China's housing security system is defective and needs to be overhauled, an expert with the Ministry of Construction said in an interview with Xinhua.

The problems stem from a lack of defined goals and long-term plans in the design of the system as well as irregular practices, said Wen Linfeng, head of the research division with the ministry's policy research center.

This is the first time an expert with the ministry, responsible for the housing supply in China, has given a systematic explanation of the housing security system, which has been blamed for the plight of millions of urban Chinese facing soaring housing prices.

According to Wen, the lack of proper support from public funds is a major issue with the housing security system.

In many countries, spending on housing security is part of the government budget, Wen said. But this is not the case in China.

Currently, only Shanghai and Beijing are allocating funds to low-rent houses. In other cities, the money comes from interest earned from public housing funds.

Public finance support for affordable houses, another form of housing security, is also weak. Such houses are built by commercial housing developers receiving tax rebates from the government.

China needs to learn to use a combination of legislation, finance,fiscal and tax policies to implement its housing security goals, Wen said.

In Japan, there are several laws that define the responsibilities of national and local governments in housing supply. Mortgage borrowers can also get discounts from the government and enjoy personal income tax exemption for incomes spent on mortgage repayment. This has yet to happen in China.

China now has Public Housing Funds and affordable houses to help ordinary urban residents to acquire their own houses, and low-rent houses targeting the poorest group. But Wen said there is no housing security for a large group of people who are too poor to buy affordable houses but rich enough to be disqualified from low-rent houses. Among this group are millions of newcomers to China's fast expanding cities.
 

Affordable houses, a major part of the housing security system, have run into many difficulties in recent years, Wen said.

One problem is the dwindling supply of such houses. In 1999, affordable houses accounted for 16.6 percent of the total investment in new houses. The figure dropped to less than five percent in 2005.

The management of the affordable houses also needs to be improved, Wen said.

Currently many high-income earners are buying affordable houses, due to the lack of a comprehensive personal credit record system and poor enforcement of income evaluation standards.

Wen said this issue is largely a result of the fact that affordable houses are almost completely handled by the developers, who have no incentives to enforce income standards, but have every reason to sell the houses as soon as possible to recover their costs.

Another major problem with the affordable houses is that most of the housing are built in the suburbs where land is cheap but infrastructure is poor, causing great inconvenience to people who live there.

As a form of housing security, affordable houses are supposed to have a floor space of 60 to 80 square meters for each unit, but in many cases, they are much larger, some even as big as 150 to 200 square meters.

Despite many problems, Wen said it is unimaginable to demolish the system of affordable houses all at once before a better option is found. What needs to be done is to perfect it through standardization and innovation.

Compared to affordable houses, low-rent houses seem to have worked quite well without any major disputes. Now the supply needs to be stepped up to benefit more people.

By 2005, 70 of the 291 Chinese cities at or above prefecture level still had not established the low-rent housing system. Following a recent order from the central government, these cities should establish the system by the end of 2006, Wen said.

Editor: Yan