An article online about the forced demolition of a shanty town in Dali county that left the elderly homeless was unfounded, the Dali county government in Northwest China's Shaanxi province said on Sunday.

The story, which caused a huge uproar on social media, such as Sina Weibo, alleged that on Friday, the local housing authority demolished three single family houses on Dahua Road, leaving people homeless in bitter weather and arousing strong public dissatisfaction.

The pictures posted showed furniture, utensils, blankets, appliances and other household goods in a pile at the site.

The government said in a statement on Sunday that the three houses dismantled on Friday are part of a shantytown renovation project, and the site will be redeveloped into a sports park.

It said no one was homeless, as the homeowners have other houses to live in, and had moved out before the demolition.

The reconstruction project involves more than 1,000 households. Most homes have already been demolished after owners signed compensation agreements, according to the statement.

The government said that it has not reached an agreement with the remaining 37 households, because the owners claimed that the compensation the government offered is lower than market standards.

It has started an investigation and any illegal action that harms the interests of the public will be punished, the government said.

Sun Junwu, the writer of the online article, told China Daily on Monday that those who did not sign an agreement with government did so because of the low amount of compensation money offered.

"The government offered 2,000 yuan per square meter, but the market price is about 5,000 yuan per square meter," Sun said.