GUANGZHOU -- China will increase the supply of low-cost rental housing to balance the residential housing market, which favors home sales.
The central government is afraid the scarcity of affordable rentals will cause a shortage of cheap labor. Although the popularity of homeownership has propped up the housing market, the widening gap between rich and the poor exposes harsher realities on the ground.
The Chinese Communist Party decided on a shift in real estate policy at the Central Economic Working Conference, the highest meeting for economic affairs, which convened in mid-December. "Land supply should favor the construction of rental housing," it stated.
The CCP's unusually strong wording has sent shock waves through the real estate industry.
The average nationwide price of housing stood at 9,287 yuan ($1,440) per sq. meter in 2019 -- up 2.1 times from a decade earlier, according to the National Bureau of Statistics. Price rises are especially noticeable in urban areas. For example, the average price in the tech hub of Shenzhen in Guangdong Province soared 3.9-fold to 55,769 yuan.
Privately owned homes are estimated to account for more than 70% of all housing in China, higher than Japan's 60%. While homeownership is considered an important prerequisite to marriage in China, home buying as an investment is also growing.
Real estate companies have mostly built homes for families because of strong demand, resulting in a shortage of rental housing for single persons and childless couples.
In old urban areas, many dwellings used to be rented cheaply, which made them attractive to workers from the countryside. But these units have been rapidly disappearing because of redevelopment.
If people in the country want to migrate to cities in search of better wages, the "shortage of affordable and convenient housing creates a high hurdle for starting life," said a woman from Fujian Province who had moved to Guangdong.
A shortage of cheap urban labor could hinder economic growth, a fact not lost on the central government.
One woman in Shenzhen who managed to move into public housing this month -- only about one in 250 applicants get this chance -- said she is "happy because, though somewhat narrow, the place is conveniently located." Her rent is 30% to 40% lower than other rents in the area.
Real estate developers such as China Vanke and Country Garden Holdings are reportedly thinking about beefing up their rental home business.
But the policy shift is not guaranteed to dampen interest in homeownership, partly because schools in some areas give preferential treatment to homeowners.