Western Experience: Affordable Housing is the Source of Diluting Housing Prices

In European and American countries, the housing difficulties of urban low-income families have been well addressed through vigorous construction of affordable housing. This policy of regulating housing prices has proven effective in many countries. Therefore, we also hope that the substantial supply of affordable housing can become a source of vitality for diluting China's currently high housing prices.

Under the backdrop of market mechanisms, many residents cannot solely rely on market regulation to solve their housing problems, especially for the numerous middle- and low-income families. Thus, the government should be the main entity responsible for constructing a housing security system. The orderly provision of affordable housing can, on one hand, gradually solve the housing problems of low-income residents; and on the other hand, provide rational expectations to the market, reducing panic over high housing prices and speculative expectations.

Controlling housing prices and ensuring housing for middle- and low-income groups are two sides of the same issue, complementing each other. When housing prices stabilize, it becomes easier to solve the housing problems of the middle- and low-income classes. Through affordable housing, when the housing problems of these groups are resolved, housing prices will not spiral out of control. Therefore, through the substantial supply of affordable housing, the rise in housing prices can be alleviated to a certain extent. This policy of regulating housing prices has proven effective in many countries. Hence, we also hope that the substantial supply of affordable housing can become a source of vitality for diluting China's currently high housing prices.

**Low-rent Housing: The Choice for Low-Income Groups**

In European and American countries, vigorously strengthening the construction of low-rent housing has, to a certain extent, addressed the housing difficulties of urban low-income families and curbed the rise in housing prices. As one of the successful practices abroad, let’s take a look at how foreign countries implement their low-rent housing systems.

In Singapore, the Housing and Development Board divides low-rent housing rents into two tiers, accounting for approximately 10% (for families earning 800 Singapore dollars or less) and 30% (for families earning between 800 and 1500 Singapore dollars) of household income. The board also increases investment, allowing more families to rent houses with rents closely aligned with their incomes.

In the United States, the primary method is through per capita subsidies targeting demand-side individuals. Government agencies assist in negotiating rents between tenants and landlords, then collect limited rents from tenants, while landlords receive their rents from government agencies. Rents do not exceed 30% of the tenant's own income.

In France, legislation promotes the implementation and improvement of the low-rent housing system. As early as 1894, the French government enacted laws to establish a low-cost housing system. Over the following century, related laws concerning low-rent housing were successively introduced. In 2000, the government appropriately launched the Social Solidarity and Urban Renewal Act, stipulating that the proportion of low-rent housing in all housing constructions in municipalities must not be lower than 20%.

In 2006, the publication of the National Housing Commitment Law significantly increased the supply of welfare housing. For many years, the steady and orderly development of France's real estate market has benefited from its relatively complete social security housing construction and supply system. Due to the non-market supply of low-rent housing, low-income residents often prioritize applying for low-rent housing before considering buying a house. As a result, in the commercial housing market, the loss of a large number of low-rent housing customers reduces the number of buyers, thus suppressing housing prices due to insufficient demand growth. Consequently, housing prices remain stable.

Given the role of developed countries' low-rent housing systems in addressing the housing issues of low-income groups and curbing housing prices, China's Ministry of Construction has long required that all cities and counties establish a low-rent housing system by the end of 2008. Currently, corresponding systems have been established in major cities such as Shanghai and Beijing. However, due to reasons such as the limited quantity of low-rent housing supplied to the market, the role of this housing security policy is not yet significant.