18 July

On July 18, 1994, China’s State Council issued a landmark decision to deepen reform of the country’s urban housing system, marking an important shift away from housing provided mainly as an employment linked welfare benefit towards personal ownership and a more market oriented property sector.

The policy is widely regarded as an important milestone in the development of China’s modern real estate market.

Before the reforms, urban housing was largely constructed, allocated and maintained by government institutions and state owned enterprises. Many workers received apartments through their employers, often at heavily subsidised rents, rather than purchasing homes as privately owned assets.

The 1994 decision proposed replacing the system under which the state and public institutions carried most housing costs with one in which the government, employers and individuals would share responsibility.

It also encouraged the gradual sale of publicly owned homes to urban workers and supported a transition from direct housing allocation towards monetary compensation.

The reform introduced a more diversified housing supply system. Economic housing was intended primarily for low and middle income households, while commercial housing would serve residents able to purchase homes through the market.

The policy also promoted housing provident funds, residential savings mechanisms and housing credit systems to help households finance property purchases.

The 1994 decision did not immediately eliminate China’s welfare housing model. Many state owned enterprises continued purchasing or subsidising apartments for employees, meaning the old and new systems operated alongside each other during the transition.

However, the reform established the policy foundation for private homeownership, residential finance and commercial property development.

China advanced the process further in 1998 by ending the direct allocation of housing in kind and separating workers’ housing more clearly from their state employers.

The residential towers, privately owned apartments and extensive housing finance market that later transformed Chinese cities can therefore be traced partly to the reform programme launched during this period.