owners of this hutong to operate. It
is a relatively stable project with rational investment.
Studios include handicraft workshops and other
activity classrooms, mainly for students and those
who want to experience Beijing handcraft culture.
Studios do not require a large area in the store, but
the shop assistants need to understand the basic
Beijing culture, and also need some craft skills to
guide customers to complete the work. Because the
price and margin of the service package are relatively
high, the overall profit of Studio is higher than other
kinds of street shops.
Table 2 forms the income statement of the entire
pilot area, which is divided into the first year (no rent
paid) and the fourth year (full rent paid). It is
predictable that the income in the fourth year and
beyond is stable and profitable.
20
 Hutong Renovator Project

Table 3: Revenue profit estimation per category of investments

Total Annual Profit After Year 7 (in CHF): 4863880

Return on Investment (ROI): 0.694645499

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 Hutong Renovator Project

Figure 2: Stakeholder split (% of Total Net Profits)

Table: 4 Landowners dividends

22
 Hutong Renovator Project

Figure 3: Map of the Pilot Area - Dongtang Hutong

23
 Hutong Renovator Project

5. Deliverables and targeted impacts

In this part, we analyze the deliverables and the waypoints we need to achieve to implement our project based on
the state of art and the theory of change, our project will be divided into three phases: 1) Initial Planning in 1 year,
from January 2022 to December 2022; 2) Renovation in 1 year, from January 2023 to December 2023; and 3)
Operation in two years from January 2024 to December 2025. The list of each deliverable and its tentative deadline
will be described in the “Deliverables” section. As it is imperative to monitor the process of our project, the
targeted impacts, along with the indicators that assist in effectively monitoring the real impacts will be discussed in
the “Target impacts” section.

5.1 Deliverables
5.1.1 Short Term: Initial Planning

Status quo of one hutong Cost-Benefit Analysis

We'll start by scanning the current status of the selected
hutong, which will include learning about the
sociodemographic characteristics of the residents (age,
gender, income, etc.), the current condition of the houses
(how many houses are along the street and how many are
in the courtyard), the hutong infrastructure, and the
sewage treatment situation. We will prepare a report on
the status quo of the hutongs as a result of our study, and
we will lay a sound foundation for our follow-up work.
Identify stakeholders
We have created a website (link) to expand the influence
of our project and engage more stakeholders. We will also
conduct a series of promotion and marketing activities to
attract and choose suitable partners, the most important
of which will be private enterprises eager to participate in
hutong renovation and hutong tourism development.
Furthermore, our renovation project is open to
international organizations such as UNESCO, local NGOs,
and government agencies that wish to participate.
At the same time, members of our team will establish
small groups to communicate with hutong dwellers in
greater depth, explain our idea, and better understand
their needs. We expect that, as a result of our efforts, the
majority of them will accept to engage in our hutong
repair project.
We have conducted field investigations to some of the
locations that have previously been renovated, such
as rural and old city renovations, and interviewed
some construction companies, design firms, and small
business owners of cafés and hotels in hutongs. Our
current Cost-Benefit Analysis shown in Part 4 is based
on the real expenditures and daily incomes from our
preliminary interviews and we will make it more
accurate based on more interviews and data in the
coming period. The Cost-Benefit Analysis will be used
during negotiation with private investors and
residents to show that our project is economically
feasible and has significant social impacts.
Renovation Proposal
Under the premise that the partners are determined
and the residents' intention is clear, we will seek out
design and construction firms to discuss the budget
and come up with appropriate renovation plans for
various hutong houses, taking into account both
economic and social values.
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 Hutong Renovator Project

5.1.2. Medium Term: Renovation

Set up a resident committee

A special committee of hutong residents will be formed to oversee the renovation process and participate in
future operations, among other issues. The committee will meet on a regular basis to have a better
understanding of the residents' concerns and to work with the designer and builder to resolve issues. The
Residents' Committee will play a vital role in the day-to-day operations of the hutong by hosting regular
workshops to enhance people's understanding of water conservation and advocate for residents to work
together to preserve the hutong's environment.

Conduct renovation for houses

After we have completed the refurbishment design and signed a customized contract with each resident, we
will formally begin our renovation project. However, we will not reconstruct all of the houses in each
household at the same time, but rather will renovate the houses along the street first, leaving some part of
the house for the residents' usual residence.

Our renovation will be separated into two phases: a no-rent phase and a with-rent phase. The houses will be
used by the operator at no charge during the no-rent phase, but the operator will be responsible for
adapting each household's sewage system. The with-rent phase will begin after the initial renovation
expenditures have been covered, at which point the operating profit will be divided with the residents. We
guarantee that we will be responsible for modifying each household's wastewater treatment system to help
homeowners improve their water use without having to worry about running out of water or not being able
to discharge their wastewater. The majority of the money for the house renovations will come from the
private sector.

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 Hutong Renovator Project

5.1.3. Long Term: Operation

Diversified business operations

Hutong houses will be converted into cafes, bookshops, hostels, restaurants, cultural and creative stores,
studios, and other commercial applications.

Opportunities for making additional income

Residents, such as the elderly and women, may be able to find jobs in some businesses. Residents can
become tour guides for visitors because they grew up in hutongs and they can tell visitors about the
traditional way of life of hutong residents, which is considered an important intangible cultural heritage in
Beijing.

Heritage preservation fund

A percentage of hutong tourism earnings can be allocated to set up a heritage preservation fund to support
the heritage preservation (tangible or intangible) in Hutong, making hutong tourism, housing, and heritage
preservation co-prosperous and sustainable in the long run.

Establish renovation platform

If the first pilot hutong is a success, we will build a platform based on our current website
(https://beijinghutongs.org/) to link private sector investment, development plans, and renovation needs
from more localities with strong cultural values but inadequate living conditions, so that hutong renovation
can be replicated on a broad scale in more places.

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 Hutong Renovator Project

Table 5: Deliverables and Timelines

Figure 4: Implementation Timelines

27
 Hutong Renovator Project

5.2. Targeted impacts

Table 6: Targeted Impacts and Indicators

28
 Hutong Renovator Project

6. Budget
According to our planning, the total budget needed for our program was consisted of the initial project design,
the preliminary cost of lobbying and financing, and final costs for completion and settlement, and was
estimated at approximately CHF 23,150.

Note 1: Our estimation of salary for human resources is based on the standard of 100 RMB per day for one
person, an average salary for workers in Beijing.

Note 2: Since most of the costs are calculated in Chinese yuan, and we convert the budget into CHF based on
the currency updated to 2021/12/10.

Table 7: Total Planned Budget

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 Hutong Renovator Project

6.1. Budget Item 1 - Project Design

The total budget for the initial project design was estimated approximately at CHF 15,000.

Table 8: Planned Budget for Project Design

30
 Hutong Renovator Project

6.1. Budget Item 1 - Project Design

Before the program started, we would use 2-3 days for the coordination and discussion for the following
program, which includes:

(1) Assess project feasibility, including internal and external opportunities, competitive pressure, resources,
financing channels, staffing, and sustainability;
(2) Determine the final objectives and decide on clear instructions for the objectives;
(3) Draw up specific feasible schemes and design a plan for execution in detail;
(4) Formulate a schedule and contribute the works, etc.

The field research refers to an investigation of the environment for Hutong and makes judgments of the
feasibility and suitability for implementing our program among different Hutongs in Beijing. According to the
statistics, there are 950 hutongs in the inner city of Beijing, by 2020, including 471 in Xicheng (West City)
District (inner part of the Second Ring Road) and 479 in Dongcheng (East City) District (inner part of the
Second Ring Road). Merely the Hutong itself is not appropriate enough to conduct the program, there still
need extra conditions. In 2018, the first non-parking alley - xizongbu alley, in Dongcheng District, was born.
The 754-meter-long and 5-meter-wide alley took more than a year to realize the non-parking of cars.
Dongcheng District divides the parking problems in hutongs under its jurisdiction into three categories, and
successively determines three key solutions: sharing, revitalizing, and appropriate construction. And as a
result, the parking problems of nearly 40 hutongs in the core urban area have been solved from 2018 to
2020, and several non-parking hutongs have appeared one after another. These 40 hutongs are the range
that we consider further investigation and renovation, which would take five of our members roughly 2 days
individually to visit.

After our project makes the decision, the key to controlling the whole project lies in its design. To effectively
control the cost of the project, we must first have an excellent and reasonable engineering design scheme,
which is the key step. And we have decided to reach out to a professional designing team with two of our
members communicating with them our pursuits comprehensively. If the cost control in the survey and
design stage is well done, the basic investment scale can be effectively controlled, improving the benefits of
the project. Generally speaking, the cost of the survey and design stage accounts for 1% - 2% of the total
construction cost, and normally the charging standards for preliminary consulting services of construction
projects with an investment of less than 30 million RMB are listed as follows:

Table 9: Charging Standards for Consulting Services of Construction Projects

For a program whose construction is about ten million, its consulting and designing fee would be approximately
100,000 RMB, which equals 14460 CHF.
31
 Hutong Renovator Project

Table 10: Planned Budget for Preliminary Costs

32
 Hutong Renovator Project

A major component of the preliminary preparation is lobbying the residents. Take Wudaoying hutong as an
example, which is currently a well-known commercial street in Beijing, its total length is more than 600
meters, with an average width of 6 meters, and it used to have 86 families in its hutong. Five of our members
can be divided into two groups for investigation and interview of each family, and provide an introduction of
our program, offering appropriate and adequate information for persuasion. And to make the program
“market” or “consumer” driven, we need marketing and propaganda to promote our program. It is needed to
tailor our program not only to meet the demands of the market and attraction of the capital but also to show
our concern to meet the needs of the neighborhood.

It is well known that global infrastructure needs are a key issue in most developed and developing countries.
There is then an urgent need to fill in the infrastructure gap. In a standard project finance deal, the
shareholders of the infrastructure set up a project company as a Special Purpose Vehicle (SPV) that becomes
the center of a complex network of contracts (72).

Figure 5: The Contractual Structure of a Project Finance Deal

33
 Hutong Renovator Project

For our financing strategy, we have decided to present our business proposal to NGOs, municipal departments
as well as investment institutions for fundraising by presenting our business plan. And the efforts are
distributed based on our team member’s academic majors and past working experiences.

Figure 6: The Distribution of Financing Strategy

6.1.3 Budget Item 3 - Completion and Settlement

The total budget for completion and settlement was estimated at approximately CHF 7,330.

Table 11: Planned Budget for Completion and Settlement

34
 Hutong Renovator Project

As the last stage of the project, the cost control of the completion and settlement stage is also vital. In
essence, completion settlement is a summary of the previous cost control, focusing on the whole life cycle of
the project. Completion settlement shall have a certain basis, such as bidding documents, work contact list,
construction contract, and other documents, which need our team members to ensure the contracts are
executed properly and legally.

While the rest of the team should inspect the quality and the completion degree of the project, the works
include:
(1) Strictly control the completion method of the project. The completion settlement stage can ensure the
project quality and give full play to the investment benefits. The final report about the program should
truthfully reflect the actual situation of the project, and it shall be summarized and drawn according to the
construction.
(2) Check the quantities and judge their authenticity. The calculation of quantities is the most onerous and
time-consuming work in the whole settlement review process. Issues such as whether the construction unit
has fulfilled the contract and completed the project contents specified in the contract; whether the quantities
are calculated in accordance with the contract should be taken into account.

In addition, since quality testing requires professional techniques and examination as well as recognition by
related stakeholders, therefore, we should set up an acceptance team to strictly inspect and evaluate the
project. The acceptance team should be composed mainly of representatives from the investors, the
designer, the construction engineer, and the supervision engineer, and confirm that all projects have met the
qualified requirements. This process usually accounts for 0.5% of the whole construction fee, which is about
50,000 RMB.

35
 Hutong Renovator Project

7. Concluding remarks
Hutong is a cultural symbol of Beijing, serving as a place to live
as well as a cultural heritage and tourist attraction. However,
houses in the hutongs were built 700 years ago without sewage
systems such as toilets, thus there are still some residents who
have to use public toilets. This is especially inconvenient for
children, women, and people with mobility problems, not to
mention having to go out to the toilet in sub-zero temperatures
in winter. However, because of low income and lack of
ownership, hutong residents have no incentive to renovate their
homes and install toilets. To accelerate the achievement of SDG
6 clean water and sanitation, a collaborative funding model is
proposed in the report.

In recent years, with the increasing awareness of cultural

preservation, the transformation of hutongs, which are
extremely rich in cultural connotations, is being carried out in
the direction of sustainable development. The preservation of
cultural values is a very important principle now. Of course, the
transformation of hutongs is inseparable from the amplification
of their commercial value, which is the result of the joint efforts
of different actors, including residents, the market, and the
government. The cultural and commercial value of hutongs has
always been a topic of discussion. A prominent issue in the
renovation of hutongs is the problem of wastewater discharge.
Most of the current hutongs use combined rain and sewage
drainage systems, which bring problems such as flooding risks,
poor hutong environment, and trouble in going to the toilet.
Scholars are actively exploring new sewage models in an
attempt to solve this problem.

By using the theory of change method, our project identifies the

current problems, the causes of problems, different alternatives,
e
our project's effectiveness, feasibility, and potential risks. The
successful implementation of the multi-stakeholder renovation
project requires to incorporate groups and stakeholders
identifying the conditions they believe have to unfold for their
long-term goals to be met. Regarding which, Beijing municipal
governments, companies, IGOs/NGOs/civil society, and local
dwellers are key stakeholders and are involved in the renovation
process. Either theory of change or stakeholder involvement is
vital for us to understand and revisit throughout the whole
process and to ensure our proposed approach will contribute to
the desired change, namely renovation of hutongs' sewerage
treatment system in a more sustainable way.

36
 Hutong Renovator Project

The deliverables and targeted impacts will be the key to

monitoring the progress of our project. Within three phases,
the initial planning, renovation, and operation, the core team
of Hutong Renovator Project will meet and communicate
constantly with stakeholders to adopt their suggestions and
embed them into the project development process. We
estimate that we will finish all the preparation works including
status quo scanning, partnership establishment, seeking
residents’ consent, funding collection, and renovation planning
within 2022. In 2023, we’ll mainly focus on renovating the old
houses in hutongs into diversified new business operations.
Each house will have a new wastewater management system.
From the beginning of 2024, all the businesses will be formally
opened to welcome tourists coming from all the places to
experience the unique Hutong tourism. We also expect to
promote the successful model to more cultural places which
need funding for renovation.

The total budget needed for our designed project consists of

the initial project design, the preliminary cost of lobbying and
financing, and final costs for completion and settlement, not
including the construction cost. And the planned budget for
the initial project design was estimated approximately at CHF
15,000; for preliminary costs, roughly at CHF 840; and for
completion and settlement, CHF 7,330. The total budget that
estimated was estimated at approximately CHF 23,150.

The initial construction cost including the renovation fee is

approximately CHF 700/m2, the total costs are CHF 5,453,000
for 86 households; the equipment and staging fees are
variable depending on different types of stores, based on the
interview and investigation, this one-time fee has been set up
Ⅱ
for each type of stores (see index ). Our team is expecting to
pay the rent to the landowners once the accumulative net
revenue reach to CHF20,000 to ensure the business has
enough liquidity except for the bed & breakfasts as the
e
business is family owned and less liquidity required. All stores
will start to pay rent after the seventh years after the
refinement and the estimate total annual profit starting from
the seventh year will be CHF4,863,880. The split of profit
among investment institutions, the landowners and our team
will be 60%, 25% and 15%, the dividend of each landowner is
the bonus we pay after the rent, it is determined by the
business type each house is running, the more profitable the
business type is (in this case the restaurants), the more
dividend the landowner will receive. In this way we hope each
party can win in this business.

37
 Hutong Renovator Project

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indonesias-wastewater-crisis-realize-its-urbanization

51. Mahbub-Ul Alam et al., 2020, Strategies to Connect Low-Income Communities with the Proposed
Sewerage Network of the Dhaka Sanitation Improvement Project, Bangladesh: A Qualitative
Assessment of the Perspectives of Stakeholders

52. Niras, Waste water turned into district heating, 2019, https://www.niras.com/projects/waste-
water-turned-into-district-heating/

53. Sauarlia, Yu, 2021, Trans-Urban-EU-China, Transition towards urban sustainability through
socially integrative cities in the EU and in China

54. Taherkhani, Roohollah & Hashempour, Najme & Lotfi, Mitra. (2020). Sustainable-resilient urban
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resilient_urban_revitalization_framework_Residential_buildings_renovation_in_a_historic_district

55. Taherkhani, Roohollah & Hashempour, Najme & Lotfi, Mitra. (2020). Sustainable-resilient urban
revitalization framework: Residential buildings renovation in a historic district. Journal of Cleaner
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resilient_urban_revitalization_framework_Residential_buildings_renovation_in_a_historic_district

56. Boito, Camillo(1986) Ouestioni practiche di belle arti, restauri, concorsi,legislazione, professione,
inseanamento, Hoepli, Milano, 1893; In Jukka Jokilehto, 'A History of Architectural Conservation,’ Ph.D
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resilient_urban_revitalization_framework_Residential_buildings_renovation_in_a_historic_district

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58. Mary Anne McDonald, 2019, Principles of Community Engagement

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and Community Involvement. International Journal of Heritage Studies. 6.
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tion_and_Community_Involvement

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socially integrative cities in the EU and in China

61. Sauarlia, Yu, 2021, Trans-Urban-EU-China, Transition towards urban sustainability through
socially integrative cities in the EU and in China

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community’s participation?. Sociology. Université Panthéon-Sorbonne - Paris I, 2017. English. ffNNT :
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community’s participation?https://tel.archives-ouvertes.fr/tel-01692487/document

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financing-instruments/

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buildings: innovative financing instruments;Joint Research Centre Italy Benigna Kiss Central European
University Hungary;
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69. Bertoldi, Economidou, European Commisson, 2019, How to finance the renovation of residential
buildings: innovative financing instruments;Joint Research Centre Italy Benigna Kiss Central European
University Hungary;
https://www.eceee.org/library/conference_proceedings/eceee_Summer_Studies/2019/7-make-
buildings-policies-great-again/how-to-finance-the-renovation-of-residential-buildings-innovative-
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9. Annexes
9.1 Organization Website

Please visit our website at https://beijinghutongs.org

Website architecture

Project Overview
Project Overview
Full Report
Hutongs
What are Beijing’s Hutongs ?
Gallery
Collaborative Funding Model
Method
Solution Design
Deliverables and targeted impacts
Overall
Short Term
Medium Term
Long Term
Budget
Overall Budget
Project Design
Preliminary Cost
Completion and Settlement
Our Team
Contact us
Funding
Partnership
Donation

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9.2 Cost-Benefit Analysis & Profit Estimations

Table: Cost-Benefit Analysis per category of investments

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Table: Revenue profit estimation per category of investments

Total Annual Profit After Year 7 (in CHF): 4863880

Return on Investment (ROI): 0.694645499

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Figure: Stakeholder split (% of Total Net Profits)

Table: Landowners dividends

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