Housing

Yingshun
Studies, Vol.
Zhao
18,&No.
Steven
5, 721744,
C. Bourassa
September 2003
722
this reform, the government gradually withdrew from economic activities and
most limitations on private business activities were lifted. Many state-owned
enterprises were privatised, or were transferred into stock companies. SelfChinas Urban
Housing
Reform:
employment,
private enterprises,
foreign
investment Recent
enterprises Achievements
and special
economic
zonesInequities
were encouraged and developed. Competition, material incenand New
tives and decentralisation in decision making were widely used to promote
productivity. The reform produced substantial results and Chinas national
economy started to take off. Entering into the 21st century, China is becoming
a major economic power (Wang & Murie, 1999b; Zhang, 1998).
Before 1980,ZHAO
Chinas&
cities
adoptedC.
a socialist,
work unit-dominated welfare
YINGSHUN
STEVEN
BOURASSA
housing system. This system involved a mixture of three components: socialist
School
of Urban
andphilosophy
Public Affairs,
of Louisville,
426goal
W. Bloom
Louisville,
ideology,
welfare
andUniversity
clan tradition.
The main
of theStreet,
socialist
KY
40208,was
USAto eliminate all defects of modern capitalist society, such as class
ideology
exploitation and con icts, social inequity, growing crime rates and degenerating
[Paper first received 20 July 2002; in final form 29 October 2002]
culture. The way to achieve this goal was to eradicate the root of all these
evilsprivate ownership, by nationalisation or socialist transformation. Under
A
Chinas
urban housing
reformhousing
startedwas
in the
early 1980s,
BSTRACT
this
ideology, most
of Chinas
urban private
transformed
intoas a part of
comprehensive
economic
reform.
old system was
dominated
work the
units that
public ownership
in the 1950s
and,The
subsequently,
public
housing by
became
provided substantial
to their
employees,
including
heavily
subsidised
predominant
form of in-kind
housingservices
provision
in Chinas
cities (Chen,
1996,
1998;
housing.
brought
three
serious
housing
shortages, corruption and inequities.
Wang
& It
Murie,
1996;
Wu,
1996;problems:
Zhou & Logan,
1996).
TheChina
goalsestablished
of housing its
reform
were
to
solve
these
problems
through
urbanashousing
own extensive urban welfare system
after 1949
a
privatisation,
commercialisation
and
socialisation.
This
study
examines
Chinas
symbol of socialist advantages over capitalism. Welfare for urban residents was urban
housing
reform
a case
study
of thesupport
city of to
Jinan.
first reviews
the history of
tied to work.
Thethrough
work units
gave
overall
theirItemployees
from
housing
in Jinan
1950s
to the 1980s,
then
analyses Jinans
cradle todevelopment
grave, including
childfrom
care,the
basic
education,
healthand
care,
pensions,
reform practices
in the
Its finding
that, after
many
years
efforts,
housing
collective
amenities,
life1990s.
employment
andishousing.
Those
who
did not
belong
to
reform inorJinan
made
but mostlyrelief.
with respect
to privatisation.
families
workhas
units
weresubstantial
given stateprogress,
or neighbourhood
Such persons
The
problem
of
housing
shortages
has
been
addressed
and
crowding
has
were very few in number. Organised dependence on work units and state lessened
considerably.
Anecdotalasevidence
suggests
that corruption
is less sector,
widespread
than in the
agencies was regarded
the victory
of socialism.
In the housing
the city
past. Thebureau
other important
housing
problem,
inequity,
still exists
in some respects,
housing
and various
work units
constructed
housing
and and,
administrahas even
worsened.
particular,
a new
form ofThe
horizontal
arisen due to
tively
allocated
this In
housing
to urban
residents.
tenants inequity
paid onlyhas
a nominal
the persistent
role of work
units &
in Murie,
housing1999b;
provision.
This1998).
paper suggests that, in the
rent
for their apartments
(Wang
Zhang,
future,
the
government
should
take
a
more
positive
role
rather
than
thein
market
Chinas clan system has a long history and currently clans are
stillleaving
common
alone
to rural
deal with
of housing
Chinas
areas.the
A problem
typical rural
clan is inequity.
a village where almost all residents
belong to an old family and people live and work together. Clans are considered
K
Wstable
China,
housinginter-personal
policy, reform,
inequity which makes them
ORDS: and
to EY
have
harmonious
relationships,
relatively easy for the government to administer. After 1949, a work unit-based
quasi-clan system emerged in Chinas cities. Work units construct housing
within, or very close to, their compounds, so that their employees can easily get
Introduction
to work. A work unit with housing stock forms a small community or a
Modern Chinas
quasi-clan.
The integration
history canofbework
divided
and into
living
two
is periods:
supposed(1)
to1949
produce
to 1978,
loyalty
theto
traditional
the
enterprise,
socialist
high period,
productivity
and (2)
and1979
a stable
to theurban
present,
society
the reform
(Zhang,period.
2000). In
In the
the
first period,
1970s
and 1980s,
Chinatoestablished
maintain the
andliving
developed
standards
a socialist
of employees
planned economy.
families, the
This
system included
government
evensuch
stipulated
components
that adult
as economic
children could
centralisation,
take on their
nationalisation
parents jobs
or
socialist
if
the parents
transformation,
retired or lost
public
the ability
ownership
to work.
of production means, and a rationed
supply
Generally
of most
speaking,
goods and
Chinas
services
urban
in urban
housing
areas
system
(Zhang,
in the
2000).
first The
period
purpose
was anof
establishing this
unsuccessful
experiment.
system was,
Public
of course,
ownership
to attempt
of urban
to housing
overcome
discouraged
the defectsindiof the
moderninvestment
vidual
capitalist economy.
in housingBut
andthis
resulted
system
in produced
housing shortages.
its own problems,
Welfare such
hous-as
inefficiency,
ing
and its related
a stagnant
administrative
economy allocation
and serioussystem
supplyled
shortages.
to housing
Therefore,
corruption.
in
the late
The
quasi-clan
1970s, China
systemcarried
causedout
a serious
major reform
housingwith
inequity
the aim
among
of accelerating
various work
industrialisation
units.
In the late 1970s,
throughthese
the introduction
problems had
of become
a modern
very
market
serious
economy.
and forced
During
the
0267-3037 Print/1466-1810 Online/03/050721-24
DOI: 10.1080/0267303032000134664

2003 Taylor & Francis Ltd

Chinas Urban Housing Reform

government to carry out reform of the urban housing system. The goals of this
reform were to abolish the three components of the old system and achieve
housing privatisation, commercialisation and socialisation. Privatisation involves
sale of publicly owned dwellings to the tenants; commercialisation involves
establishment of modern urban housing markets where housing is regarded as
a commodity rather than a welfare benefit; and socialisation involves the transfer
of housing management from the control of the work units to professional
companies (in China, socialisation has a different meaning from the Western
understanding, which equates socialisation with nationalisation).
Since Chinas urban housing reform began, there has been a growing body of
research on this topic. The early studies mainly gave a general introduction to
and description of Chinas urban housing system and urban housing reform
(Bian et al ., 1997; Chen, 1996, 1998; Fleisher & Hills, 1997; Tong & Hays, 1996;
Wang, 1995; Wang & Murie, 1996; Wu, 1996; Zhao, 1997; Zhou & Logan, 1996).
After 1998, when the Chinese central government accelerated reform, most
studies tended to address specific issues and new problems faced by the ongoing
housing reform. For example, after 20 years of reform, various work units still
play a key role in the urban housing sector, forming an obstacle to future reform.
Many authors have discussed this problem and urged that the linkage between
work units and housing provision be dissolved. Zhu (2000) argued that the goal
of establishing a market-oriented system of housing development and investment with clear property rights has a long way to go because the work unit is
still in place. Li & Siu (2001) studied residential mobility in Guangzhou and
concluded that the work unit and the municipal housing bureau, rather than
market forces, are the primary driving forces behind suburbanisation in China
today. Rosen & Ross (2000) argued that the resale of privatised public housing
is not feasible because the owners of such housing still rely on their work units
for maintenance and improvements. Moreover, work units are constructing new
housing and employees may exchange their old housing for that new housing.
Li (2000a) posited that Chinas current urban housing market could not replace
the function of work units. Instead, local government would shoulder much of
the housing responsibilities currently resting upon the work units. Fu
(2000) hold the pessimistic viewpoint that weaning urban residents away from
work unit housing is a difficult task because it infringes upon many vested
interests, primarily those of work units, employees and their families.
Wang & Murie (1999a), Lan & Sun (2000), and Li (2000a, 2000b) addressed
construction, sale and management of new private, often referred to as commodity, housing in Chinese cities. Their conclusions were that Chinas urban
housing market was not mature because most developers were state-owned and
few ordinary urban residents are able to buy commodity housing due to its high
price. Chiu (2001) and Zhang (2001) argue that China currently has a dual
system of housing sectors: privatised public housing and commodity housing,
with different prices, rents, and delivery patterns. In this situation, the government should take a more proactive role rather than leaving the market alone to
solve the housing problems of disadvantaged people. A market-oriented policy
does not mean that the government does not need to do anything. Wang (2000)
and Wang & Murie (2000) have also examined Chinese urban housing reforms
impact on the urban poor and housing reforms social and spatial implications,
respectively. In addition, Tang (1994) and Wu (1999) have discussed the impacts
of Chinas urban land system on housing development.

723

et al .

724

Yingshun Zhao & Steven C. Bourassa

This paper explores the new issue of horizontal inequity that has resulted
from housing reform. Previously, a few authors have addressed new inequities
in Chinas urban housing (Lee, 2000; Wang & Murie, 2000; Zhang, 2001). Their
analyses have focused on vertical inequities resulting from the failure to provide
housing for the urban poor or due to the persistence of the rank system for
allocating housing. This paper argues that the new horizontal inequities stem
from the persistence of the work unit system of housing provision. Before
housing reform, there was some inequity in housing conditions among different
work units, but these inequities were not very significant due to the intervention
of the government. But, in the reform era, because of the introduction of market
competition and the withdrawal of the government from the economic sector,
the differences in economic power among work units increased. Some powerful
work units, especially those in monopoly positions, have earned considerable
profits and constructed high quality housing for their employees, while other
work units have been less successful and, consequently, unable to improve their
employees housing. One person may earn only an average income but can have
a good unit of housing because the work unit is powerful. Another person, who
works in a small work unit or a private enterprise without housing stock, or is
self-employed, may earn a good income, but cannot get housing from a work
unit and also cannot afford commodity housing.
Most case studies of Chinese urban housing reform have examined only a few
large cities such as Beijing (Lan & Sun, 2000; Li, 2000a), Guangzhou (Li, 2000a,
2000b; Li & Siu, 2001), Shanghai (Wong, 1998), or Xian (Wang, 1995). These cities
have well developed economies, relatively high personal incomes and more
market-oriented thinking. Housing reform in these cities was carried out relatively early and some of them were selected as pilot cities for urban housing
reform. Their progress in housing reform was greater than that of other Chinese
cities. The subject of the case study here, Jinan, is smaller in population and area
than the above-mentioned cities. Its process of housing reform has been relatively slow. For example, by the end of 1997, the average percentage of
privatised public housing in 36 major Chinese cities (including Jinan) was 60 per
cent, while Jinans was only 31 per cent. By the end of 1998, the national average
rent for urban public housing was 1.51 yuan per sq. metre, while Shanghais
average was 3.05 yuan, Beijings was 2.86 yuan, Nanjings was 2.31 yuan, and
Chengdus was 1.73 yuan. Jinans average rent was only 1.26 yuan. In 1998, the
national average deduction from wages for the Housing Provident Fund was 5
per cent of wages, and some cities had a higher ratio: Shanghai and Tianjin were
6 per cent, and Beijing and Guangzhou were 7 per cent. Jinans average was 5
per cent (4 per cent before 1994). In 1999, the national percentage of commodity
housing purchased by individuals (rather than organisations) was 89.1 per cent,
while Guangzhou was 98.1 per cent, Shanghai was 97.5 per cent, Tianjin was
96.8 per cent, and Beijing was 95.2 per cent. Jinan was only 57.9 per cent
(Yangeng Wang, 2000). These data show that Jinan was different in many
respects from the other, larger cities that have received most of the attention
from researchers. To date, little or no research has been published about second
tier cities such as Jinan.
In addition, Jinan is the capital of Shandong Province, which along with
Guangdong Province had housing reform plans that were unusual in many
respects, especially in regard to the calculation and issuance of one-time purchase subsidies and monthly subsidies. The two plans are believed to be good

Chinas Urban Housing Reform

725

examples by many Chinese scholars and have been cited often in academic
articles and news reports (see Lee, 2000; Li, 1999; Yanjie Liang, 1998; Yongping
Liang, 1998; Wang, 1998; Wong & Flynn, 2001; Xie, 1999). Therefore, study of a
city like Jinan can help to better and more completely explain Chinas ongoing
urban reform.
This is essentially a qualitative study based on information collected in Jinan
in August 2000. The primary data sources include materials from selected work
units, including an industrial firm, a university, a service trades company and
various others. The documents collected include work units housing reform
plans, housing standards and criteria, and educational materials related to
housing reform. In addition, interviews were conducted with individuals in
charge of Jinans housing reform, staff members of work units housing offices,
and city residents holding various types of jobs in different work units. These
primary data were supplemented with various documents published by the
Chinese government, including materials from the city archives section of the
Jinan public library.
The History of Housing in Jinan: 1950s to 1980s
Jinan is located on the Yellow River in eastern China, some 500 km south of
Beijing. In 1998, Jinan City proper had a population of 1.51 million (ranking 15th
among Chinas 668 cities) and a built-up area of 115.6 sq. km (about 47 sq.
miles). Jinans housing includes two large sectors: public and private. Public
housing in Jinan originated in 1949, immediately following the founding of the
new communist city government. At the beginning, public housing was small in
amount but it increased rapidly after the socialist transformation in the mid1950s, which put many private dwellings into public ownership. At that time,
private housing had had a long history and had been the major form of housing
provision. After 1949, development of private housing was limited under the
socialist economic strategy, and that sector gradually came to house a minority
of the citys residents. Public housing may be divided into two sub-sectors:
public housing managed directly by the city government and public housing
managed by various work units. In 1949, private housing, city governmentmanaged public housing and work unit-managed public housing accounted for
76 per cent, 13 per cent, and 11 per cent, respectively, of Jinans housing stock.
By 1998, these figures were 19 per cent, 18 per cent, and 63 per cent, respectively
(Table 1).

Table 1.

Composition of the housing stock in Jinan: 194998 (1000s of m

Total housing Government- Work unit-

Year space managed housing managed housing Private housing

1949 3985 535 (13%) 438 (11%) 3028 (76%)
1955 4429 549 (12%) 997 (23%) 2882 (65%)
1963 5505 1772 (32%) 1860 (34%) 1872 (34%)
1976 6721 1416 (22%) 4157 (61%) 1156 (17%)
1984 10 370 2602 (25%) 6153 (60%) 1622 (15%)
1998 28 012 5061 (18%) 17 564 (63%) 5395 (19%)
Source: Wang, 1999.

2)

726

Yingshun Zhao & Steven C. Bourassa

City Government-Managed Public Housing

The housing in this sector had three main origins: housing received from other
sources in the late 1940s; private housing converted in the socialist transformation movement in the mid-1950s; and housing constructed since the 1950s. The
new communist city government, which as noted above was founded in 1949,
proceeded to: receive housing from the former city government, the former
ruling party and the old army; confiscate housing from counter-revolutionaries,
political enemies or foreigners; take over housing from private housing owners
for public use; buy housing from private owners; and receive housing donated
by some private owners.
The socialist transformation of urban private housing in Jinan was experimented with in 1956, and carried out on a large scale in 1958. By 1966, the
socialist transformation was basically completed. A total of 1 270 000 sq. metres
of private housing, owned by 6700 landlords, had become government-managed
public housing (Jinan Housing Bureau, 1998). Other Chinese cities also experienced the same process during that period (Wang & Murie, 1999b; Zhang, 1998).
The construction of new public housing started in the 1950s and made great
progress in the 1980s and 1990s. Between 1950 and 1970, a total of 1 189 000 sq.
metres of public housing was constructed. This new housing was mainly
one- oor houses or simple two- or three- oor apartment buildings, with public
toilets and tap water. In the 1980s and the 1990s (the reform era), the public
housing stock increased rapidly and a total of 3 370 000 sq. metres was constructed. The newly-constructed houses in this period were mainly four- to
six- oor apartment buildings with modern facilities, including individual
kitchens, toilets, independent water and electricity meters, halls and balconies.
City government-managed public housing was allocated according to housing
need. To be eligible, applicants had to be legal city residents, had to live in very
crowded conditions, and had to present letters from their work units verifying
that the work unit could not provide housing. The Housing Bureau reviewed all
applications at regular intervals and made housing allocation decisions after
balancing the housing needs of all applicants. Typically, it was very difficult for
city residents to get public housing because of serious housing shortages, and
the waiting time was very long. Due to relatively limited investment, the public
housing managed by the city government was often smaller and simpler than
the public housing managed by various work units. City residents usually asked
for housing from their work units before applying to the city government. Only
those who were self-employed or those working in small work units went
directly to the Housing Bureau (Zhang, 1998).
The city government implemented unified rents for public housing. In theory,
these rents were also applicable to the public housing managed by various work
units. In practice, work units ignored the official rates and established their own
rents, which often benefited their employees because they were lower than the
governments guidelines. Between 1948 and 1977, the city government issued
five rent guidelines and the average rents changed slightly following the
issuance of each guideline. In comparison with the average incomes of urban
employees, rents remained more nominal than substantive. For example, in 1977,
the rent of a standard room (about 12 sq. metres) was about 1.30 yuan, which
made up only 2.7 per cent of the average monthly wages of a typical employee.
In the 1990s, when urban housing system reform started in Jinan, the rent began

Chinas Urban Housing Reform

Table 2.

Rents of government-managed public housing, wages, and

living spaces per person in Jinan: 19482000
Average

Year of Monthly rent monthly urban Housing space Ratio of rent

guideline (yuan/m

) wages (yuan) (m

/person) to wages (%)

1948 0.138 22.5 4.09 2.49

1951 0.192 36.8 3.83 2.01
1959 0.143 49.1 3.27 0.96
1968 0.171 45.8 3.41 1.27
1977 0.108 48.2 4.05 0.91
1992 0.324 225.8 7.62 1.09
1994 0.900 394.7 7.92 1.80
1998 1.268 693.8 9.77 1.78
2000 6.750 937.3 10.48 7.50
Sources:

Jin, 1999; Jinan Annals Office, 2001.

to be raised significantly. Because income also increased, rent continued to

account for only a small part of average monthly wages (Table 2).
Work Unit-Managed Public Housing
Public housing managed by work units has two main origins: housing received
and bought in the early 1950s, and housing newly-constructed by various work
units from the late 1950s to the present. After the 1949 Communist Revolution,
the government started the process of nationalising private enterprises and
many state-owned enterprises were founded. These work units established their
own housing stock for their employees by receiving housing from the old
government-owned enterprises and buying private housing. From the mid1950s, Chinas national economy began to develop and the number of urban
employees increased rapidly. The great demand for urban housing pushed
various work units to construct housing for their employees. The government
encouraged work units to do this in order to rapidly solve the problem of
housing shortages. Many previous limitations on work units housing construction activity were lifted, and work unit-managed public housing expanded
rapidly.
Public housing managed by the city government and public housing managed
by various work units share some characteristics, such as administrative allocation and nominal rent. They also have many differences. First, the city government-managed public housing is scattered throughout the whole urban area and
is provided to legal city residents, while the work unit-managed public housing
is typically close to each work unit and is supplied only to employees. A tenant
of government-managed public housing may remain in place regardless of a
change of employer, but a tenant of work unit-managed public housing would
have to move out under such circumstances. Second, government-managed
public housing has unified criteria for construction (regarding selection of
location, house design and structure, and cost), maintenance and management,
while various work units might construct and manage their housing without
regard to official standards. Thus there are great differences in housing conditions across various work units. Third, although both of them collect a nominal

727

728

Yingshun Zhao & Steven C. Bourassa

Table 3.

Rental rates of selected work units in Jinan,

1985
2

Work unit Rental rate (yuan/m

Public utility 0.055

Factory 0.065
Machine tool factory 0.070
University 0.070
Post office 0.095
Government-managed public housing 0.108
Source: Jinan Housing Bureau, 2000.

rent, the government-managed public housing complies with a uniform rent

guideline, while each work unit has its own rent-setting criteria. As mentioned
previously, the rents for work unit-managed public housing are usually lower
than those for government-managed public housing (Table 3).
Fourth, although both types of housing are allocated administratively, the
allocation principles are very different. Government-managed public housing is
allocated according to housing need and priority is given to those living in the
most crowded conditions. In work units, housing is used as an incentive to
reward employee efforts and to promote employee productivity. For this purpose, two allocation systems, the rank system (each rank is entitled to a certain
amount of housing) and the point system (for priority of allocation within the
same rank), were invented and used widely in various work units (Wang &
Murie, 1999b; Zhang, 1998). Housing conditions such as crowding and inconvenience were not taken into account (Tables 4 and 5).
Private Housing
In 1955, just before the socialist transformation began, Jinan had nearly 2.9
million sq. metres of private housing, making up 65 per cent of all housing in
the city. Most private housing consisted of simple one- oor buildings. In early
1956, the central government issued
Some Ideas on the Current Basic Situation of
Urban Private Housing and the Socialist Transformation Movement
. This defined the
goals for, significance of, and schedule for this movement, and asked all cities to
commence the transformation. Following this directive, the Jinan government
began an experiment in the Shi-Zhong district. This experiment adopted two
models: joint state-private ownership and private ownership with state manage-

Table 4. Ranks and housing entitlements in a

prosperous work unit in Jinan, 1992
Rank Entitlement (m
Ordinary workers and staff 4550
Junior professionals and officials 5055
Middle professionals and officials 6070
Senior professionals and officials 8090
Source: Jin, 1999.

Chinas Urban Housing Reform

Table 5. The calculation of housing allocation points at
a university in Jinan, 1988
Basis for calculation Points
Rank
Ordinary worker or staff 35
Teaching assistant or assistant section chief 40
Lecturer and section chief 45
Assistant department head 50
Associate professor and department head 55
Professor and associate commission head 65
Time on the job

1/year

Other considerations
Model teacher 2
Husband and wife working in same unit 1
Two children over 12 years old of opposite gender 1
Family member in military service 1
Only one child 1
Source: Yangeng Wang, 1999.

ment. The city government stipulated that: (1) Owners of over 600 sq. metres of
private rental housing should participate in the transformation, and their housing, except for a few rooms for the owners living spaces, should be transferred
into joint state-private ownership. This housing should be assigned a price by
the Housing Bureau, and a fixed 0.5 per cent interest payment, based on the
price, would be given to the owner on a monthly basis. Tenants would pay rent
directly to the Housing Bureau. (2) Owners of over 360 sq. metres of private
rental housing should participate in the transformation, and their housing,
except for a few rooms for the owners living space, would be transferred into
state management. The Housing Bureau would collect rent from the tenants at
a rate established by the city government. After withdrawing 18 per cent for
property taxes, 25 per cent for maintenance fees, and 10 per cent for management and insurance fees, the Housing Bureau would give the remaining rent
revenue (called the fixed rent) to the owners. (3) Owners of smaller amounts of
rental housing might participate in the state management programme if they
wanted and if they did not make their living mainly from rental revenue.
In the experiment, a total of 51 300 sq. metres of private housing was
transformed, of which 43 800 sq. metres was transferred into joint state-private
ownership and 7 500 sq. metres was transferred into state management. After
this experiment, owners of another 22 800 sq. metres of private housing expressed their desire to participate in the transformation and the Housing Bureau
met their demands. Therefore, during this period, a total of 74 100 sq. metres of
private housing was transformed.
In 1958, the city government issued
An Idea on the Socialist Transformation of
Private Housing
, which called for a full-scale transformation. Based on the
previous experiment, it made some important modifications. The joint stateprivate ownership pattern was given up. The rental housing owned by churches,
temples and mosques was required to be transformed; however, rental housing
owned by Chinese people living overseas would not be transformed. Rent was

729

730

Yingshun Zhao & Steven C. Bourassa

set at 20 to 40 per cent of the original rent. Due to the previous experiment and
substantial preparatory work, the full-scale transformation was completed very
quickly. In total, 1 040 000 sq. metres of private housing, owned by 5100 persons,
was transformed, consisting of 85 per cent of the housing eligible for transformation. Of all the transformed private housing, 29 200 sq. metres were not eligible
but the owners insisted on participating. A total of 177 200 sq. metres was not
transformed because of poor quality. The average fixed rent was just 27 per cent
of the original rent.
In 1964, the central government issued
A Report on Problems of the Socialist
Transformation of Urban Private Housing
. This report asked for further efforts to
transform the private housing of those owners who were eligible but did not
participate in the 1958 full-scale transformation. Following this report, the Jinan
government started a new wave of transformation. By 1966, another 154 400 sq.
metres of private housing had been transformed (Jinan Housing Bureau, 1999).
In 1975, when China was undergoing the Cultural Revolution, private housing
was further reduced until it accounted for only 7 per cent of all city housing. In
the reform era of the 1980s and 1990s, the government encouraged individuals
to construct housing by themselves. Private housing rose to 19 per cent of the
citys total by 1998. In this period, some two- and three- oor modern-style
private houses were built.
During the 1950s, the Jinan government issued three rent regulations for
private rental housing. These regulations divided private rental housing into
different classes according to location and construction materials and quality.
Rent ranges for each class were fixed, but the tenant and the landlord were still
expected to negotiate the actual rent, which often was higher than that for public
rental housing. The last regulation, issued in 1956, was in effect for almost 30
years. Entering into the 1980s, private rents started to rise significantly, following an increase of migration from rural to urban areas caused by the new
economic growth. In this period, the government did not issue any new rent
regulation and instead allowed the rent to be decided on the market. In practice,
the rent usually was negotiated between the landlord and the tenant based on
current prices of basic commodities. Currently, private rent is usually two times
higher than that for public housing, or about 50 to 100 yuan per room (Zheng,
1999).

Urban Housing System Reform in Jinan in the 1990s

The welfare housing system, with its administrative allocation and nominal rent,
could not support itself and maintain normal investment. Under the overarching
principle of production first, with consumption a distant second, China had for
a long time neglected investment in housing. As a consequence, housing supply
did not increase to meet the growing demand for housing. The resulting
shortage created severe problems in Chinese cities. In Jinan, living space per
resident declined during the 1950s, and by the late 1970s had returned only to
the levels of the late 1940s (Table 2). In 1982, Jinan had 1.45 million sq. metres
of housing in urgent need of repair, of which 415 000 sq. metres of housing was
near collapse. Of Jinans approximately 300 000 families and unmarried adults,
161 700 (54 per cent) had housing problems. Among them, 101 400 did not have
any housing and had to live with parents or relatives, or in offices or workshops;

Chinas Urban Housing Reform

14 700 lived in inconvenient conditions (unmarried adults of opposite gender
lived in the same room); and 45 600 lived in very crowded conditions (Ye, 2000).
Inequity in housing consumption was very serious. In 1979, while the average
living space per capita was 4.06 sq. metres in Jinan, 4 500 households lived in
extremely crowded conditions with average living space of less than 2 sq. metres
per person. In some cases, several generations had to live in a single room.
Under the rank allocation system, ordinary people had no opportunity to live in
adequate housing. At a university in Jinan, it was not uncommon to find many
older workers living in small houses with shared kitchens and toilets, and even
two families sharing a single unit. The work unit management of housing also
resulted in great housing differences. A young university graduate working in
a prosperous company might be allocated a two-bedroom apartment when he
married, while his classmate working in an academic institution might obtain
only a one-bedroom apartment. Many city residents lived in very crowded
housing conditions only because they were self-employed or employed in poor
or small work units.
On the other hand, essentially free public housing with nominal rent resulted
in excess demands because living in larger or better housing did not entail
greater costs to the tenant. Allocation of housing managed by the city government and some work units did not follow a rank system, but instead relied on
administrative discretion. This administrative allocation system led to grave
housing corruption and many officers used their powers to get extra free public
housing, even to the point of acquiring housing for their unborn grandchildren.
A junior officer of the urban district government, who was in charge of
personnel affairs, got four units of housing for his four unmarried sons. These
units were government-managed and scattered in different locations. In another
work unit, about half of 36 units in a new apartment building were mysteriously
empty for several years. These units were reserved for young children or
grandchildren of some of the leaders of the work unit.
These kinds of problems led to resentment by the public and low productivity.
Entering into the 1980s, China started large-scale economic reform. A market
economy was introduced to replace the planned economy, and private enterprises were encouraged. The urban housing system, because of its severe defects,
also became a target of urban reform. In the early 1980s, urban housing reform
experiments took place in many Chinese cities. In Jinan, the city government
carried out some small-scale housing reform programmes in the mid-1980s,
including reorganising housing management systems, selling newly-constructed
commodity housing with subsidies, opening youth apartments for young married couples without their own housing, and experimental sales of old public
housing.
Jinans urban housing reform was formally implemented in 1992 when the city
government issued a
Temporary Plan for the Jinan City Housing System Reform
This plan implemented the central governments
National Plan for Urban Housing
System Reform
issued in 1988,
Notice of Continuing to Carry Out Urban Housing
System Reform
issued in 1991, and the housing reform plans of Shandong
Province. Following Jinans temporary plan, and other directives issued later, a
set of housing reform programmes was carried out. They included raising rent
for public rental housing, establishing the Housing Provident Fund, initiating
comfortable housing projects and selling public housing. The following sections
discuss each of these initiatives.

731

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Yingshun Zhao & Steven C. Bourassa

Rent Increases
The nominal rent of public housing was a main defect of the old housing system
and the main origin of many housing problems. Therefore, raising rent has been
an important aim of housing reform. In 1992, the Jinan city government started
to raise the rent of public housing. The city government issued a
Notice of Raising
Rent and Issuing Housing Subsidy
that asked the Jinan Housing Bureau and work
units to uniformly raise the rents for all public housing. At the same time,
housing subsidies should be issued to employees who lived in public rental
housing. The amount of this housing subsidy would be 2 per cent of the
employees monthly wages. Those who lived in units larger than the entitlements for their ranks would pay a punitive rent for the extra housing space.
Ordinary workers and staff were entitled to 50 sq. metres, middle officials and
professionals to 70, and senior officials and professionals to 90. The punitive rent
was 1.56 yuan per sq. metre. After this increase, the average rent of public
housing rose from about 0.11 to about 0.32 yuan per sq. metre.
In 1994, the city government issued
The Decision on Jinans Urban Housing
Reform , which further raised the rent of public housing. The new space entitlements for each rank were 65 sq. metres for ordinary workers and staff, 75 sq.
metres for junior officials, 90 sq. metres for middle officials and professionals,
and 120 sq. metres for senior officials and professionals. The punitive rent
for using extra space was increased to 2 yuan per sq. metre. The new regulation
had provisions giving exemptions in hardship cases. After this increase in
rent, the average rent of public housing in Jinan rose to about 0.77 yuan per sq.
metre.
In 1998, the city government issued a
Plan for Further Promoting Housing
Reform, which further raised rents. Punitive rent was raised to 3 yuan per sq.
metre. Households could apply for a special rent subsidy from their work units
if their rents were more than 9 per cent of monthly income; households whose
monthly income per person was less than 130 yuan were allowed to pay only 70
per cent of the newly raised rent. After this increase in rent, the average for
public housing in Jinan rose to 1.27 yuan per sq. metre (Jinan Housing Reform
Office, 1999). In 2000, the rent was raised again and the average for public
housing reached 6.75 yuan per sq. metre. At that time, the market rent in Jinan
was about 20 to 30 yuan per sq. metre (Jinan Annals Office, 2001). Khan
et al .
(1999) show that, across urban China, housing subsidies dropped from about 18
per cent of household income in 1988 to less than 10 per cent in 1995.

The Housing Provident Fund

Chinas housing provident fund system started in 1991, and it followed the
model of the Singapore Central Provident Fund in some respects. A key
difference is that the Singaporean scheme provides broad social insurance while
the Chinese approach provides only for housing. Before the reform era, Chinas
urban welfare housing system resulted in a severe drain of the housing fund and
housing shortages. One of the objectives of the urban housing reform was to
replace this dysfunctional system with one that required employees to bear a
large part of the cost of housing. The provident housing fund is a compulsory
saving programme. It forces employees to spend part of their wages on housing

Chinas Urban Housing Reform

733

in order to solve the problem of housing shortages. It also provides employees

with a source of housing finance in a new market housing system.
The Shanghai government started the first housing provident fund in 1991. It
required each employee to contribute 5 per cent of monthly wages to this fund;
the work unit would contribute another 5 per cent. The fund could be used only
for the construction and purchase of housing. Since then, many Chinese cities
have joined this trend. In 1994, the central government issued a
Guideline for
Provident Housing Funds
, which required all Chinese cities to initiate such a fund
as soon as possible. The guidelines stipulated that the fund should be deposited
at a designated bank and could earn a specified, low rate of interest. The fund
would be managed solely by a centre dedicated to that purpose in each city. The
fund might be used for the following purposes: lending to work units, government or developers for constructing housing; supporting employees in housing
purchases, construction, and renovation; and providing mortgage loans to
employees. By the end of 1999, all of the 203 large- and medium-sized and most
of the 465 small Chinese cities had started provident housing funds. These funds
had attracted 69 million participants and raised 140.9 billion yuan. At the same
time, 15.8 billion yuan in mortgage loans were provided to individuals by the
funds (Ye, 2000).
Jinan started its fund in 1993 when the city government issued
Management of
the Provident Housing Fund of Jinan
.Itrequired all work units to participate in the
fund. Work units and employees would each contribute 4 per cent of monthly
wages, and this ratio might be adjusted upward later depending on economic
growth and wage increases. Delay in payment into this fund by work units
would accrue a 0.5 per cent fine each day. The fund would earn interest and,
after 10 years, employees might withdraw the money they paid in the first year
(after 11 years, they could withdraw the money paid in the second year, and so
on).
In 1994, the city government decided that the employees and work units
contributions to this fund would each be raised to 5 per cent of wages. For
foreign investment enterprises, the contributions would each be 8 per cent of
wages. The government urged those work units that still did not participate in
the fund to do so. Starting in 1995, the city government would force work units
to participate in the fund. In 1997, the city government issued a
Notice of Loan of
the Provident Housing Fund
, which stipulated that employees who participated in
the fund could apply to the fund for home purchase loans. To be eligible for
these loans, an employee had to have a stable job, have invested in the fund
more than 30 per cent of the house price, and have agreed to use the fund
exclusively for buying a house. The amount of these loans could not exceed
50 000 yuan, and their terms were typically 5 to 10 years, and at most not more
than 15 years. Their terms also could not extend beyond an employees typical
retirement date. The interest rate on these loans would be 2 per cent higher than
the rate for a fixed three-month deposit set by Chinas central bank.
In 1998, the city government issued a notice reconfirming that work units and
employees contributions to the fund were each 5 per cent of wages and for
foreign investment enterprises the contributions were 8 per cent. This notice also
suggested that, for some rich or prosperous work units, the contributions could
be raised to 6 or 7 per cent on a volunteer basis. For some poor and depressed
work units, the requirement could be decreased to 4 per cent. For the work units
that still did not participate in the fund, punitive actions would be taken,

734

Yingshun Zhao & Steven C. Bourassa

including disapproval of their housing construction projects, refusal to allocate

land to them for housing construction, not allowing them to enjoy benefits from
the policies for housing reform, and prohibiting them from buying vehicles and
newly-constructed commodity housing. With these measures, the housing provident fund made rapid progress. Since 1996, the value of the citys fund has
grown at an annual rate of 20 per cent. By the end of 1999, 89 per cent of work
units in the Jinan area participated in the fund, and its value had reached 900
million yuan. Almost all employees have used their investments in the fund to
buy public housing.

The Comfortable Housing Project

In 1994, Jinan was designated by the central government as a pilot city for a
five-year Comfortable Housing Project. Subsequently, the city government
issued an
Implementation Plan for the Comfortable Housing Project of Jinan
Comfortable Housing was designed to be good quality, affordable housing for
low-income urban households. Through this project, by the end of the 1990s, all
of the citys low-income households with housing problems (such as crowding)
were to have been able to buy or rent a unit of comfortable housing. The Jinan
Housing Bureau was designated to handle the construction and sale of comfortable housing. This kind of housing was to consist mainly of two-bedroom
apartments. Funds for the project came from: housing development companies
in the Jinan area; housing funds of city and district governments; the provident
housing fund; work units revenues from the sale of their public housing; and a
special appropriation for comfortable housing from the central government. The
city government would also support this project by remitting some regular fees,
such as those for infrastructure, education, commercial facilities, electricity and
water, and the tax on new construction materials.
Comfortable housing would be sold to work units or individuals at a low cost
price. The components of cost price included survey, design and project preparation fees, construction fees, land cost and management fees. Work units
might resell this housing to their employees at a discounted price equivalent to
the sale price of their existing public housing. Work units also might rent this
housing to their employees at cost rent, if these employees did not have the
financial ability to buy. Families who wanted to buy this housing had to meet
two basic requirements: (1) they must have been low-income (less than 130 yuan
per person per month) and (2) they must have been living in very crowded
conditions (less than 4 sq. metres of living space per person), or in very
inconvenient arrangements (having unmarried adults of opposite gender living
in a single room), or have had no housing of their own.
In 1995, the Housing Bureau started to construct the first comfortable housing
subdivision. By the end of 1999, the Comfortable Housing Project had invested
980 million yuan and completed construction of 900 000 sq. metres. This housing
was sold at cost price to poor households with housing difficulties. Special
priority was given to teachers at elementary and middle schools, and retired
workers and staff who lived in poor conditions. The city government also issued
special housing loans for low-income families. By 1999, of 24 500 low-income
households with housing problems in Jinan, 10 800 had bought or rented
comfortable housing.

Chinas Urban Housing Reform

Sale of Public Housing
Sale, or privatisation, of public housing was the first goal of urban housing
reform and had been emphasised by the government many times since the start
of housing reform in the early 1980s. But because the sale of public housing
affected vested interests of the government, work units and individuals, progress was slow. In 1994, after a few experiments with selling public housing in the
1980s, the city government issued
Ideas for Implementing the Decision on Urban
Housing Reform of the Central Government
.Itdefined three tasks for the citys
future housing reform: developing the housing provident fund, raising rent, and
selling public housing. On the sale of public housing, the directive outlined the
general regulations for sale of housing, such as calculation of prices, calculation
of discounts, buyer eligibility, payment patterns, forms of property rights, and
maintenance of sold housing. Subsequently, in 1996 and 1998, the city government issued two more detailed regulations for the sale of public housing. These
regulations played important roles in the privatisation of public housing in
Jinan.
The 1994 regulation stipulated that, in principle, all public housing might be
sold, except: (1) old public housing located in the revitalised areas of the city; (2)
physically dangerous public housing; and (3) public housing over which there
was controversy between the city government and work units regarding property rights. Public housing would be sold at one of three possible prices: for
high-income households, public housing would be sold at the market price; for
middle-income households, at the cost price; and for low-income households, at
the standard price. The different prices would bring different housing property
rights. In Jinan, most urban workers and staff were defined as members of
middle- or low-income groups, and they were allowed to pay the cost or
standard prices when buying housing.
The components of the cost price included compensation for land acquisition,
demolition, design and project preparation fees, construction fees, infrastructure construction fees, housing management fees, interest on housing
construction loans and tax. In 1994, the city government fixed cost price at 845
yuan per sq. metre of gross oor area. The standard price was set at 570 yuan
per sq. metre, which was 9.8 times the average annual wages of a worker
divided by 56 (the size in sq. metres of a standard housing unit). By this price,
a standard two-bedroom house would cost three or four times the average
yearly income of an ordinary urban household with two incomes. This ratio was
said to be normal in foreign countries. Both prices were adjusted for location,
orientation (facing toward or away from the sun), and oor level. Cost or
standard prices for old public housing would be discounted 2 per cent per year
of age. Housing space beyond the entitlement for the buyers rank would not be
sold at cost or standard prices, but at market price, regardless of the buyers
income.
When tenants bought housing at the market price, they would get full
property rights, and might resell their housing and gain all sale revenue. When
tenants bought housing at the cost price, they were allowed to resell only after
five years occupation, and were required to repay any profit from the increased
value of the land. When tenants bought housing at the standard price, they
could occupy and use their housing, but not rent it out. These buyers also might
resell their housing after five years occupation, but only to the original owners

735

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Yingshun Zhao & Steven C. Bourassa

Table 6.

Housing prices in 1996

Guidelines

(yuan/m

Reinforced concrete
Reinforced concrete foundation and brick Crushed stone and
foundation and wall wall brick wall
Terrazzo Cement Terrazzo Cement Terrazzo Cement
Price class oor oor oor oor oor oor
Market 1869 1635 1352 1139 1070 1011
Cost 1168 1022 845 712 669 632
Standard 768 690 570 535 503 475
Bottom-line 290 250 210 170 150 125
Source: Jinan Housing Reform Office, 1996.

(the city government or work units) and only for 67.5 per cent of the market
value.
Some home buyers were eligible for subsidies and discounts. They included:
(1) a housing purchase subsidy based on length of employment (3.40 yuan per
year for both husband and wife, per sq. metre of housing gross oor area); (2)
a 2.5 per cent discount for buyers who were the current tenants; and (3) an 18.5
per cent discount for payment in a lump sum. The housing sale revenue, after
withdrawing 15 per cent for a maintenance fund, would enter into the housing
fund of each work unit. This fund would be used exclusively for housing
construction and housing reform. Maintenance of the private spaces would be
the responsibility of the buyers, while maintenance of the public spaces would
be the responsibility of the sellers with the help from the maintenance fund.
The 1994 regulation did not produce significant results. There were two
reasons. First, at that time, traditional welfare housing thinking was still very
strong and most employees were hesitant about investing in private property; at
the same time, most work units still constructed housing and rented it to
employees at well below cost. Second, the purchase subsidies and discounts
were not sufficiently attractive and buyers had to pay a considerable amount
(sometimes, all of the family savings) to purchase homes. By the end of 1995, of
about 350 000 units of public housing in Jinan, only 16 500 (4.7 per cent) were
sold. Most of the buyers were rich self-employed or high-income households.
A regulation issued in 1996 provided more detailed and effective rules
regarding the sale of housing. According to this regulation, all saleable public
housing was divided into six classes, and market, cost, and standard prices were
fixed for each class (Table 6). Some very poor quality housing was to be sold
with a ten per cent discount in addition to the other subsidies and discounts.
After deducting all subsidies and discounts, the housing price could not be less
than a bottom-line price. This would prevent the over-discounted sale of public
housing in favour of the employees at the expense of the state. Households that
had a yearly income of more than 39 000 yuan or had a per member yearly
income more than 13 000 yuan had to buy public housing at the market price;
other households might buy housing at the cost or standard prices.
Given that most public housing was old and in need of maintenance, sellers
were required to contribute to a maintenance fund. The fee was calculated at 10
yuan per sq. metre of gross oor area for new houses, with a 2-yuan increase for
each year of housing age, but the highest rate could not be more than 40 yuan

2)

Chinas Urban Housing Reform

per sq. metre. In addition, the discount for a lump sum payment was increased
from the previous 18.5 per cent to 20 per cent, and the discount for current
tenants was increased from the previous 2.5 per cent to 5 per cent.
Also in 1996, the city government issued
The Notice on Maintenance of Sold
Public Housing . This notice clarified the regulations on the maintenance of sold
public housing. They included the definitions of private space and public space
in apartment buildings, maintenance methods, payment patterns for maintenance, con ict resolution between owners and maintenance companies, and
punishment for improper use of housing. This notice recommended establishing
a housing management committee in each work unit or neighbourhood, consisting of representatives of housing sellers and buyers. This committee would
make decisions on the selection of a maintenance company, examine the companys maintenance plan, and supervise maintenance works.
In comparison with the previous regulation, the 1996 regulations gave more
benefits, such as housing maintenance fees paid by sellers and higher purchase
discounts, to housing buyers. In addition, maintenance of the sold housing,
which had been a main concern for ordinary housing buyers because most
public housing was old and the maintenance costs were very high, was addressed in detail by the government. Therefore, following the issuance of the
regulation, more tenants bought their housing. During 1996 and 1997, another
91 000 units of public housing (26 per cent of all urban public housing) were sold
in Jinan. But the majority of Jinans households maintained an attitude of wait
and see, because purchase costs were still high compared with incomes.
In early 1998, Chinas new central government reviewed the long-term and
small-progress urban housing reform and made a determination to accelerate
change. It ordered all city governments and work units to stop the payment of
wages in kind through the housing system by the end of 1998, and to make
further efforts to privatise urban public housing. In response to this, the Jinan
government, based on the provincial housing reform plan of the same year,
issued another housing sale regulation. In comparison with the previous two
regulations, the new one incorporated an important difference: it greatly increased the amount of housing purchase subsidies in order to encourage
individuals to buy public housing: (1) the monetary amount of the subsidy
increased from the previous 3.40 yuan to 6.49 yuan per sq. metre and (2) the
calculation of this subsidy was not based on the actual gross oor area of the
house that one wanted to buy, but on the entitlement for ones rank. Given that
the entitlement was often larger than the actual housing space a household
occupied (and, typically, wanted to buy), the increase in the purchase subsidy
was significant. For some old or high-ranking buyers, the subsidies fully offset
the prices of the dwellings, and some buyers could even qualify for subsidies
greater than the purchase prices. In the latter case, the surplus would typically
be kept by the work unit and used for housing improvement in the future. In
addition, from the end of 1998, a monthly housing subsidy would be issued to
the employees. The amount of this subsidy was 25 per cent of the monthly
wages of each employee. It was not given directly to employees but was
deposited in a special account in the name of the employee in a designated bank.
It could be used only for the purposes of housing purchase, maintenance, or
rent. In addition, from the end of 1998, along with the improvement of peoples
income, the standard sale price would be abolished.
Because of significantly increased housing purchase subsidies, growing

737

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Yingshun Zhao & Steven C. Bourassa

accumulation in the housing provident fund, and the new monthly housing
subsidy, the sale of public housing became a free or almost free allocation in
many cases. Following this regulation, a wave of housing privatisation took
place in Jinan and substantial progress was made. By the end of 1998, about
124 000 units of public housing (35.6 per cent of all public housing in Jinan) were
sold. By the end of 1999, a total of 280 000 units of public housing (80 per cent)
had been privatised (Jinan Housing Reform Office, 1999).
The Continuing Challenge of Housing Inequity
The reform of the public housing system in Jinan has been carried out for over
10 years, and the achievements are significant. The rent for public housing
increased from an average of 0.11 yuan per sq. metre of living space before the
reform to 6.75 yuan per sq. metre in 2000. The housing provident fund has been
established and is playing an important role in housing reform. Before the
reform, Jinan did not have any work unit with such a fund. But by the end of
1999, 89 per cent of work units in the Jinan area participated in the fund, and its
total value had reached 900 million yuan. From 1996 to 1999, the Comfortable
Housing Project had raised 980 million yuan and completed construction of
900 000 sq. metres. A total of 10 800 low-income households with housing
problems had benefited from the project. The average living space per person in
Jinan had increased from 3.7 sq. metres in 1976 to 10.48 sq. metres in 2000.
Households living in extremely crowded conditions (with less than 2 sq. metres
per person) no longer existed, and among 48 200 households living in very
crowded conditions (less than 4 sq. metres per person), the majority had
significantly improved their housing conditions. The quality of housing has also
been greatly improved; private kitchens, toilets, gas, tap water and telephones
have become common in most ordinary houses. The sale, or privatisation, of
public housing had been a stunning success; by the end of 1999, about 80 per
cent of city public housing had been sold. Along with the reduction of in-kind
payment of wages in the form of subsidised rents, corruption in housing
consumption was significantly diminished. Based on these observations, it might
be concluded that housing reform in Jinan has led to significant achievements
and that the housing conditions of most urban residents have been improved.
However, another problem, housing inequity, still exists in Jinan, and has
even worsened in some cases. Under the old system, housing disparities involved inequity within the work units caused by the different social ranks of
each employee (vertical inequity), and inequity across different work units
caused by differences in the economic power and administrative rank of the
work units (horizontal inequity). During the housing reform era, inequity still
existed because work units continued to dominate housing provision and the
rank allocation system was still in place. But horizontal inequity across different
work units worsened. This trend has been taking place within the context of
widening inequality in household income in urban China. Khan
document a sharp increase in income inequality between 1988 and 1995. During
the same period, housing subsidies became less equally distributed, with 41 per
cent of subsidies in 1995 received by households in the top 10 per cent of the
income distribution. The distribution of income from rental housing in 1995 was
even more unequal than the distribution of subsidies. Khan
conclude: Housing policy (privatisation and subsidies combined) accounted for

et al . (1999)

et al . (p. 299)

Chinas Urban Housing Reform

37 per cent of overall inequality in the distribution of income in urban areas in
1995 compared with about 30 per cent in 1988.
In Jinan, there are some powerful work units that have used their powers to
construct very luxurious apartments within their compounds, in order to favour
their employees and promote productivity. The housing conditions of employees
in these work units improved rapidly in the reform era. Their apartments are
well decorated and equipped by their work units with many modern facilities,
such as air conditioners, hot water heaters, modern kitchen equipment and even
Internet connections, which are not common in Jinans ordinary homes. These
luxurious apartments have been sold to employees at very favourable prices. In
Jinan, such new and luxurious apartment high-rises are very conspicuous. These
buildings often belong to banks, government departments, and some enterprises, such as electricity, postal and telecommunication companies that take
advantage of their monopoly positions to raise huge profits. This type of
housing forms a sharp contrast with the housing of other urban residents.
At the same time, Jinan still has about 70 000 households with housing
problems, including 18 900 households living in very crowded conditions, 19 000
living in inconvenient conditions, and over 32 000 with no housing and living
with their parents (Yangeng Wang, 2000). Most of these households are employed in small work units, such as retail stores, elementary schools, small
factories and depressed state-owned enterprises. These work units cannot provide any housing or financial support to help improve their employees housing
conditions. Other workers are self-employed or employed in private enterprises
without any housing stock. These people also do not have the financial ability
to buy housing on the market. In a survey of 273 work units of Jinan in 2000,
there were 17 big units with more than 500 employees, 94 medium-sized units
with 100 to 500 employees, and 162 small units with less than 100 employees. All
of the big work units had their own housing stock. Among medium-sized work
units, 78 (83 per cent) had their own housing. But among small work units, only
55 (34 per cent) had their own housing.
In one such small work unit without housing stock, seven out of 29 employees
(all of whom were married) did not have their own housing and had to live with
their parents. Given the general housing conditions of Chinas urban residents,
it is extremely crowded and inconvenient for married children (often with their
own children) to live with their parents. Six employees lived in expensive, but
simply appointed, private rental housing. Although the government encouraged
the development of private housing, ordinary city residents often do not rent
such housing because the cost is too high, with average rents some two or three
times higher than those of public rental housing. Another seven employees lived
in old public rental housing owned by the Jinan Housing Bureau; three of them
lived in crowded conditions (less than 4 sq. metres of living space per family
member). Finally, nine employees lived in their own housing, most of which was
outdated. In 1998, the average per capita living space within these employees
households was 6.1 sq. metres, while the average living space per capita in Jinan
as a whole was 9.7 sq. metres.
An example of the poor-quality housing occupied by employees of less
prosperous work units can be found in Jinans Lixia District. A total of 32
households live in a four-storey residential building, owned by the Housing
Bureau. Each apartment has two small rooms (about 10 sq. metres) and a very
small kitchen (about 3 sq. metres). The kitchen has neither tap water nor gas. On

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Yingshun Zhao & Steven C. Bourassa

the public hallway on each oor, there is a public water tap and a public bedpan
with no water supply. It is very crowded and inconvenient waiting to get water
and use the bedpan in the morning and evening, and the smells are very
unpleasant. All employed members of these 32 households work in poor work
units, such as small factories and companies, department stores, middle and
elementary schools, small hotels and restaurants and salvage yards. In the early
1980s, this building accommodated some households whose members worked in
government institutions or big enterprises. Later, their work units constructed
newer and larger housing, and those households moved out. Now, the only
hope of the remaining households in this building is that, when this building
becomes older and unsafe, the government will demolish it and the residents
will be allocated better quality subsidised housing.
Another example can be found in the Shizhong District in the inner city of
Jinan, where a family lives in a one-storey public housing unit. The head of this
family is a middle-aged divorced taxi driver, living with his teenage daughter
and elderly mother. The house is of an old-style and in poor condition. It has
only two small rooms with a small window and little daylight, and it has no
kitchen or toilet. The residents must cook under the houses eaves and walk for
five minutes to the public toilet in another street. The neighbouring houses are
all in similar condition. These rows of houses were built about 50 to 80 years ago
along very narrow lanes. The tenant of this particular house works in a small
taxi company without housing stock, although his monthly income is about 1500
yuan, which is higher than the average monthly income in Jinan (937 yuan).
However, he is not able to buy commodity housing on the housing market. He
hopes that, because his house is located in the inner city, the area will be selected
by the government as a target for urban renewal (for commercial and office
development) in the near future. In that case, he would be resettled by the
government into a new apartment.
The experience of a government official shows how much better are the
housing conditions of employees of some powerful work units. This official is of
middle age and middle-rank and lives with his wife and daughter. In the reform
era, his housing conditions improved rapidly and, within less than 10 years, he
changed his apartment three times. Following each of these changes, his housing
became better and larger. In the early 1990s, he and his family lived in a
two-bedroom apartment in a building in the living quarters of his work unit
very close to his place of work. It was not newly constructed but was modern
and spacious, with a living room, a modern kitchen, a toilet and a balcony, as
well as gas and heating. At that time, this kind of housing was envied by many
people. In the mid-1990s, his work unit developed new living quarters in an
attractive southern suburban area where he was allocated a three-bedroom
apartment. The new apartment was more modern, with hot water, central air
conditioning and cable television. His work unit opened a shuttle bus service
between the new living quarters and the work place. In the late 1990s, his work
unit again started to make investments to further improve living conditions.
New living quarters were again constructed, this time in the southeastern
mountain scenic area, surrounded by a dense forest with plenty of fresh air. The
official moved into a very spacious three-bedroom apartment that was luxuriously decorated with wood oors, modern lighting, kitchen and toilet and three
large balconies. By this time, welfare housing allocation had been discontinued
by the central government and people were required to pay for their new

Chinas Urban Housing Reform

housing. But this official paid only a small amount for his new apartment after
receiving a substantial purchase subsidy from his work unit. He said to the
authors that, compared with other professions, government employees did not
enjoy other benefits because the law strictly regulated wages. So, the only
advantage was to use the governments power to improve employees housing
conditions.
The government admits that its employees enjoy favourable housing conditions
relative to their rates of pay. One state councillor commented in a speech that the
housing conditions of staff employed in government departments and party
institutions is generally better than that of many other employees (Li, 1998). One
study showed that, in 1999, Jinans small and medium-sized enterprises employed
persons occupying apartments with an average living space of 45 sq. metres. In
contrast, the average living space of households with members employed in
government organisations and institutions was 80 sq. metres (Ye, 2000).
The cause of this horizontal inequity is that most urban housing supply
continues to be closely linked with various work units, the work units continue
to construct housing and sell it to their employees, and the privatisation of public
housing was completed only within each individual work unit. One goal of
housing reform is to remove the role of the work unit in housing provision, but
housing privatisation has actually reinforced the work units centrality (Bian
al., 1997). Because there continues to be a strong relationship between employees
and work units in housing supply, the differences in economic conditions among
various work units lead to differences (or horizontal inequity) in housing
consumption among employees. In the reform era, these economic differences
have become larger as a result of the introduction of markets and the withdrawal
of the government from most economic activities, and thus housing inequity has
worsened.
Before the reform era, there were some economic differences, as well as housing
differences, among various work units due to their different sizes, statuses and
locations, but these were mitigated by the government. The government often
took the extra profits from big or rich work units to support small or poor work
units. This kept all work units in roughly similar economic conditions. But, in the
economic reform era, the situation changed dramatically. A market economy was
introduced and competition was encouraged. The government withdrew from
most business activities and no longer supported poor or small work units at the
expense of other work units. Most limitations on economic activities were lifted
and work units were allowed to run their course in the market. Under market
competition, some work units, especially monopolies, rapidly became prosperous,
and some work units became depressed, even bankrupt. Without the governments intervention, the economic and housing differences among various work
units grew. At the same time, the government gave work units more autonomy
(including freedom to decide how to use their profits) in order to promote
economic performance and encouraged work units to solve the housing problems
of their employees without government assistance. These changes resulted in
great disparities in economic situations and housing conditions across work units.
Conclusion
Resolving the new horizontal housing inequity should be the next goal of Chinas
urban housing reform. The most effective solution to this problem would be
through socialisation of urban housing supply. Socialisation involves abolishing

741

et

742

Yingshun Zhao & Steven C. Bourassa

the work unit-dominated housing system by (1) prohibiting the work unit from
buying commodity housing on the market or constructing its own housing; and
(2) cutting the linkage between the work units and urban housing management
and maintenance. But this solution is constrained by the urban quasi-clan system
and is not feasible for the time being.
The basic unit of Chinas urban quasi-clan system is the work unit with its
own housing stock. The work unit not only is a work and living place, but also
has important social and political functions, like those of a Chinese rural clan.
The urban quasi-clan system has these features: (1) employees work and live
together (with their families), forming an urban community; (2) there is a
patron-client relationship between work units and their employees, typically
involving lifetime employment; and (3) the heads of work units can determine
the fate of employees both with respect to work arrangements and personal
lives, thereby greatly limiting workers personal freedoms.
The quasi-clan system has economic functions such as organising production,
providing welfare and housing to employees, and supplying basic social services
and facilities to the community. But more importantly, a quasi-clan also plays a
role as a tool of the government, including supervising clansmen, mediating
disputes, keeping tabs on behaviour, reporting acts against the government, and
investigating and gathering information for the government. In fact, a quasi-clan
is a supplementary police organ, and it is even more effective than the police
because it is pervasive and grass roots in nature. In addition, a quasi-clan also
plays an important role in manpower mobilisation, mass movements, political
education and dissemination of ideological propaganda. The quasi-clan system
constitutes an important part of Chinas administrative machine. Cutting the
relations between the work units and housing supply means dissolving this
system. Therefore, the Chinese government has always been very reluctant to do
this, although many researchers have been asking for this since the beginning of
housing reform.
A feasible alternative is to establish subsidised public housing for urban
households with housing problems. This housing would be managed by the city
government. To be eligible for this housing, a household should meet two
criteria: (1) it must be low-income and (2) it must occupy crowded, inconvenient,
substandard or physically dangerous housing. The rationale for the second
criterion is that, in certain cases, some households have low incomes but their
housing conditions may be good. For example, the employees of an old stateowned enterprise might earn only a living wage because the enterprise is
performing poorly, but those employees live in good housing that was constructed in more prosperous times. Therefore, the income criterion must be
accompanied by the housing condition criterion. Subsidised housing for disadvantaged urban households would help to decrease both horizontal and
vertical housing inequities.
The current trend in housing reform is to privatise public housing as much as
possible and to demolish all poor-quality welfare housing. It seems that the new
emphasis on the market is incompatible with public or welfare housing. This
argument is not correct and it ignores the experiences of other countries that
provide state-supported housing to supplement what is provided on the private
market. China should follow the practices of many other countries and establish
its own welfare housing programme. The government should take a positive
role rather than leaving the market alone to fight the problem of inequity. A

Chinas Urban Housing Reform

743

market-oriented policy does not mean that the government does not need to do
anything (Zhang, 2001).
Correspondence
Steven C. Bourassa, School of Urban and Public Affairs, University of Louisville,
426 W. Bloom Street, Louisville, KY 40208, USA. Email: steven.bourassa@
louisville.edu
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