Housing Shortage in China Dashes Dreams of Better Life

HAO XIAODONG has all the accouterments of an increasingly comfortable middle-class life in China. He just has nowhere to put them.

Crammed into the tiny, rundown room occupied by Mr. Hao, his wife, Zheng Xiaoling, and their three-year-old daughter, Jia-Jia, are a refrigerator, color television, telephone, videocassette recorder, an air conditioner, a piano covered with a maroon velvet cloth, and assorted furniture.

By February, though, the Hao family's frustrating five-year wait for less-cramped quarters may end. The government-employed electronic engineer expects to move his family to a rented, two-bedroom apartment, his "dream come true."

"Housing is the biggest issue in normal people's lives," Hao says, seated at a dinner table wedged between a double bed and a desk. "All we can do is wait for a bigger apartment."

Millions of frustrated urban Chinese confront an acute housing shortage that thwarts their dreams of a better life. Both the growing middle class and rural migrants demand space in crowded cities in what has become a major dilemma for China's rulers.

Ever since the Communists took power in 1949, housing has been a government priority. Under the state-run system, state employers provided urban residents with housing at negligible rates, and average per- capita living area doubled in size.

Buyers face huge obstacles

In Beijing, more than 10 percent of the 2.2 million households live in inadequate housing, according to city officials. By the turn of the century, the number of urban Chinese living in poor conditions will almost double.

"In the long run, the government will have to do more to deal with this problem of housing," says Zheng Qing, an official at the Beijing Housing Reform Office.

"The government knows that lack of adequate housing could develop into a real middle-class issue," says a Western diplomat in Beijing.

Faced with mounting deficits, government departments and state-run industries have been overhauling the old housing system, requiring Chinese to pay a larger part of their rents and encouraging home ownership. Since the government began phasing out subsidized housing five years ago, rents have risen steadily. The average Chinese now pays 5 percent of his annual income in rent compared with less than 1 percent five years ago. By 2000, 15 percent of annual incomes will go for rent.

Housing prices have jumped even more sharply, doubling in the last five years. Today, high prices have made buying a residence unthinkable for most city residents and created a glut of overpriced housing. The price of ordinary housing is up to 30 times the average household income of most urban dwellers. Those that buy do so from employers at subsidized rates.

The official Wen Hui Daily reported recently that almost 10 percent of China's housing for sale or rent stands empty.

Chinese analysts say potential buyers lack the capital to buy homes outright and a mature home-mortgage system to ease the burden. Banks will advance only up to 60 percent of the value of a property. People are deterred from buying houses, because renting remains comparatively inexpensive. "They do nothing for us. Year after year, there isn't enough housing, although lots of new buildings are put up," says one Beijing resident.

Still, government officials report more and more Chinese are starting to accept the free-market reform of paying more for housing. The official English-language China Daily estimates that 80 percent of urban residents are saving to purchase their own houses, especially in lower-cost suburbs on city outskirts.

Private market emerges

More private housing is coming. Local authorities often approve commercial projects in exchange for developers also building inexpensive housing. Foreign companies find they must offer housing in order to recruit skilled, well-trained workers.

The government is also moving to fill the low-cost housing shortage. This year it introduced a national "Comfortable Housing Project." Beijing plans to build 1.6 billion square feet of housing or 25 million new apartments in 59 major cities over the next five years under the $600 million program.

But officials have complained that the no-frills housing project is proceeding too slowly. Only about 100 million square feet, or 75 percent of the 1995 target, was completed. In a reprimand, Construction Minister Hou Jie urged that completed dwellings "should be sold to families in urgent need of housing first."

Hao, the government engineer, is able to save about one-third of his $3,500 annual salary and per diem allowances he receives for overseas travel toward buying a house. His neighbor, Shi Zhen, though, isn't so lucky. Although Mr. Shi just bought a microwave oven, "for us, buying a house is still a long way off."