Yi Xianrong: Develop the long-term rental housing market and realize residential justice

Source: Global Times

The recent Central Economic Work Conference pointed out that it is necessary to adhere to the positioning that houses are used to live, not to speculate, and to adapt measures to local conditions and take multiple measures at the same time to promote the stable and healthy development of the real estate market. It is necessary to attach great importance to the construction of affordable rental housing, accelerate the improvement of long-term rental housing policies, gradually make rent-to-buy housing have the same rights in enjoying public services, and standardize the development of the long-term rental housing market. That is, the development of the long-term rental housing market has become the main direction to solve the housing problem in large cities.

From the perspective of international experience, the best reference for China's development of the long-term rental housing market should come from Germany. The reason why it can become a country with a sustained and stable development of the real estate market may have a lot to do with Germany's positioning of the real estate market and the development of the housing rental market. Between 1970 and 2015, the nominal price index of newly built german housing rose by 90%, and after deducting the impact of inflation, its real price fell by 11.3%, and the real house price-to-income ratio fell by 62%. Germany positions the housing market as one that meets the basic living conditions of residents. The real estate industry is only an important component of the state welfare system, not a "pillar industry" that drives economic growth, let alone a profitable investment tool. Germany's Housing Support Act, the Housing Rent Assistance Act, the Housing Rental Act and the Private Housing Grant Act provide a legal framework for the supply of social security housing, rent subsidies for low- and middle-income earners, the regulation of the rental market and the construction of private housing, the purpose of which is to absolutely guarantee the basic living conditions of every resident. Under the protection of these legal systems, Germany's housing rental market is very developed and the degree of marketization is also very high, but it is almost impossible to make huge profits in the housing market.

Why do German residents prefer to rent a house and not want to own it? In Germany, the transaction costs of housing are high, and the housing capital gains tax is taxed in a cumulative manner, which is basically impossible to make the housing transaction profitable, which naturally weakens the motivation of residents to hold housing. The Housing Rent Assistance Act stipulates that the objective of housing rent assistance is to guarantee an adequate and family-friendly living condition financially. For this reason, every German citizen is able to receive a government housing rent subsidy. About 10 per cent of these households rent government-provided affordable housing, and 90 per cent receive housing rent subsidies. Under the housing rent subsidy law, if the consumption of rental housing is much better than that of holding housing, then residents prefer to rent.

In order to further encourage residents to rent, the German government has not only provided comprehensive subsidies for the construction of social rental housing, but also required real estate developers to build more high-quality housing to ensure the supply of housing rental market. At the same time, the German government has established a series of legal systems to strongly protect housing renters. For example, the government will rate all houses according to their size, location and quality, and then set the corresponding rental value according to the score. Not only can landlords not charge rents higher than the corresponding rental value, but the annual rent increase is also strictly restricted. The tenant's right to renew the lease is also fully protected. During the lease period, the landlord may not evict the tenant and the lease ends unless the tenant is grossly negligent and the landlord must continue to re-lease. At the same time, in accordance with the relevant laws, rental housing owners have formed strong associations. The organization not only coordinates the interests of renters with various relevant departments, but also participates in the formulation of urban housing development planning, housing laws and regulations and housing policies, so as to protect the interests of tenants in an all-round way.

The initial conditions for the development of China's housing rental market have their own particularities, mainly manifested in the land property rights system with the lack of ultimate ownership, the extremely high residential housing ownership rate, high housing prices, the market dominated by investment speculation, and the complex housing property rights system. These are the realistic basis for the development of China's housing rental market, but also the basis for relevant laws and institutional arrangements, in order to formulate policies to adapt to China's housing rental market, it is necessary to start from these initial conditions, and on this basis, some of the existing systems are reformed.

From the German experience, it can be seen that the essence and core of the modern housing rental market is how to ensure the basic living conditions of low- and middle-income people and achieve social housing justice. To do this, China's housing market must return to the function of residential consumption, rather than becoming a tool for investment and making money. Under this premise, the government needs to make a lot of financial investment in the housing rental market through different ways and means, formulate corresponding laws and regulations and policies to ensure the effectiveness of financial investment, the fairness of rental housing distribution and the marketization of the operation of the rental housing market, and formulate a set of laws and policies that comprehensively protect the interests of housing tenants from infringement.

Due to the particularity of goods and services such as housing, and the absolute weakness of housing tenants in the market, how to price the housing rental market is very important. For public rental housing, it should be fully priced by the government and a nominal fee charged to tenants. For the housing rental market built by individuals and rural collective land, considering that it has just started, the relevant institutional arrangements and legal preparations are insufficient, so it cannot be completely priced by the market, and it can be considered to limit the housing rent to less than 30% of the median income of tenants, rather than setting it according to the housing rent-to-house price ratio and the median income level of the entire social residents. In fact, some developed countries, including the United Kingdom and Germany, will implement strict price control on rents at a special stage of housing rental development. At present, many domestic enterprises regard the housing rental market as a financial tool, such as the popular "rental loan" in the market, the government should resolutely ban it, which is the key to the establishment of China's long-term rental housing market. (The writer is a professor at the School of Economics, Qingdao University)