Housing affordability in Shenzhen Special Economic Zone: A forerunner of China's housing reform

Abstract

This paper aims to examine and draw national implications from the affordability issues of the housing reforms in Shenzhen Special Economic Zone. It was found that since the reforms, housing was still well within the affordability limit of the end-users, but availability was a problem for the non-government employees. The Shenzhen experience inferred that the 35 per cent rent-income ratio targeted for China's urban sector by the year 2000 might be appropriate. A target price-income ratio of three for the lower- and middle-income household also seemed plausible, but the market pricing principle for high-income families was cautioned in the paper. It was found that the non-government work units faced the greatest affordability problem in providing housing for their employees because of the need to purchase housing at market prices. The government had less affordability problems after the reforms because it could reduce spending on housing and recoup some of its past investment through the sale of housing. Moreover, as a result of the reforms it received an additional levy from the development companies.