On January 5, the People's Bank of China and the State Administration of Financial Supervision and Administration issued the "Opinions on Financial Support for the Development of the Housing Rental Market", which reads as follows:
People's Bank of China State Administration of Financial Supervision and Administration
Opinions on financial support for the development of the housing rental market
(Yin Fa [2024] No. 2)
Shanghai Headquarters of the People's Bank of China, branches of all provinces, autonomous regions, municipalities directly under the Central Government and cities with separate state planning; supervision bureaus of the State Administration of Financial Supervision and Administration; China Development Bank, policy banks, state-owned commercial banks, Postal Savings Bank of China, joint-stock commercial banks:
In order to thoroughly implement the decisions and arrangements of the Party Central Committee and the State Council, support the acceleration of the establishment of a housing system with multi-subject supply, multi-channel security, and simultaneous rental and purchase, cultivate and develop the housing rental market, and promote the steady and healthy development of the real estate market, according to the "Several Opinions of the General Office of the State Council on Accelerating the Cultivation and Development of the Housing Rental Market" (Guo Ban Fa [2016] No. 39) and the "Opinions of the General Office of the State Council on Accelerating the Development of Affordable Rental Housing" (Guo Ban Fa [2021] No. 22) and other documents, the following opinions are hereby put forward on financial support for the development of the housing rental market.
1. Basic principles and requirements
(1) Support the supply-side structural reform of housing rental. Financial support for the development of the housing rental market should highlight the key points and aim at the shortcomings, mainly in large cities, focusing on solving the housing problems of new citizens, young people and other groups, supporting all kinds of entities to build, renovate and operate long-term rental housing, revitalize the stock of housing, and effectively increase the supply of affordable and commercial rental housing.
(2) Focus on supporting the development of professional and large-scale housing rental enterprises of self-owned properties. Financial support for the development of the housing rental market should adhere to the positioning that houses are for living, not for speculation, and focus on supporting self-owned property-based housing rental enterprises that operate as independent legal persons, have clear business boundaries, and have professional real estate investment and management capabilities, so as to promote their large-scale and intensive operation, and improve the supply capacity and operation level of long-term rental housing.
(3) Establish and improve the financial support system for housing leasing. Financial support for the development of the housing rental market should be based on market allocation, independent decision-making according to the principle of marketization, and provide diversified, multi-level and full-cycle financial products and financial service systems for the investment, development, construction and operation of rental housing, with complete market functions, balanced structure and orderly competition.
-- The division of labor among financial institutions is reasonable. Commercial financial institutions should meet the reasonable financing needs of all types of housing leasing entities in accordance with the principles of legal compliance, controllable risks, and commercial sustainability. Policy-based development financial institutions are limited to providing financing for the construction and operation of affordable rental housing on the premise of conforming to their own functional positioning and business scope.
-- Standardization of financial product innovation. Housing lease credit products should have clear functions, reasonable term and interest rate pricing, and sound risk assessment and post-loan management. Direct financing products should have a simple and clear structure, transparent pricing, true and compliant use of funds, and sound and effective market constraints and operating mechanisms.
-- Optimizing the allocation of credit and capital markets. The credit market mainly meets the needs of various entities for the development and construction and purchase of rental housing, as well as the liquidity and daily operation needs of housing rental enterprises. The capital market focuses on the development of long-term investment and financing tools for housing leasing. The credit market and the capital market can coordinate and reasonably continue according to the income and risk characteristics of different links of housing leasing.
2. Strengthen the innovation of housing rental credit products and service models
(4) Increase credit support for housing rental development and construction. Support commercial banks in issuing housing rental development and construction loans to real estate development enterprises, industrial parks, rural collective economic organizations, enterprises and institutions, and other entities that build and renovate long-term rental housing in accordance with laws and regulations. The term of the loan for housing rental development and construction is generally 3 years, and the longest is not more than 5 years, and the proportion of project capital for rental housing construction shall meet the relevant requirements of the State Council on the capital system for fixed asset investment projects.
(5) Meet the reasonable financing needs of groups for bulk purchase of rental housing. For enterprises and eligible public institutions that purchase stock of idle houses in bulk in accordance with laws and regulations for use as dormitory-type affordable rental housing, and specialized large-scale housing rental enterprises that purchase stock of idle houses in bulk in accordance with laws and regulations for long-term holding and operation of affordable or commercial rental housing, commercial banks are encouraged to issue housing rental group housing purchase loans on the premise that the risks are controllable, the business is sustainable, and there is strictly no new hidden debt of local governments. The commercial housing and commercial housing purchased with the loan shall be a house with a clear legal relationship and has been completed and accepted, and the purpose of the housing lease shall not be changed during the loan term. The term of the housing rental group purchase loan shall not exceed 30 years, the loan amount shall not exceed 80% of the appraised value of the property in principle, and the loan interest rate shall be reasonably determined by the commercial bank taking into account the borrower's risk status, risk mitigation measures and other factors.
(6) Support the issuance of housing lease operating loans. If a housing leasing enterprise operates long-term rental housing with its own property rights, the term of the housing lease operating loan shall not exceed 20 years, and the loan amount shall not exceed 80% of the appraised value of the property in principle. The term of the housing lease operating loan shall not exceed 5 years, and the loan amount shall not exceed 70% of the total rent receivable during the loan term.
Commercial banks shall conduct due diligence on the legal compliance of the operation and management of rental housing, the rent level and occupancy rate of rental housing, as well as the professional ability, financial status and continuous prudent operation of the housing rental enterprise, and reasonably and prudently design the amount, term, interest rate and repayment method of the loan in light of the operation, risk characteristics and purpose of the housing rental enterprise.
Housing leasing enterprises should use rental income as the primary source of repayment. On the premise of complying with laws and regulations, effectively preventing and controlling risks, and being commercially sustainable, commercial banks may issue credit loans, pledges, and mortgage loans according to the credit standing and operating conditions of housing leasing enterprises. Commercial banks should prudently assess the legal risks of pledges and mortgages when issuing pledges and mortgages to ensure that the pledges and mortgages are enforceable.
For rental housing projects where the development, construction, holding and operation are the same entity, the housing lease operating loan can be used to replace the housing rental development and construction loan in the early stage of the project. When issuing a loan for housing lease development and construction, a commercial bank may sign a contract for a housing lease operation loan at the same time, agree with the borrower on the conditions for the issuance of subsequent housing lease operation loans, and include the housing lease operation loan as a source of repayment funds for housing lease development and construction loans.
(7) Improve comprehensive financial services for housing leasing-related enterprises. Commercial banks are encouraged to actively explore financial service models and financial products that are suitable for the needs and characteristics of housing leasing-related enterprises, and provide comprehensive financial solutions such as account opening, settlement, consulting, and cash management to housing leasing enterprises, housing rental brokerage institutions, and housing rental management service platforms.
3. Broaden diversified investment and financing channels in the housing rental market
(8) Enhance the ability of financial institutions to provide housing lease loans. Support commercial banks in issuing financial bonds for housing leasing, and raise funds specifically to increase the allocation of housing rental development and construction loans, group housing purchase loans, and operating loans.
(9) Broaden the financing channels for housing leasing enterprise bonds. Support housing leasing enterprises to issue bonds, which are specifically used for the construction, purchase and operation of rental housing. Encourage the optimization of the bond issuance process, improve the efficiency of housing lease bond issuance, and provide financing convenience for housing rental enterprises.
(10) Support the issuance of housing lease guarantee bonds. If the rental housing held and operated by a housing leasing enterprise has a continuous and stable cash flow, it may use the property mortgage as a credit enhancement and issue housing rental guarantee bonds. Housing lease guarantee bonds are included in the bond management framework.
(11) Steady development of real estate investment trusts. Steadily promote the pilot work of real estate investment trusts, and raise funds for housing rental enterprises to hold and operate long-term rental housing under the premise of controlling risks. Support the trading and circulation of real estate investment trust shares, promote the long-term stable operation of housing rental enterprises, and prevent short-term speculation. Priority will be given to supporting key areas supported by national policies, such as the Xiong'an New Area, the Hainan Free Trade Port, and the Shenzhen Pilot Demonstration Zone of Socialism with Chinese Characteristics, as well as large cities with a net inflow of population, to carry out pilot projects of real estate investment trusts, and provide financial support for enterprises that use various types of construction land (including collective construction land, idle land owned by enterprises and institutions, etc.) to build, hold and operate long-term rental housing in accordance with laws and regulations.
(12) Guide all kinds of social funds to invest in the field of housing leasing in an orderly manner. Support financial institutions and asset management institutions to standardize investment in financial products related to housing leasing. Housing rental enterprises and professional asset management institutions are encouraged to hold and operate rental housing for a long time through real estate investment trusts. Support long-term funds such as insurance funds to invest in the housing rental market. Housing leasing enterprises and financial institutions are encouraged to use interest rate derivatives to hedge related interest rate risks.
4. Strengthen and improve the financial management of housing leasing
(13) Strict boundaries of housing leasing financial business. The housing rental finance business should be strictly positioned to support the development of the housing rental market, and it should not provide financing for short-term speculation. Housing rental financial products and services should be clearly distinguished from other housing financial products and services, and it is strictly forbidden to finance non-rental housing in the name of supporting housing leasing, and it is strictly forbidden to use housing rental financial products for commercial real estate development in violation of regulations.
(14) Strengthen the management of housing lease credit funds. Commercial banks should establish a sound loan approval mechanism and risk management mechanism, strictly review and post-loan management of housing leases, strengthen follow-up investigation of borrowers, project attributes, authenticity of loan purposes, and sources of repayment funds, ensure that loan funds are used for housing lease construction, purchase and operation in accordance with the agreed purposes, and effectively prevent risks such as misappropriation and cash-out of funds. If there is a change in the lease attributes of the project or the purpose of the housing lease during the loan period, the loan shall be recovered in a timely manner, and appropriate risk prevention and control measures shall be taken against the borrower as appropriate.
(15) Standardize the innovation of direct financing products for housing leases. Housing lease direct financing products should have good underlying assets, simple structure, clear legal relationships, open and transparent information, and legal and compliant use of funds. The relevant departments shall clarify the business model of the housing rental enterprise, the use of the raised funds and other policies and review requirements, improve the management of information disclosure and duration, and take effective measures to ensure that the raised funds are used for the construction, purchase and operation of rental housing and other related activities, and shall not be diverted for other purposes.
(16) Prevent financial risks in housing leasing. Commercial banks and other financial institutions that provide financing for housing leases should establish and improve relevant systems, strengthen compliance review and assessment, and ensure that relevant businesses are carried out prudently and compliantly. The upper limit of the debt level of all types of housing rental enterprises and real estate development enterprises holding rental housing is controlled to ensure that their asset-liability ratios remain within an appropriate range. Strengthen the monitoring of the operation and management, financial status, and use of funds of housing leasing enterprises, and promptly adopt effective measures such as accelerating repayment and early loan collection to resolve risks if housing leasing enterprises and other borrowing entities violate the provisions of the loan contract.
Before providing financing, financial institutions need to ensure that the housing leasing enterprise has made a business opening report or filed with the housing and urban-rural development department in accordance with the regulations, and is engaged in housing rental business. For direct financing products for housing leasing, the risks related to the housing leasing business and the real estate market should be fully disclosed, and a risk early warning and disposal mechanism should be established and improved to protect the legitimate rights and interests of investors.
(17) Strengthen the monitoring and evaluation of housing rental finance. The People's Bank of China takes the lead in housing rental financial statistics, and strengthens the statistics, investigation, monitoring and analysis of housing rental financial products. Relevant departments have strengthened the sharing of information related to housing leasing and brought into play the joint force of supervision.
These Opinions shall take effect on February 5, 2024.
People's Bank of China
State Administration of Financial Supervision and Administration
January 5, 2024
Source: People's Bank of China website