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Author: Jia Yongmin

Academic Advisor, Institute of Balance

Special Researcher, Interdisciplinary Center, Zhejiang University

“Housing pension” has once again sparked heated discussion.

At the press conference of the State Council Information Office on the 23rd, Dong Jianguo, Vice Minister of the Ministry of Housing and Urban-Rural Development, told reporters that "research is underway to establish housing health checks, housing pensions, and housing insurance systems, and 22 cities including Shanghai are currently conducting pilot projects." Regarding housing pensions, Dong Jianguo particularly emphasized that "individual accounts already exist through the payment of special housing maintenance funds, and the focus of the pilot project is for the government to establish a public account."

This marks that the long-planned "housing pension" system has officially entered the pilot stage.

The concept of "housing pension" easily reminds people of "personal pension", which has triggered public doubts about whether the public needs to make additional contributions and whether it is a disguised property tax. In response, the Ministry of Housing and Urban-Rural Development's official website subsequently published several expert articles to explain that housing pension is not a real estate tax, and the public account does not require the public to pay money, and the principle of "not increasing personal burdens and not reducing personal rights and interests" is followed.

In any case, we need to sort out the past and present of this system. Because, after decades of rapid urban and rural construction, "how to provide housing for the elderly" is indeed a major issue worthy of the attention of the Chinese people.

Housing pensions have accumulated for more than 20 years, with a scale of over 1 trillion yuan

In fact, housing pensions are not a completely new thing. If housing pensions refer only to housing maintenance funds, that is, funds reserved for future maintenance of houses, then they have actually existed for quite a long time, but the original name was "housing maintenance fund", and later it was uniformly changed to "special housing maintenance fund". Of course, the connotation and scope of the proposed housing pensions are no longer limited to special housing maintenance funds.

Nationwide, the housing maintenance fund system began in 1998, the year when China officially announced comprehensive housing reform. In the "Notice on Further Deepening Urban Housing System Reform and Accelerating Housing Construction" issued by the State Council that year, it was clearly mentioned that a special housing maintenance fund system should be established.

Of course, before that, "housing reform" with the sale of public housing as the main form had already been launched in many places, so the housing maintenance fund actually existed before 1998. Take Jinan City as an example. The first housing maintenance fund was the housing reform house in 1996. That year, when Jinan City was carrying out housing system reform, it required a certain proportion of the housing price from the sale of public housing to be stored in a special account of the Municipal Finance Bureau for the maintenance of public parts of the house. The total amount of maintenance funds collected by Jinan City at that time exceeded 900 million yuan, and that batch of housing reform houses became the first batch of houses with "pensions" in Jinan City.

In comparison, the "pension" for commercial housing is a bit late. The reason is that in those years, it was not a mandatory requirement for newly built commercial housing to pay maintenance funds. Therefore, many commercial housing buildings at that time did not have housing maintenance funds.

Generally speaking, from 2000 to around 2004, various parts of the country successively issued housing maintenance fund management methods and implementation rules, stipulating that new commercial housing must pay a maintenance fund before it is delivered for use, otherwise the real estate certificate will not be issued. Since then, the collection of housing maintenance funds has become normal.

On October 30, 2007, the then Ministry of Construction and the Ministry of Finance jointly issued the "Management Measures for Special Residential Maintenance Funds" (effective from February 1, 2008), which formally established the special residential maintenance fund system, and the payment standard was also adjusted from the previous "2%-3% of the purchase price" to "5%-8% of the cost of each square meter of residential construction installation project."

In 2013, CCTV's "Focus" program revealed that the amount of housing public maintenance funds deposited nationwide had reached more than one trillion yuan. There has been no relevant data at the national level since then, but now, ten years later, the scale should have risen by more than one level. (Take Beijing as an example. As of July 2013, Beijing had accumulated 34.81 billion yuan in housing maintenance funds; almost ten years later, by the end of 2022, the city had accumulated 78.29 billion yuan in special housing maintenance funds.)

The housing pension system that people are discussing now is nothing more than a further exploration of how to ensure residents' housing safety and improve housing facilities based on the existing special housing maintenance fund system.

Why raise housing pension again? One trigger and four underlying reasons

Since there is already a special housing maintenance fund, why do we need a housing pension? Moreover, the topic of special housing maintenance funds has been tepid for more than ten years after it attracted people's attention around 2013. Why has it become hot again since last year? There are both direct triggering factors and deeper reasons. Let's first look at the direct triggering factors.

The immediate precipitating factor may be an accident.

On April 29, 2022, a particularly serious accident of self-built house collapse occurred in Panshuwan Group, Jinping Community, Jinshanqiao Street, Wangcheng District, Changsha City, Hunan Province, resulting in 54 deaths, 9 injuries, and direct economic losses of up to 90.7786 million yuan.

The Ministry of Housing and Urban-Rural Development held a video conference on May 1 of that year and deployed a special rectification campaign on the safety of self-built houses across the country, pointing out the need to accelerate the research and improvement of various systems for housing construction safety management, study the establishment of a housing physical examination system, and strengthen safety protection throughout the life cycle of houses.

Subsequently, on May 24, 2022, the General Office of the State Council issued the "Notice on the National Special Rectification Work Plan for Self-built Housing Safety", pointing out that“Improve the mandatory standards for housing quality and safety, and study the establishment of systems such as regular housing physical examinations, housing pensions, and housing quality insurance.”

Then, on April 7, 2023, a national teleconference on the special rectification of self-built housing safety proposed to "actively promote the pilot projects of the 'three systems' of housing pension, regular housing physical examination, and housing quality insurance."

In May 2023, the Ministry of Housing and Urban-Rural Development visited Jiangsu Province and other places to investigate the construction of the housing pension system.

Finally, the Minister of Housing and Urban-Rural Development once again emphasized the exploration of the establishment of a housing pension system at the end of June 2023, which may be a signal to accelerate the construction and pilot of the housing pension system.

Let's look at the deeper reasons. There may be four.

First, China has fully entered the era of existing housing, the proportion of old houses has continued to increase, and housing for retirement has to be put on the agenda.According to data from the "China Population Census Yearbook 2020", as of the end of 2020, the country had 460 million housing units in stock with a construction area of ​​51 billion square meters; there were 290 million housing units in urban areas with a construction area of ​​29.2 billion square meters, of which old housing (built before 2000) accounted for 31% by number of units, and is still rising rapidly.

Many old houses had deficiencies in their original planning, design, building materials, and construction technology. Many of them now have hidden dangers or problems such as unstable structures, roof leaks, falling exterior walls, and aging facilities and equipment.

Second, the existing special housing maintenance funds cannot meet the demand.This can be divided into two levels. First, the special housing maintenance fund has never been paid in full from the beginning. According to a report by China Business News, in Nanjing, 30% of the approximately 940,000 residential units with a house age of more than 15 years have never collected maintenance funds, and even in old residential areas that have collected maintenance funds and currently have surpluses, 28% of the balances are less than 100,000 yuan, far from meeting maintenance needs. Secondly, even if the special housing maintenance fund is paid in full, it is impossible to meet the demand.

Regarding the maintenance of houses after delivery, the current policy regulations can be roughly summarized as follows: during the house quality warranty period, the developer or the original construction unit is responsible for maintenance, or the housing warranty fund is used; after the warranty period expires, daily minor repairs are paid for by the property management fee, and only medium or major repairs are used for special maintenance funds. The problem is that the property management fees of most old communities are actually impossible to maintain daily maintenance expenses, resulting in a rapid deterioration in the quality of public parts of the house, and the need to use special maintenance funds is becoming more and more common. This situation even exists in some relatively new communities.

Third, there is a need to stabilize housing prices and resolve real estate market risks.At present, "ensuring the delivery of buildings, people's livelihood and stability" almost overrides everything else. However, if housing prices keep rising, there is no need to "ensure the delivery of buildings". Second-hand housing prices support new housing prices, and the downward trend in second-hand housing prices in many places is largely reflected in the continuous decline in the prices of "old, dilapidated and small" houses.

Old residential areas are often located in good locations and have good school districts. The decline in their housing prices is at least partly due to the fact that the maintenance of old houses has not kept up. In this sense, providing full life cycle security for houses through housing pensions may help delay the decline in housing prices, resolve housing market risks and the greater risks that come with them.

Fourth, housing pensions may also drive economic growth.After establishing housing pensions, to achieve the goal of providing security for housing throughout its life cycle, at least two aspects of work are needed: first, to establish a housing quality inspection, safety management system, and housing quality insurance system; second, to increase efforts to carry out long-term and continuous housing repairs and maintenance.

The former provides a stable demand for housing inspection, housing security and insurance, while the latter forms a stable demand for building materials, household goods and corresponding labor services. Both of these mean a demand for property management services. In addition, the housing pension system is also conducive to raising funds for the renovation of old communities. All of these may help promote economic growth.

There are similarities between the systems of providing for the elderly with a house and providing for the elderly with a person.

Regarding the design of the housing pension system, whether it is government deputies to the National People's Congress, members of the Chinese People's Political Consultative Conference (for example, National People's Congress deputy, Nanjing Metro Group Co., Ltd. Party Secretary and Chairman She Caigao, National Committee of the Chinese People's Political Consultative Conference member, President of the China Real Estate Appraisers and Agents Association Chai Qiang), or experts and scholars (for example, Shanghai Real Estate Science Research Institute President Yan Rong, Guangdong Housing Policy Research Center Chief Researcher Li Yujia), they all tend to draw on the pension system, that is, setting up two types of accounts and building three pillars.

The two types of accounts refer to the classified management of housing pensions, which consist of a public account and a personal account.

The public account refers to the public pooling account for housing pensions. Yu Caigao suggested that a portion of the land transfer fee be allocated in proportion to make the public account solid, and that the public account be supplemented with other sources of funds, such as the surplus of the added value of the maintenance fund, the funds for the renovation of old residential areas, the funds that should be collected for the transfer of the three supplies and one industry, and the urban property management reward and subsidy funds. The management of the public account follows the principle of "government-led, professional operation, coordinated use, and special funds for special purposes", adheres to the "two lines of income and expenditure", and is mainly used for public services such as daily mandatory housing physical examinations, daily housing inspections, and the purchase of comprehensive housing safety insurance.

The personal account mainly refers to the original special residential maintenance fund account, which is managed in accordance with the relevant laws and regulations on special maintenance funds, and is mainly used for the maintenance and renovation of common parts and common facilities and equipment in the residence after the warranty period expires.

According to the idea of ​​Yan Rong, director of the Shanghai Real Estate Science Research Institute, the three pillars refer to basic, special and commercial housing pensions.

Basic housing pensions are paid from fiscal funds and are used to ensure basic housing safety.The sources of funds can be considered from the following three aspects: first, extract a certain proportion from the land transfer fee income, which is the main source of funds for basic housing pensions; second, include housing pensions in the "other expenditures" item of land transfer fees for overall allocation; third, if a property tax is introduced in the future, a certain proportion will be extracted to supplement basic housing pensions.

Special housing pensions mainly rely on existing special housing maintenance fundsHowever, the management system needs to be optimized in the following two aspects: First, on the basis of the existing individual maintenance fund account, a unified account will be established. Its funding sources are mainly the added value and sedimentation income of special maintenance funds, as well as special financial maintenance funds, etc., which are used to provide emergency housing maintenance guarantee, advance the insufficient part of the maintenance fee paid by the individual account, and purchase property insurance for residential communities; second, the mechanism for the renewal of maintenance funds should be streamlined, and the project of incorporating the property service fee calculation into the phased renewal should be explored, or the owners should pay it together with the monthly property management fee.

Commercial housing pension refers to housing pension insurance purchased voluntarily by owners as a supplement to basic pension and special pension.There are three major advantages to purchasing housing pension insurance. First, you can fix the insurance premium and "lock in" possible future maintenance costs. Second, insurance has a risk management function, which can reduce the wear and tear of the house. Third, insurance has a financial arrangement function. After going through the owners' meeting voting process when taking out insurance, the subsequent maintenance costs will be paid by the insurance company, and there is no need to go through the owners' meeting voting process.

Institutional design should not be "upward-looking and downward-looking", motivating owners is the key

The top-level design of housing pension described above looks very good. If it can be implemented as an enforceable system, it will certainly be a good thing.However, this framework has some implicit assumptions that may not necessarily become a reality.

The first assumption is that future land transfer fees will continue to increase or remain stable, or at least will not drop sharply.

In the above top-level design, both the public account and the first pillar are very dependent on land transfer fee income. Indeed, the land transfer fee income of various places has been very considerable in the past few years and has gradually increased, but this trend has reversed in 2022, and judging from the population and economic development trends, the possibility of returning to growth in the future may not be very high.

The second assumption is that the value (or market price) of the house will not fall to the point where someone would rather not have the house than pay the special maintenance fund.This assumption may also be wrong. In some cities in China, many houses have actually been abandoned.

The third assumption is that there will be a wealth of residential pension insurance products to choose from in the future.This assumption may not necessarily become a reality, because the nature of this type of insurance is just like the "housing for retirement" insurance business that has been vigorously promoted at the national level in previous years but has always been a lot of noise but little results (its professional name is "reverse mortgage pension insurance"). It seems that there is a lot of room for development, but in actual operation it is subject to great restrictions and there are many legal obstacles to overcome.

The fourth assumption is that the government, property owners and other relevant actors are willing and efficient to participate in housing pension insurance. The unreality of this assumption is obvious.nowThe most criticized point about some special residential maintenance funds is that, on the one hand, they are not enough, and on the other hand, they are difficult to use when they are really needed. The fundamental reason is that the difficulties of collective action are hard to overcome.In addition, the framework of two types of accounts and three pillars,There may also be another hidden risk: transferring more power of property owners to the government.

According to statistics, only about 30% of all residential communities have established homeowners' committees. According to current regulations, in the absence of homeowners' committees (or when homeowners' committees are "unwilling" to manage), special maintenance funds are managed by government authorities, which has already weakened the power of homeowners to a certain extent. The top-level design of the housing pension insurance fund mentioned above may further strengthen this point.

In view of this, in addition to top-level design, we should also pay attention to bottom-up exploration. For example, the housing maintenance "medical insurance" in Taizhou City, Jiangsu Province, solves the problem of continued fundraising for major housing repairs and the pressure on residents to pay for repairs by establishing a "housing major disease pooling fund", and also encourages owners to pay property management fees normally.

For example, although many residential communities are old, they have excellent locations and scenery, and the community properties can continue to generate cash flow. Some property companies cooperate with residential communities, combine the renovation of old communities, and raise housing pensions through "operating communities". There are many successful cases in this regard, which deserve attention.

In short, the key to the design of housing pension system, like all other system designs, is incentive compatibility, that is, to make the owners truly agree - doing so is in the interests of the owners themselves and will not affect their power. Therefore, special attention should be paid to bottom-up exploration.

This article is an original article specially commissioned by the Phoenix News Commentary Department and only represents the author's views.

Editor: Liu Jun