Study Of Financing Pattern For Public Rental Housing Based On REITs

Since the abolition of welfare housing distribution system, China’s real estate market has been in prosperity along with the development of economy, but it also generates some negative external effects. The gap between the soaring prices and standstill income becomes a massive concern of the society. Housing problem is always an important issue affecting people’s livelihood. After being put forward in the Government Work Report for the first time in March,2009, constructing public rental housing has become the main component of affordable housing system, which has also been explicitly proposed by China’s "Twelfth Five-Year Plan".According to the State Council’s arrangement, local governments rapidly put forward of public rental housing construction work in recent years, forming a huge demand of funds. But the system of indemnificatory housing is nowhere near perfect. Especially the problem of financing has become a bottleneck in the development of indemnificatory housing. The national policies encourage the expansion of social financing channel, including the using of insurance funds, trust funds and real estate investment trust funds (REITs) to support the financing of affordable housing construction.In this paper the author tries to focus on how to use REITs in China’s affordable housing financing and through a combination of theory and practice, especially experience from the international market, a REITs financing mode applicable to China was established. The main contents are as follows:First of all, the author analyzes the institutional basis which includes the Maslow hierarchy of needs, income redistribution theory, while market theory including the theory of public goods and equitable distribution. As such, it comesto the conclusion that both government and market forces should be involved in the expansion of financing channel.Secondly, combined with practice inShanghai and Chongqing, the author analyzes how the financing gap of affordable houses came into being. Under government overall plan and guidance, we must develop social capital as an important source of funds of public rental housing construction. Further, this paper analysis the necessity and feasibility of use REITs to public rental housing financial.Thirdly, the author compares different countries and regions such as USA, Japan, Germany, and Hong Kong. By studying their financing mode and related institutional characteristics, the author tally up referential experience for china’s present indemnificatory housing financial mode.Finally, based on the aforesaid analysis, the author puts forward the introduction of REITs in innovation of public rental housing financing mode in China with corresponding countermeasure, which focuses on the design of contractual REITs under the guidance of the government, including the related organization structure and operation mode. In addition, taking Shanghai for example, an empirical analysis in which cost and expected return rate of public rental housing is studied to demonstrate the premise of using REITs in public rental housing financing. It shows that the increase of REITs rate of return is the core premise. In addition, the paper proposed three main actions to be taken to further improve the operation effectiveness of REITs.