For Chinese, Rising Rent Isn’t Just a Financial Problem
Across China, rents are on the rise. In 2021, rents in 55 major cities increased by an average of almost 10%. In eight of the country’s largest cities, housing rents jumped by nearly a quarter, up 24.5% compared with 2020. The southwestern metropolis of Chengdu led the way with a 40% increase, but residents of Beijing, Shanghai, and the eastern tech hub of Hangzhou all saw rents go up by more than 20% on average.
Three decades ago, the impact of this spike would have fallen largely on the shoulders of migrant workers from rural areas. In the 1990s, young, educated urbanites generally only rented for short periods of time before saving up enough to buy a house. Today, growing numbers of young urbanites are long-term tenants. In a recent survey of residents in 10 large cities across China, my research team found that Chinese in their twenties and thirties were by far the biggest renter demographic, accounting for almost 63% of all tenants. Three-quarters are migrants, some from the countryside, but many from cities elsewhere in China. Among non-local tenants in this age group, 61% have an undergraduate degree or higher.
In other words, young white-collar, college-educated migrants now make up a key segment of China’s rental market.
One reason for this shift is China’s real estate bubble, which has left even white-collar professionals priced out of urban homeownership in large cities. As recently as 10 years ago, young Chinese were still able to purchase houses in places such as Shenzhen and Shanghai on a mortgage, so long as they had some help from their parents. Today, a 90-square-meter apartment in the closer suburbs of Shanghai that would have cost 2 million yuan (roughly $300,000) in the early 2010s now costs as much as 7 or 8 million yuan. Many young people simply cannot afford to buy a house in their city of residence, even with support from their parents.
This has pushed them into long-term tenancy, which can have a negative impact not just on their finances, but also on their happiness and perception of social justice.
In our research, my team found that, under China’s current rental market conditions and household registration policies, whether or not young people own a house is an important indicator of their happiness and their perceptions of social justice. Among homeowners, for instance, 77% of respondents described themselves as “happy” — nearly 20 percentage points higher than non-local renters. Homeowners reported overall satisfaction levels 24 percentage points higher than non-local renters.
One reason home ownership has such a great impact on residents’ happiness is that rents are too high. Even before last year’s spike, rents paid by college-educated non-local renters already accounted for nearly one-third of their total income. Though their personal income is on average far higher than that of local homeowners, the money they spend on rent greatly inhibits their capacity to invest in things like their children’s education or their own happiness.
The experience of renting also affects young people’s perceptions of social justice, as well as their satisfaction with the country’s bureaucracy and laws, though homeownership was less correlated with this than possession of a local hukou household registration. Although smaller cities have de-emphasized the importance of hukou in recent years, in larger urban centers like Beijing and Shanghai, a person’s hukou continues to play a key role in determining access to public resources such as education, health care, and social security. For example, children without a local hukou have a much harder time accessing local public education resources and cannot take the college entrance exam locally. Therefore, regardless of whether or not they’re homeowners, urban residents in possession of a local hukou tend to think of society as being fairer, while those without local hukou have more negative perceptions.
It is worth noting that, although young, college-educated urbanites enjoy real advantages in terms of social status and income, their perceptions of social justice were the most negative of our survey groups. Their reported happiness was also relatively low — no better than less-educated non-locals. Educated, non-locally registered residents of major cities often express dissatisfaction with local government policies and initiatives. This is perhaps because they feel that, although they are well-educated and earn more than many residents and homeowners in possession of a local hukou, they themselves cannot afford a home, are forced to pay high rents, and are excluded from certain public services.
Although this group may be the most dissatisfied with their lives, the most disadvantaged residents in urban areas are non-college educated renters without local household registrations. Mainly individual business owners, service industry employees, and industrial workers, their household incomes are the lowest of any renting demographic. They also face strong social stigmas and experience the most instability, both in their jobs and in their living conditions.
Between their low incomes, the high cost of school tuition for their non-locally registered children, and the stress of funding or providing care for their aging parents, this group has the least disposable income for cultural consumption. They also report the highest level of perceived social exclusion, in part because they are seen by locals as a threat to the city’s safety, order, and local culture.
Urbanization is key to China’s future innovation and development. But continually rising housing costs are making both life and work in the big city increasingly stressful, with negative consequences for young people’s sense of happiness and faith in social justice. Addressing not just soaring housing prices, but also rents, is therefore vital.
To that end, cities should rethink their development priorities. In particular, city governments should increase the supply of affordable and public housing by earmarking more land for this purpose. Currently, local governments are often willing to sell or lease out valuable land resources at low rates to industrial firms, which many officials see as key to generating sustained revenue. By contrast, the prices that real estate developers must pay to buy land are astronomical. But factories and manufacturing industries are no longer the only means of boosting local economies, and the overuse of scarce land resources for these purposes is exacerbating housing costs and burdening residents.
There are signs that the central government realizes the severity of the problem. This year, the State Council — China’s Cabinet — specified for the first time that the country’s “housing security” programs should include public rental units and affordable rental housing. The Ministry of Housing and Urban-Rural Development has likewise made developing affordable rental housing a priority, and last August issued a document capping rent increases in urban areas at 5%.
Creating comprehensive housing security systems in the nation’s largest cities will take time. But as long-term tenancy becomes increasingly commonplace, the government will need to adapt, including by shouldering new responsibilities like reducing rents and addressing weak renter rights and exclusionary welfare policies. If young workers in the city are unable to live peacefully and take pleasure in their work, China’s urban and industrial development will suffer the consequences.
Translator: Lewis Wright; editors: Cai Yiwen and Kilian O’Donnell; portrait artist: Wang Zhenhao.
(Header image: A woman looks out from her rented home in Qingdao, Shandong province, Oct. 10, 2018. People Visual)