Land ownership woes for China's homeowners

The Henghe North neighbourhood of Wenzhou, China. Recently, when a resident of the neighbourhood tried to sell her apartment, local officials told her that her lease on the land had expired. To sell her apartment, she had to pay the government one-th
The Henghe North neighbourhood of Wenzhou, China. Recently, when a resident of the neighbourhood tried to sell her apartment, local officials told her that her lease on the land had expired. To sell her apartment, she had to pay the government one-third of the sales value. The dispute highlights the government's grip on all land in the country.PHOTO: NEW YORK TIMES

They own the homes but the government owns all land, and disputes flare up when land leases expire

WENZHOU • Mr Chen Furong and his wife bought their home 23 years ago for its proximity to the city centre and for the tree-lined canal just outside. Their dream was to pass it on to their children and grandchildren, a piece of wealth giving their family a share of China's economic miracle.

Then their neighbour tried to sell her place - and everything was thrown into doubt.

Like every other homeowner in China, Mr Chen and his neighbour own their homes but not the land they are built on. All land in China is owned by the government, which parcels it out to developers and homeowners through 20- to 70-year leases.

When the neighbour - whose surname is Wang - tried to sell her apartment, local officials told her that her lease on the land had expired. To sell her apartment, they told her, she would have to pay them one-third of the sales value.

Ms Wang protested in a move that drew national attention. Suddenly, millions of Chinese who had socked away billions - and possibly trillions - of dollars were worried as well. If the local authorities in other parts of China did the same thing, they thought, a big chunk of their own wealth could end up with the government as well.

"What will happen after our land lease expires?" asked Mr Chen, 69, who, with his wife, holds a 70-year lease. "I will be dead when the lease expires, but will I be able to give it to my son?"

CONCERN ABOUT FUTURE

What will happen after our land lease expires? I will be dead when the lease expires, but will I be able to give it to my son?

MR CHEN FURONG, who, with his wife, holds a 70-year lease on the land they live on.

China's erratic stock market and its strict limits on sending money overseas have prompted many Chinese families to invest in residential real estate.

China's families have put nearly two-thirds of their wealth into housing, estimates Professor Li Gan, a professor of economics at Texas A&M University who runs a widely read survey of Chinese households. Some own two or more homes and buy and sell them the way US investors play the stock market.

That pot of household wealth is crucial to China's efforts to take its economy to the next level. As reliable sources of growth such as exports and manufacturing falter, China is trying to turn its households into American-style consumers. Faith in their home savings would make them more likely to open their wallets.

But even as it pushes for increased home ownership, the Chinese Communist Party has done little to loosen its grip on the nation's land. The party attacked private landlords during its rise to power, and when it took control, it nationalised all land, following the Soviet model. Although the death of Mao Zedong led to reforms that allowed people to own their homes, the central government continued to retain the title to the land, giving it a major lever in China's economy.

Some experts say the central government cannot continue to serve as national landlord.

"Our country still believes in an ideology that is already outdated," said Mr Mao Yushi, a prominent economist who previously directed the Unirule Institute of Economics, a Beijing research firm.

"The patriarch of public ownership, the Soviet Union, has collapsed already, but we are still holding onto public ownership."

Giving land to the people would not be easy. Local governments in China do not have the power to levy taxes, so leasing land is one of the few ways they have to raise money.

Allowing the people to own land could also concentrate wealth in the hands of a few, Mr Mao said.

"So how would we tax those who end up owning the vast swathe?" he asked.

In 2007, China moved to reassure homeowners by requiring local governments to renew 70-year leases automatically. Yet the law was silent on whether homeowners would have to pay for the renewal and what would happen to those with shorter leases.

China's Legislature needs to resolve this issue, said Mr Sun Yuhua, an associate researcher at the East China University of Political Science and Law. "Otherwise," he said, "it will trigger huge disputes."

At least three Wenzhou neighbourhoods have been hit by government requests for money to renew land leases, including Henghe North, where Ms Wang and Mr Chen live.

The Chens' home is typical of the area's modest dwellings. Nestled on the third floor of a grey-tiled building, the apartment crams two bedrooms into 580 sq ft.

A blocky complex of buildings, Henghe North is bordered by a busy avenue lined with noodle stands, vegetable markets and other small shops. Trees and flower beds grow along the canal that abuts the development. Mr Chen said local people pooled their money to build a community centre designed like a Chinese temple.

The unassuming neighbourhood was turned upside down by Ms Wang's discovery. Local apartment owners started checking their lease documents. Chinese reporters went door to door, especially in Ms Wang's building.

"There were so many journalists here that she didn't want to talk to anyone,"Mr Chen said.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on June 02, 2016, with the headline 'Land ownership woes for China's homeowners'. Print Edition | Subscribe