Building of low-rent low-priced homes
Updated: 2007-09-10 10:23
There is belief that land transference income links local governments with estate developers. When prices of homes rise, land prices follow suit, and the land transference income of a local government also goes up. Thus, some local governments turn a blind eye to soaring estate prices, and some even encourage it.
Land transference income plays a major role in the balance sheets of local governments. And naturally, they may not be willing to put that money into building houses for low-income groups.
People have reason to be concerned about this issue. Some have suggested listing the number of such houses being built as part of the official accessing scheme, so that local governments carry out the central government's policies.
This could be an effective solution, but not under the current situation. The performance of local governments is difficult to assess through simple numbers. When land transference income is involved, the issue gets even more complex because it is related to the distribution of financial resources from the central government to the local ones.
After the tax system reform in 1994, the central government gained a larger portion of all State income but with less burden in providing public services. With less than 50 percent of State income, the local governments are now paying for education, infrastructure, public security, public health and several other services which used to be paid by the central government.
Against such a backdrop, the income from land transference becomes even more significant for local governments. The income is not listed in local governments' budget, which means local governments have greater flexibility in using it. There is also no strict supervision from the central government on the usage of this money.
It will be a challenging task for the central government to ensure that the local ones spend one-tenth of their land transference income on building houses specially for low-income earners.
Therefore, the funding sources may need reconsideration.
It is especially important to balance funding between the central and local governments.
According to international experience, the central government has a bigger responsibility in social welfare issues, like medical care, housing and education. If the central government pays the bill for these items, social welfare development will not be harmed for the lack of money.
More importantly, if the central government pays for the houses for low-income earners, it may cut the income link of local governments with that of the real estate market. Thus, the administrative manipulation of the market to the benefit of local governments would no longer be possible.
The author holds a doctorate in economics from the Shanghai Academy of Social Sciences
