Property

Rotten boroughs

Affordable housing push may face delays because of shoddy construction

This is what a housing collapse looks like...

Two months ago, China’s rapidly expanding high-speed rail network was a badge of national honour – or “a major achievement of China’s technology innovation” in the words of the Ministry of Railways.

The deadly train crash near the city of Wenzhou at the end of July is now prompting something of a rethink (see WiC117). So perhaps it shouldn’t come as a surprise that analysts are also beginning to ask more questions about another of the government’s mega-construction projects: the aggressive push in low-income housing construction.

Premier Wen Jiabao rolled out grand plans in March this year for 36 million units of public housing as part of the current five-year plan (from 2011 to 2015).

Last month he announced that construction of more than 5 million units had already begun, taking work more than halfway towards the target of 10 million units for the year.

That should be greeted as good news, right? Well, not quite as much as it might have been before the Wenzhou rail smash. In fact, Wen’s statement prompted some to query the quality of the buildings now being put up so fast.

That’s because, as of the end of May, only 3.4 million units had been started which suggests that work must have been fast-tracked on the following 1.6 million over the last two months.

Numbers in China are often large. But by any standards that’s a rapid pace of construction and it’s now raising questions about the quality of work.

And not in the letters column of some obscure architectural magazine, either. “If low-income housing construction is blindly devoted to speed, then like the frequent accidents we’ve seen recently, problems will keep occurring… and potentially even end in tragedy,” warned an article in national broadsheet the People’s Daily, published only a few days after the train accident.

There have also been reports of slapdash construction on recently-finished low-income housing. An affordable housing project near Anqing City in Anhui Province was completed only two years ago but has been receiving numerous complaints from residents, says Century Weekly. Paint has been peeling off walls and ceilings are falling apart. Some residents say their homes are now too dangerous to reside in.

To assuage wider public concern, government spokesmen say a campaign will be launched to check affordable housing quality. Reuters also reported last week that the government is looking to lower completion targets for 2012. “China will make sure that construction proceeds at a reasonable pace,” said Minister of Finance Xie Xuren earlier this month.

That might create problems too. The low-income push has been positioned as crucial assistance for ordinary Chinese to buy their own homes. Although not mentioned as explicitly, policymakers also hope it will take some of the steam out of property prices in some cities.

But there could also be a wider economic impact. HSBC research out this month suggests that a 20% decrease in social housing units built could wipe out Rmb264 billion ($40 billion) of investment.

The delay would then feed through into the broader economy, since the property sector is said to contribute about 10% of the country’s GDP.


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