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China Seeks to Cap Rising Home Rents in Latest Equality Move

China Seeks to Cap Home Rent Increases, Preserve Older Buildings

China unveiled plans to keep a lid on home rents in cities and preserve older properties, its latest move to ease price pressures in the residential market and promote urban renewal. 

The housing ministry aims to control growth in urban rents to no more than 5% per year, it said in a statement on Tuesday. It’s seeking to ensure a balanced supply and demand in the rental market. 

The announcement underscores one of the top priorities for President Xi Jinping in his pursuit of “common prosperity.” Regulators are ratcheting up efforts to tame land and home prices that have fueled China’s runaway property industry. 

The statement also addressed issues including improving public services and infrastructure, building good affordable rental housing, and ensuring urban development projects aren’t excessive or create a sudden surge in housing demand.

In large cities, pressure on rents has partly stemmed from large-scale demolition undertaken for urban renewal. Such activity runs against the government’s original intention and doesn’t fit China, which has entered a later stage of urbanization, Housing Vice Minister Huang Yan said at a briefing. 

Almost 64% of the population now live in cities, said Wang Menghui, minister of housing and urban-rural development. That’s up from 51.3% in 2011 and 10.6% in 1949, according to the statistics bureau.

Stabilize Prices

China will stabilize land and home prices, as well as market expectations, to ensure the healthy development of the property sector, Vice Housing Minister Ni Hong said at the same briefing. Authorities will further crack down on violations in the industry, Ni added, without giving details. 

Rent controls have become a controversial issue in some developed nations at a time when home prices are soaring worldwide. Berlin had a rental freeze until it was recently overturned in court earlier this year. In Sweden, a proposal to deregulate the rental market triggered a political crisis

China’s move is the latest addition to a slew of policies aimed at cooling the property market. The government recently halted land auctions in some major cities, potentially hurting a key source of cash for local governments. It has also stipulated that the price premium for land should be capped at 15%, Citigroup Inc. analysts including Griffin Chan wrote in an Aug. 11 note after market rumors about the policy change.

Regulators have halted private equity funds from raising money to invest in residential property developments, choking off one of the last channels of stable funding for the sector. 

China Seeks to Cap Rising Home Rents in Latest Equality Move

Government efforts to cool the home market are beginning to have an impact. Major cities saw home prices grow at the slowest pace in six months in July, climbing 0.3% from June, National Bureau of Statistics figures showed.

China has spent years trying to tame property prices, to little avail. The government needs to tread carefully as the real estate sector now accounts for 13% of the economy from just 5% in 1995, according to Marc Rubinstein, a former hedge fund manager who now writes about finance.

The government is signaling that this time might be different. Vice Premier Han Zheng has pledged to avoid using property as a tool to boost the economy. China has also tightened funding channels including bank loans and trusts as part of a campaign to reduce risks. And authorities are revisiting the idea of imposing a property tax.

©2021 Bloomberg L.P.

With assistance from Bloomberg