Public Rental Housing Scheme brings opportunities

Jin Mao PRC Lawyers
Edward Wang and Nancy Chen
[email protected]; [email protected]

The Shanghai government is planning to implement a Public Rental Housing Scheme (PRH Scheme) to relieve the accommodation stress of local young staff and migrant workers who have relatively low income.

The PRH Scheme provides that a large number of houses will be offered for lease at a relatively low price compared with the average market price to young, local staff and migrant workers who meet the specific requirements formulated by the government. The tenancy period is limited and after maturity of the period one cannot renew it as the house will be taken back and leased to other qualified candidates. Special governmental support will be given to the construction of such houses and the construction will be conducted by qualified institutions in line with market rules.

Background and purpose

The background behind the PRH Scheme is that Shanghai has become one of the most expensive cities to work and live in Mainland China. In recent years, Shanghai has witnessed prosperity in its housing market as well as skyrocketing house prices. As a result, the large number of new graduates and migrant workers who come to Shanghai for job opportunities are unable to afford the expensive living costs of Shanghai. At the same time, the continuous development of Shanghai's economy requires a stable human resource supply.

Given the existing conflicts, the PRH Scheme is designed to calm down the overheated real estate market, providing governmental assistance so that promising workers on low incomes are able to find accommodation in Shanghai. The PRH Scheme is a temporary and transitional arrangement as the tenancy period is strictly limited. Its purpose is to provide young workers in difficult situations with assistance but not to create new unfairness.

Specific measures

In consideration of the special background and purpose of the PRH Scheme, a strict admission system and a recycled mechanism of public rental houses areindispensable. It is important to formulate standard measures of land supply and house rental management.

Firstly, the Shanghai City Planning Administration and the Land Management Department should give priority to ensure the sufficient supply of construction land for the PRH Scheme.

Secondly, preferential policies, special funds and other supporting measures in the areas of capital investment, housing construction, financing, and the supply and management of the PRH Scheme shall be offered to the above-mentioned qualified institutions. The qualified institutions established under PRC law are encouraged to invest, acquire land, construct, and supply and manage public rental houses provided that they can operate following market rules and with the target of earning just a small profit margin.

A number of manufacturing companies located in economic and industrial development zones have been encouraged to build public rental housing on their leasehold lands. In other words, housing built on industrial manufacturing land will be legally permitted to be transferred for accommodation use.

Applicants for the PRH Scheme are required to make their applications directly to companies offering jobs or qualified institutions. Applicants are legally required to ensure the authenticity of documents submitted by them. Provided that the application is accepted, applicants will sign lease contracts with qualified institutions in accordance with rules and guidance under the PRH Scheme. The performance of tenants under the lease contract will be recorded in their social credibility files according to the PRH Scheme.

The PRH Scheme is different from previous public housing projects or other social accommodation welfare arrangements. It is a scheme involving independent companies, rather than governmentally controlled entities, investing and operating in line with market rules. The PRH Scheme is especially attractive for small or medium-sized real estate developers as the profit is secure and the investment amount is not huge.

Opportunities for lawyers

Being a newly drafted policy, the PRH Scheme requires the professional services of lawyers in areas such as land acquisition, public rental housing construction, the checking of applicants' conditions, and the commencement and termination of public rental housing leases.

For example, at the stage of acquiring land, lawyers are able to contribute services to (a) the renovation of old buildings; (b) the transforming of other social accommodation welfare arrangements into the PRH Scheme; (c) the provision of manufacturing companies' leasehold land for public rental housing; (d) the conversion of villagers' freehold land into residential land for city workers; and (e) the transformation of manufacturing factories, warehouses and office buildings into public rental housing subject to the city development plan.