“Affordable Housing” Numbers Don’t Quite Add Up

Reuters investigates Beijing’s progress in increasing the country’s supply of affordable accommodation:

To gauge the status of the scheme, Reuters visited a dozen building sites in the dusty city of Shijiazhuang south of Beijing. A middle-income city of 10 million, including satellite towns, Shijiazhuang is one of the few to have published a public list of its affordable housing projects.

Tall towers rising from flat fields and former industrial sites laid to rest the assumption of some that local governments are simply faking affordable housing starts to meet central government targets. In Shijiazhuang at least, the projects are real.

But a good portion of what’s being built is already-planned construction re-labeled as affordable housing. Those projects aren’t delivering the additional demand for concrete, steel, glass or aluminum window frames that typically ensure that construction gives an outsized boost to economic growth ….

“There’s a big difference between government definitions and what a normal person would consider an ‘affordable house’,” said GK Dragonomics research manager Rosealea Yao.

The focus on affordable housing, however loosely defined, has taken a heavy toll on other projects. The Wall Street Journal recently looked at a stumbling feng shui-compliant high-end canalside development in Wuxi, Jiangsu:

Artists’ renderings showed a forest of gleaming glass buildings, including a 40-story hotel-anchored skyscraper, overlooking yacht-bearing waterways. Even though Wuxi isn’t generally considered among China’s marquee cities, the country’s property-mad investors were hooked. When the first 303 apartments went up for sale in 2009, they sold out within four hours.

Today, the Xi Shui Dong development stands less than half complete, hamstrung by its parent company’s high debt and tough new government restrictions. Last year, unit sales fell 25% from 2010, despite steep discounts. Construction cranes loom over mostly empty streets boasting only a handful of retailers.

It is an increasingly common malady: China’s two-year push to drive down property prices has punished many of the nation’s once highflying property developers and stymied a number of upscale projects …. Policies enacted since 2010 include restrictions on the purchase of second homes, higher down payments and tighter credit.