Opinion

Public rental scheme in a dilemma

(China Daily)
Updated: 2010-08-03 11:41

A big increase in the supply of public housing for rent has been widely touted as a key solution to tame the looming property bubble and meet low-income families' demand for affordable housing.

The subsidized rent levels that Beijing's housing authorities released last week - up to 30 yuan ($4.4) per month for each sq m - has however called into question the feasibility of such a program since the actual cost of renting a public housing unit is close to or even more than what renters can directly get from the private housing market.

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Local housing authorities had said that such public housing units will be rented at a discount to market rentals. They had also made it clear that they will run the program at cost or for just a slim profit. But the latest set of figures either allows for no discount at all (to ensure adequate returns on cost) or indicates that market rentals will have to rise further.

If the public housing program cannot give low-income renters a better offer than what the market does currently, the housing authorities should review the program as soon as possible. If the current average rental levels put out by the authorities are taken as the benchmark, then they will have to brace for another round of rent hikes in the local property market.

That is bad news for policymakers anxious to rein in the recent spike in apartment rents at a time when the surge in realty prices across major cities is just beginning to lose steam.

The public rental scheme has been rolled out to help renters in the mid-to-low income bracket. Local housing authorities should shed light on how they arrived at the current rental rates and what discounts they will eventually offer to ease public worries.