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【text/author lu ming】

the real estate market seems to have not yet warmed up. however, any disturbance in the real estate market can shake the entire market. the recent controversy over the housing pension system is an example.

as early as the end of july, the state council issued the "five-year action plan for deeply implementing the people-oriented new urbanization strategy". on august 2, the state council information office held a regular briefing on the state council's policies, proposing the establishment of a housing pension system to provide financial support for housing examinations, housing repairs, and housing insurance.

on august 26, the head of the relevant department of the ministry of housing and urban-rural development explained to the media that housing pensions are composed of two parts: personal accounts and public accounts. personal accounts are special housing maintenance funds deposited by owners, and the deposit is carried out in accordance with current regulations. the public account is established by the government, and local governments can raise funds through fiscal subsidies and land transfer fees. the purpose is to establish a stable channel for housing safety management funds, which does not require residents to pay extra fees and will not increase personal burdens.

in accordance with the regulations on the management of special residential maintenance funds, personal account funds are used specifically for the maintenance, renewal and renovation of common residential parts and common facilities and equipment after the warranty period expires. public account funds are mainly used for housing physical examinations and insurance expenses.

in order to better carry out "urban renewal"

from the background of its introduction, the housing pension system is a supplement and optimization of the "urban renewal action". the concept of urban renewal was first proposed at the central economic work conference in december 2019, and was first written into the 2021 government work report and the "14th five-year plan" document in march 2021, thus rising to the national strategic level. the report of the 20th national congress of the communist party of china more clearly proposed to implement the urban renewal action, strengthen urban infrastructure construction, and build livable, resilient and smart cities.

early urban renewal was mistakenly regarded as a "second spring" by urban investment companies. at that time, urban investment companies' financing was restricted to a certain extent, and the large-scale "urban reconstruction" movement was suppressed. urban investment companies urgently needed to find the next outlet for releasing production capacity, and urban renewal projects were regarded as "high-quality assets" by urban investment companies in many places. financial institutions represented by banks flocked to them, and credit lines were tilted towards urban renewal projects in the short term.

but the good times did not last long. most urban renewal projects were projects with no benefits, such as renovation of the facades of old residential areas and renovation of the internal environment of residential areas. a few projects charged fees by adding new parking spaces or providing property services, but the fees were far from covering the investment costs. in the end, due to excessive financial pressure, the enthusiasm of banks and urban investment companies to participate dropped sharply.

in order to alleviate the problem of insufficient income from urban renewal projects, on september 7, 2021, the national development and reform commission and the ministry of housing and urban-rural development jointly issued the "notice on strengthening the construction of supporting facilities for the renovation of old urban communities", which clearly stated that all central budgetary investments will be used for the construction of supporting facilities for the renovation of old urban communities. financial institutions are encouraged to participate in the investment of urban renewal funds such as the renovation of old communities established by local governments. for the renovation contents that have certain profitability, such as elderly care, parking, convenience markets, and charging piles, social capital is encouraged to professionally contract single or multiple items. in accordance with the principle of "who benefits, who pays", residents are actively guided to invest in the renovation, which can be implemented through direct investment, use (reconstruction, continuation) of special residential maintenance funds, and transfer of community public income.

now, with the introduction of the housing pension system, it should be able to effectively solve the problem of slow progress of urban renewal projects due to no or insufficient returns, and continuously promote high-quality improvement and development of the living environment.

renovation of old residential quarters/data map china construction news

housing pensions are no stranger

the personal account in the housing pension is actually the special housing maintenance fund deposited by the owner.

as early as february 1, 2008, the "management measures for special residential maintenance funds" (hereinafter referred to as the "management measures") came into effect, and it has been 16 years. if you are still unfamiliar with the "special residential maintenance funds", then change its name to "major repair funds". if you have bought a house, you will definitely know it.

owners of commercial housing and non-residential properties shall deposit special residential maintenance funds according to the building area of ​​the properties they own. the amount of the first installment of special residential maintenance funds deposited per square meter of building area shall be 5% to 8% of the construction cost per square meter of the local residential building installation project.

the owners of commercial housing should deposit the first installment of special housing maintenance funds into a special housing maintenance fund account opened by a commercial bank designated by the local housing and construction department before going through the housing move-in procedures. if the balance of special housing maintenance funds on the owner's account is less than 30% of the first installment deposit, the owner should make the additional payment in a timely manner. the ownership of the deposited special housing maintenance funds belongs to the owner.

special residential maintenance funds are funds specifically used for major repairs, medium repairs, renewal and renovation of common parts and common facilities and equipment in residential buildings after the warranty period expires and may not be used for other purposes.

common parts of a residence generally include: the foundation, load-bearing walls, columns, beams, floor slabs, roof, and outdoor walls, foyers, stairwells, corridors, etc.; common facilities and equipment generally include elevators, antennas, lighting, fire-fighting facilities, green spaces, roads, street lights, ditches, pools, wells, non-commercial parking lots and garages, public cultural and sports facilities, and houses used for common facilities and equipment.

the application for the use of special residential maintenance funds basically includes the following six steps, and there will be differences in the actual operations in different places.

step 1: the property service company proposes a use suggestion on behalf of the owner or the owner voluntarily. step 2: owners whose exclusive property accounts for more than two-thirds of the total building area and more than two-thirds of the total number of owners discuss the use suggestion. step 3: the property service company or the relevant owner organization determines the use plan.

step 4: property service companies or related businesses submit relevant materials and apply to the construction (real estate) authorities for expenditure. step 5: after review and approval by the construction (real estate) authorities or the department responsible for managing the special maintenance funds for public housing, they issue a notice to the special account management bank to transfer the special maintenance funds for housing. step 6: the special account management bank transfers the required special maintenance funds for housing to the maintenance unit.

public housing pension account is a "masterstroke"

counting from the issuance of the implementation plan for the phased implementation of housing system reform in urban areas nationwide in february 1988, the earliest batch of commercial housing in my country is 36 years old. according to statistics from chen wenjing, director of market research at china index academy, by the end of 2022, nearly 20% of existing urban housing in china was built more than 30 years ago. this is not a small number. as time goes by, there will be more old communities to be updated and renovated in the future.

although the "management measures for special residential maintenance funds" has been implemented for 16 years, the withdrawal rate of funds is very low. zhang yu, deputy director and chief macro analyst of huachuang securities research institute, has calculated the withdrawal rate of special residential maintenance funds in various regions. the withdrawal rate in beijing at the end of 2022 was less than 10%, and the withdrawal rate in shandong at the end of 2019 was only 3.3%.

the reason is not only that the procedures for using special residential maintenance funds are cumbersome, but more importantly, the prerequisite for withdrawal stipulated in the "management measures" is that "owners whose exclusive property within the scope of the funding accounts for more than two-thirds of the total area of ​​the building and more than two-thirds of the total number of owners discuss and propose uses."

in real life, taking the replacement or installation of elevators as an example, a building with 50 households installs an elevator worth 150,000 yuan, and each household spends 3,000 yuan, which is not much from the current purchasing power. however, judging from the deposit amounts from more than ten or twenty years ago, the balance in the special account is not enough to cover the amount. even if it is enough to cover the amount, the balance in the owner's special account is likely to be less than 30% of the first deposit, triggering article 17 of the "management measures": "if the balance of the special residential maintenance fund on the owner's household account is less than 30% of the first deposit, it should be renewed in time." therefore, the renewal of the special residential maintenance fund will make the owners "hold their pockets". even if most owners are willing to replace or install elevators, as long as it does not reach "two-thirds", the withdrawal plan will not be passed.

who doesn’t want to enjoy a high quality of life? however, no one is willing to pay too much for quasi-public goods. in the final analysis, it is probably because of “lack of money”.

in this case, the government should bear part of the costs, so that the people can enjoy quasi-public goods and services of the same quality while reducing their payment pressure.

where does the money for public accounts come from?

what is the appropriate amount of money to be deposited into the public housing pension account? where does the money come from?

the amount of money deposited into the public account depends on two aspects: "government sincerity" and "government capability". the government's capability limits the sincerity, while sincerity inspires capability mining. ultimately, it comes back to the question of "where does the money come from?"

according to the head of the relevant department of the ministry of housing and urban-rural development, "local governments can raise funds through fiscal subsidies and land transfer fees." local finances are now stretched thin, and land auctions in various places have increased slightly or even plummeted. if the funds are evenly distributed, it will not play a role in "filling the gap", let alone "leveraging" personal account funds.

according to data from economist ren zeping and his team, land transfer income accounts for 30-40% of local fiscal revenue, of which local fiscal revenue only takes into account general public budget revenue and government fund revenue. taxes directly related to land and real estate account for about 10% of local fiscal revenue, and land transfer fees and related taxes account for 60% of housing prices.

it can be seen that local finances are strongly dependent on land and its downstream real estate, which is why the local fiscal model was called "land finance" in the past.

today, the real estate market continues to decline, and local fiscal deficits are bound to be unsustainable. therefore, "fiscal subsidies" and "land transfer fees" will inevitably not become the main source of funds for public accounts.

since local governments have limited capacity, the central government needs to coordinate expenditures. the renovation of shantytowns that began in 2015 and the renovation of old residential areas that began in 2021 both received funding from the central budget.

can public accounts leverage larger amounts of funds to enter the market?

now that we have the funding source, how much should we invest?

official regulations stipulate that public account funds are mainly used for housing health checks and insurance expenses, which is equivalent to government funding as start-up capital, and not much is needed, while personal account funds are the main project capital, in line with the principle of "whoever benefits, whoever pays". whether supporting financial institutions need financing depends on the purpose of the withdrawal.

if it is a public welfare project such as replacing or installing elevators, updating facades, and improving community greening, funds can be directly withdrawn from personal accounts and public accounts. financial institutions are willing to participate only if it involves the renovation and upgrading of a larger public area and can generate income.

for some public area renovation projects with higher returns, it is even possible to attract social capital participation according to market principles, but the property owners' committee needs to agree to transfer the public area operation and income rights for a certain period of time. for example, opening businesses within the community, charging service facilities, adding charging facilities and leasing them, etc.

china started the commercial housing pilot in 1988, and the number of commercial housing has increased year by year. the national bureau of statistics began to collect data on commercial housing sales area by use in 2000. in 2000, the commercial housing sales area was only 186.3713 million square meters, of which the residential commercial housing sales area was 165.7028 million square meters. so far, the year with the largest commercial housing sales area is 2021, with the above data being 171.4146 million square meters and 149.60234 million square meters respectively.

from 2000 to 2023, the total commercial housing sales area nationwide is 2,417,568.49 million square meters. a simple calculation shows that the total commercial housing sales area in the past ten years is 1,470,772.49 million square meters, accounting for 60.84%; the total commercial housing sales area in the past fifteen years is 2,017,094.06 million square meters, accounting for 83.43%; the total commercial housing sales area in the past twenty years is 2,315,993.54 million square meters, accounting for 95.80%.

what do these data mean? it means that nearly 60% of commercial housing will not participate in "urban renewal" in the short term, more than 20% of commercial housing have potential needs such as replacement or installation of elevators, and renewal of community greening, 10% of commercial housing involves public welfare renovations such as facade renewal, installation of elevators, and internal environment upgrades, and the remaining 10% belong to the category of "old communities".

therefore, the commercial housing that actually needs to be mobilized accounts for less than 20% to 30% of the total. according to the "management measures", "the amount of the first installment of special residential maintenance funds deposited for each square meter of construction area is 5% to 8% of the construction cost per square meter of local residential construction installation projects." fifteen or twenty years ago, the construction cost was very low, which means that the amount of special residential maintenance funds deposited was also low.

according to reports from online channels such as china business news, the surplus of special housing maintenance funds nationwide exceeds 1 trillion yuan, of which the amount that can actually be activated is estimated to be no more than 100 billion yuan, not to mention that the purpose of this 100 billion yuan is purely for public welfare.

national commercial housing sales area by use from 2000 to 2023 (data source: national bureau of statistics)

what is the concept of 1 trillion? according to dm's statistics, regions with relatively small balances of municipal investment bonds, such as xinjiang, yunnan, shanxi, and jilin, are about 1.5 trillion, 1.3 trillion, 1.2 trillion, and 1.1 trillion, respectively, while regions with relatively large balances of municipal investment bonds, such as jiangsu, zhejiang, shandong, and sichuan, are about 3 trillion, 2 trillion, 1.5 trillion, and 1.1 trillion, respectively.

obviously, the 100 billion yuan of personal account funds is not the target that the public account wants to pry into.

since the 1 trillion yuan of personal account funds cannot be leveraged, and the 100 billion yuan of personal account funds are consumer expenditures and cannot drive larger-scale investment and consumption, why is the pilot construction of a housing pension system still in place? in addition to improving the living environment and quality of life of the people, what is the economic significance?

maintaining and increasing value is the prerequisite for revitalizing existing housing

the answer is on the surface of the riddle. the "housing pension" has clearly and vividly told everyone that this system is to provide "old-age care" for houses, to prevent "old and dilapidated communities" and "old and dilapidated houses" from being unpopular and no one taking them over.

continuing the viewpoints of my previous article "where is the urban investment company going at the end of this round of urbanization" and previous articles, revitalizing the existing housing transactions is the focus of stimulating consumption potential. the establishment of the housing pension system is the beginning of revitalizing the existing housing, and it is also the most critical link in the implementation of the real estate "517 new policy".

the value of commercial housing depends not only on the construction cost, but also on external factors such as location and surrounding facilities, as well as its own unique attributes such as area, apartment type, and floor. in addition, public area factors such as the internal environment, internal facilities, and site planning of the community will also affect the price of commercial housing. the first two factors are very important, but for existing housing, there is almost nothing we can do about them.

therefore, for community groups, the value preservation and appreciation of housing depends more on the positive impact of public area factors. this is what positive externalities in economics refer to.

in summary, housing for the elderly has many benefits. for individual owners, it can not only improve their own living quality and life experience, but also ensure the stability of rental and sales prices. at the same time, it lays a good foundation for the subsequent acquisition and operation of affordable housing. in the long run, it can also reflect the superiority of socialism.

beware of local misinterpretations and misinterpretations that will only increase the burden on residents

however, the recent housing pension system has obviously caused panic among the public, and has been interpreted as "collecting property taxes in disguise" and "finding ways to pry into personal accounts", and even "squeezing blood and sweat" and "cutting leeks hard". the public is worried that the introduction of this system will force them to increase their own economic burden.

if the housing pension system is misunderstood or misinterpreted, causing local governments to forcibly stipulate that overdue residential communities must be included in the renovation list - which is not impossible, then this will increase the burden on residents and may be an unnecessary economic expenditure.

according to article 17 of the management measures: "if the balance of the special housing maintenance fund on the owner's account is less than 30% of the initial deposit, the owner shall make the additional payment in a timely manner." once the personal account is forcibly deducted, the individual owner will face the pressure of making up the payment. in addition, forced execution may also cause a waste of resources and premature and excessive renovation.

therefore, the author also calls on all local governments, especially the first batch of pilot areas, to carefully study the policy documents and deeply understand the policy essentials; they must learn and understand the continuity and consistency of the central government’s policies, and must not distort or misinterpret the housing pension system.

the author believes that the housing pension system is not intended to leverage or activate funds in personal accounts, nor is it intended to stimulate consumption. moreover, in fact, it cannot stimulate more consumption through "community renovation". instead, it is more of a prelude to new real estate policies.

the real focus of policies to stimulate consumption and drive investment is on the "three major projects", especially affordable housing and "dual-use" projects. the renovation of old neighborhoods should be adapted to local conditions and should not increase the burden on residents.

the truth is simple, and if you keep going, you will reach your destination. we must adhere to the principle of "drawing a blueprint to the end" and "enhance the consistency of macroeconomic policy orientation."