China’s housing crunch

Early one recent Friday morning, government agents dressed in military fatigues and lugging sledgehammers stormed into one apartment after another at a huge housing complex here. They smashed walls and tossed tenants’ belongings outside. Frightened occupants fled.

These weren’t drug houses or prostitution dens. The targets of raids were “collective rentals”: apartments divided into tiny rooms and crammed with 10 or more tenants, many of them migrant workers.

“All of a sudden, we’ve become pests of society,” said one resident driven onto the streets.

The raid last month at Twin River Bay apartments in northwest Shanghai shows how tensions have risen as landlords, residents and governments grapple with a severe housing crunch in Chinese cities.

Soaring home prices and rents have put ordinary housing out of reach for many workers. New apartments are going up, but often they’re snapped up by investors from out of town, creating legions of absentee owners. Meanwhile, young people from the countryside continue to flood into cities.

Of Shanghai’s 20 million residents, 2 million to 3 million are thought to be part of the city’s “floating population.” There may be jobs for them, but where to live is another matter.

Affordable housing -- a perennial issue in large U.S. cities such as Los Angeles -- has become one of the toughest challenges for China’s central government as it gears up for the Communist Party Congress in mid-October, held every five years.

President Hu Jintao, who is expected to solidify his power at the meeting, has built his platform on the motto of harmonious society. But harmony is in short supply in communities such as Twin River Bay.

The government has ordered construction of more low-rent, subsidized housing nationwide, but for the most part, the Communist Party apparatus, which once allotted housing to workers, has taken a hands-off approach to the problem.

The free-market solution has been collective rentals. In typical Chinese entrepreneurial fashion, a cottage industry has sprung up around the practice.

Until the raid, Ge Yiwei, 18, and his older sister managed half a dozen such apartments at Twin River Bay. In most cases, he said, property owners couldn’t find families who would pay $300 to $350 a month for their two-bedroom units. So the owners turned over the keys to a collective rental business.

One apartment, Ge said, had 17 tenants. One bedroom contained eight bunk beds. Partitions made of plaster divided the living room into three cubicles. Everybody shared one bathroom. Some rooms came with a TV and a desk. Towels were provided. Tenants paid on average about $40 a month, for a total of almost $700 for the unit.

In some months, the Ge siblings took home a combined $500. “I slept wherever there was a vacant bed,” said Ge, who now works for a restaurant in Shanghai making about $170 a month, $16 of which goes for a bed in an employer-run dorm.

Government officials in Shanghai didn’t respond to requests for interviews about the raid or the issue of collective renting. By some analysts’ estimates, though, the practice is common in a third of all Shanghai apartment complexes.

At Twin River Bay, a onetime slum that has been cleaned up, more than 600 apartments are collectively rented to an estimated 10,000 tenants, according to local media reports. Among them are students and white-collar workers whose pay, even with minimum-wage increases in recent years, has failed to keep pace with housing costs.

“Just take a look at the income standards and current rent prices and you’ll understand these people’s choices,” said Gu Jun, a sociology professor at Shanghai University.

Chinese officials are trying to temper speculation in housing markets. Last week, authorities bumped up interest rates for mortgages and upped the down-payment requirement to 40% from 30% for those buying second homes. But with many investors reportedly paying 100% cash for houses, the latest move isn’t likely to have much punch. Across the nation, home prices rose more than 8% in August from a year earlier, and the pace was even faster in some larger cities, the central government said.

But the problem isn’t confined to big cities. On Hainan Island off the southeastern coast, collective renting has grown as migrant workers have arrived for jobs in cabarets. The island’s minimum wage is less than $70 a month while rent for a single room costs at least $40, said Wang Zhiwu, an economics professor at Hainan University.

If it weren’t for the warm climate, he said, which allows people to sleep on beaches year-round, the situation would be more miserable.

When Wang read reports of the raid in Shanghai, he was beside himself. “It’s ridiculous,” he said. “Why can’t rich people be more tolerant of poor people?”

Beijing and Shanghai may have the most at risk. Some scholars worry that a lack of housing options will exacerbate labor shortages.

In Beijing, there’s no shortage of takers for collective rentals. Beijing is a magnet for students, and huge pools of workers have come to remake the city for the 2008 Olympics. Adding to the housing crunch, Beijing and other cities have demolished many old neighborhoods that weren’t pretty but had plenty of cheap housing.

With tensions flaring, local governments are starting to draft rules banning collective renting. Jin Yusong, vice general manager of Beijing Linkhome Real Estate Agent Co., predicts that will just drive the practice underground and cause more trouble.

“The biggest problem of collective renting is safety,” Jin said. “Because all these tenants are strangers coming in from everywhere and sharing a small space, it is really hard for them to trust each other. That causes all kinds of security problems for each other as well as for the neighbors.”

But Du Yueping, a Shanghai lawyer, says many such tenants are quiet white-collar workers.

“Most of them bring their own garbage downstairs, and they’re willing to pay more for using public resources like elevators,” Du said, adding that what city officials did at Twin River Bay was wrong. “There is no legal basis to crack down,” he said.

Many residents, though, were happy with the raid.

“They tie up the elevator, throw trash everywhere and urinate all over,” said Cao Guiping, 36, who with her husband and son moved to the complex a year ago. Cao said her family paid about $165,000 for the three-bedroom unit. Their units have since appreciated about 30%, she and other owners said, and they want to protect their investments.

On a recent night, the grounds of Twin River Bay were littered with trash. Red banners were hoisted throughout the complex. “Crack down on collective renting; return peace to homeowners,” read one.

But there were signs that collective renting was still thriving. From outside, one could see balconies divided in halves and porches cluttered with appliances and furniture.

On the 17th floor of one tower, Dong Ming, 20, sat forlornly in a kitchen that had been converted into a bedroom, which he and a friend rent for $90 a month. Dong had come from Anhui province and works as a salesman for a securities firm. In good months, he said, he takes home as much as $400. His roommate works for a decorations company and supplements his income by selling Amway products.

Dong said he had lived in another collective rental a month ago but had to leave after it was raided. He said he slept in an Internet cafe that night and moved to another building the next day.

His room now has enough space for a large single bed, made of boards, that he shares with his roommate. There was a 13-inch TV supplied by the landlord. The walls were bare except for a meter that calculated his electricity use and two large newspaper ads for a new BMW. The floor was teeming with roaches.

Dong kept his head down as he talked. He showed no emotion except when asked about his plans. Then his eyes lighted up. “I want to buy my own apartment,” he said. “That’s my ultimate goal.”

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don.lee@latimes.com

Cao Jun in The Times’ Shanghai Bureau contributed to this report.