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| An under-construction housing complex by Chinese property developer Poly Group in Dongguan, in China’s southern Guangdong Province, in 2022 |
An interesting article in the June 6, 2024, edition of The New York Times ("Guess Who's Angry?") made me aware that housing market issues in China are not, perhaps, all that different from housing market issues in my own hometown.
Here is an excerpt from the article I am talkintg about (with emphasis added):
For much of the past decade, China’s efforts to curb speculation on real estate grew broader and more extensive.
Shanghai declared that anyone who got a divorce would be subject to restrictions on apartment buying for three years, to counter couples who were splitting up just so they could buy second homes as investments. In Chengdu, in western China, only local residents who paid social welfare taxes and drew a winning ticket in a lottery could buy a new place. In the city of Tangshan, in the country’s northeast, anyone buying a home had to hold the property for at least three and a half years.
Those restrictions, along with limitations in other regions, have been lifted as China tries to revive a severe property downturn. Since last year, more than 25 Chinese cities have eliminated all restrictions on real estate purchases, as many local governments scrapped rules that prevented developers from cutting prices.
Last month, the central government went further. It lowered down-payment requirements and relaxed mortgage rules, and urged local governments to buy unsold homes and convert them into public housing.
But some of China’s efforts to stimulate home buying have upset one of the country’s most vocal constituencies: existing homeowners.
Many Chinese homeowners, who pinched and saved to buy apartments that serve as a main household investment, are now worried that the relaxing of restrictions will depress prices for their properties. The new policies have given rise to a dose of NIMBY-ism, short for “not in my backyard,” in a country ruled by the Communist Party.
The government must thread a needle as it tries to address the collapse of an industry that accounts for a quarter of the Chinese economy. While discontent over the economy could shake social stability, so could a backlash by homeowners, many of whom are holding on to hope that their properties will build wealth for future generations.
Many of the restrictions were lifted by the same policymakers who had introduced the rules only a few years earlier to adhere to the decree by China’s leader, Xi Jinping, that “houses are for living, not for speculation.”
It was more or less news to me that the "real estate boom" in China, which I did know about, has been supported by "investors" who have been buying up housing not, simply, to provide a home for themselves and their family, but as an "investment" that would pay off as housing prices increased.
In other words, despite the admonition that "houses are for living, not for speculation," and despite the fact that China is supposed to be "communist," not "capitalist," those who were buying housing were, in fact, "speculating." Recent government efforts to make housing more available are making some people "angry." Who? Well, the homeowner/speculators who are afraid that actually making housing available to those who need shelter (and thus encouraging a pricing policy that will allow more people to buy) will depress housing prices, and thus undermine their strategy to use ever-increasing housing prices as a way to make money.
The situations in China and the United States are different, but a common thread is the idea - advanced by some, at least - that residential real estate should be an "investment," as opposed to providing simple shelter for those who need housing.
In Santa Cruz County - and the City has a similar program, originally patterned after the County's - some housing price increases are limited. The County's "Measure J" inclusionary housing program (one of the first in California), allowed average and below average income people to buy housing at a price that they could afford. BUT... unlike what apparently happened in China, that housing was sold with a price restriction, so that when a Measure J inclusionary unit is resold, the price can go up only to reflect inflation and any additional investments made by the homeowner. The idea is that the purchaser of a Measure J inclusionary unit, when it is originally sold, will buy the unit at a price that is "affordable" to a person with an average or below average income. When resold, that housing unit will also go to someone who is at the same income level as the person who originally bought the home. Housing that is "affordable" when first sold will remain "affordable." Buying up truly affordable, price-restricted housing, will not be the kind of investment that will make you a lot of money.
Clearly, the idea here is exactly the one articulated by Xi Jinping: "Houses are for living, not for speculation." Alas, speculators abound - in both countries, it appears. We know they abound in the United States! The Times' article points out that they abound in China, too.
Housing is a basic and fundamental human need. When housing is converted into a speculative good, with people buying housing not becuase they need a home, but in order to profit from an anticipated price runup, then the "Golden Rule of Economics" comes into play. You may remember that I have talked about this "Golden Rule" before:
Those Who Have The Gold Make The Rules
In my hometown, developers of a proposed new development adjacent to the Town Clock are telling everyone that all we need to do to provide "affordable" housing is just to build more housing, period (they're the builders, of course). They say that the increased "supply" of housing will cause the "price" to come down, thus making "affordable" housing more generally available.
Don't you believe it! That certainly doesn't work in Santa Cruz, California. People from all over the world (including China, by the way) are going to be bidding for every new housing unit built in our local community. Unless there is a price restriction on the new housing units produced, those with the "Gold" will get the goods. Please be aware that this will not include any average or below average working people who support community services. You know, the teachers, the store clerks, the guys who do landscaping, or who take care of customers in their local gym. Painters, waitresses, and house cleaners need not even think of applying!
Finding ways to take the "speculation" out of housing prices can solve our affordable housing crisis. In fact, it's the only way to do it. More sixteen or eighteen-story buildings on downtown streets will just put more "gold" into the pockets of the developer/speculators who tout their deep commitment to the community and to "affordable" housing.
Santa Cruz residents should check out the pictures below. This proposed development, called "Clock Tower Plaza," is the latest effort to deliver wealth to the property owners and developers, at the expense of everyone else. They won't provide parking. They won't restrict prices (except for a small number of units). And they will sell or rent their units to those who can pay the most. That won't be most of us! There will only be a very few price-restricted units available. The developers will make out just fine, while the rest of us can have the privilege of watching our community disappear:
Image Credits:
Don't they realize that garish eyesores like this are going to devalue Santa Cruz in the long run? Who will want live here when it looks like this? Beauty is what makes Santa Cruz beloved.
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