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Special Report

An Elusive Dream

With the fierce competition for places at China’s top schools linked to home ownership, efforts to cool the housing market by incentivizing renters could stumble at the first hurdle

By NewsChina Updated Oct.1

Will we be enrolled in a better school by renting a house?” asked a parent at a recent meeting on elementary school admissions held at a local educational training center in Guangzhou, Guangdong Province.  

It’s the question on every parent’s lips after several large Chinese cities, including Guangzhou and Beijing, released new policies on their residential rental markets that pledged renters will enjoy the same rights as those who own their homes.  

The new policy is seen as a response to central government moves to rein in China’s house price surge by developing and promoting a healthier rental market. But with home ownership tied to enrollment in local public schools, what really matters to renters is whether or not their children will have the same chance as those who own a nearby home to be admitted to a decent school in the area.  

The answer: probably not. With China’s top schools concentrated in big cities and these schools’ places falling desperately short of demand, experts worry that rather than equalizing renters and buyers, the new policies will merely drive up the cost of renting. 

Equality of What?  

China’s sky-high housing prices have attracted public scorn for years, especially in larger cities such as Beijing and Shanghai where ordinary people cannot afford to buy a home even if they save their whole lives. Responding to public complaints, Chinese President Xi Jinping announced at the central government’s annual conference of economic affairs held in December 2016 that “houses are for living in, not for speculating on,” signaling to local governments they should introduce measures to curb housing prices.  

In a departure from previous years, when local governments focused on restricting families from buying more than one apartment, the focus shifted this year to growing the rental market. Last June, China’s State Council decreed that the nation should place the same importance on the rental market as that on the housing sales market. In July of this year, China’s Ministry of Housing and Urban-Rural Development released a joint plan with eight other ministries to develop the rental market in cities which were seeing more domestic migrants coming than going. It picked 12 pilot sites.
One was the city of Guangzhou, where the local government proposed 12 measures to meet the central government’s target, including increasing land supply, decreasing rental tax, and encouraging real estate developers to create residential complexes zoned for renters only.  

Yet, defying the expectations of officials, it was a provision to “grant qualified renters’ children the right to enroll at nearby public schools, and ensure equality between renters and homeowners” that attracted the most attention nationwide. Beijing, another pilot city, issued a similar proposal.  

The concept of equality between renters and homeowners was the headline of a slew of media and social media reports. Since current school enrollment quotas are bound to an applicants’ hukou (permanent residence permit) and where they live, commentators claimed that the high costs of apartments in districts with the best schools would be a thing of the past, and some even speculated that the policy would have the effect of a neutron bomb on the Chinese housing market.  

However, many experts and insiders threw cold water on this optimism. Li Tie, head of the China Center for Urban Development under the National Development and Reform Commission, said the connection between public school admissions and residential buildings could be seen as a kind of “resource exchange” – residents buy an apartment in a good school district in order to access the school. “The policy [of equality between renters and homeowners] just changes the form of ‘exchange,’” he said. “Sales are replaced by rent, the price of which I believe will soar.” 

One teacher at the afore-mentioned educational training center was more direct: “It is impossible to be enrolled in a good school [by renting a house],” he told the parent who asked. “If you are lucky, your child may be enrolled in a second-tier school.”  

“I don’t think that the policy has much to do with renters. It is more related to landlords, instead,” he added.  

Order of Priority

According to Wang Minghui, an elementary education director at the local education bureau of Tianhe district, Guangzhou, trying to even the playing field for renters and buyers is not a new idea. “I don’t think the ‘equality’ policy is of any meaning to us,” he told NewsChina. “We don’t want to discriminate against them [renters], but we have to deal with the shortage of education resources.”  

Wang said the children of renters had a chance of enrolling in their nearby school of choice as long as they had a Guangzhou residence permit, but if the schools were full they had to join a waiting list behind those whose parents or grandparents had bought an apartment in the district. “Whether or not a renter’s child will be admitted depends on whether or not the target school has enough positions. If they don’t, the child will be assigned to another school within three kilometers, allocated by computer,” he explained.  

In fact, it’s common practice in big cities like Guangzhou and Beijing to prioritize applicants in the same way when schools in one district cannot take all of the children – those who hold a hukou and whose parents own an apartment in the district are always put first, followed by those who hold a hukou but have no apartment in the district, and while those who have neither a hukou nor an apartment languish at the end of the line.  

Several years ago, Guangzhou and Beijing launched a “bonus system” for domestic migrants. These schemes see applicants allocated points based on the location of their companies and homes, their educational background, and their social insurance payments. Applicants are granted a residence permit when their points reach the required level. However, such permits remain inferior to a hukou and owning an apartment is worth many points under the scheme.  

The latest plans from Guangzhou and Beijing require “qualified renters” to enjoy the same rights as homeowners, and set restrictions on the number of domestic migrants who will be given residence permits. But this does not mean renters will be given the same priority as house owners.  

Scarce Resources 

The priority system is a function of the significant education resource deficit in China’s major cities. Wang Minghui told NewsChina that in order to accommodate the growing number of school-age children, his district of Tianhe has exhausted all options trying to increase the number of positions.  

“Tianfu Road Elementary School, for example, has expanded from the planned 24 classes to 40, and the teachers have to work in temporary offices built outside the school,” Wang said. “Another elementary school [in our district] has to dismiss the students in batches after class to prevent traffic jams. 

“Nearly all of our public schools are overburdened, so we cannot create any more positions without building new schools or buying places from private schools,” he continued, revealing that Tianhe planned to move five high schools to suburban areas to make room for new elementary schools.  

“That’s why we are reluctant to loosen the restrictions on applicants,” he said. “We have to prioritize them.”  

Wang’s account was backed up by Cai He, a top sociology researcher at Sun Yat-sen University who sits on the Guangzhou City Committee of the Chinese People’s Political Consultative Conference (CPPCC). He told NewsChina that during his investigation of elementary school admissions in Guangdong Province, he found that far fewer migrant children were admitted to their local public schools in big cities than in smaller cities. “In small cities where public schools have a surplus of positions, migrant children are not abandoned even though there is no ‘equality’ policy, while in large cities like Guangzhou, it will take time to place all school children whether or not there’s a new policy,” he said.  

Positions at good schools are even scarcer. For example, Shenzhen’s priority system goes so far as to detail the specific time an applicant purchased their local apartment. In order to give their children top priority, parents in Beijing have hiked up apartment prices near the best-ranking schools to two or three times that of other areas. Media reports said good schools in big cities could hardly place children whose grandparents already owned an apartment in the district (who are ranked after those whose parents own a local apartment), leaving renters and migrant children out in the cold.  

“I think the ‘equality’ policy aims to ensure ‘everyone has food to eat,’ rather than ‘everyone will eat [luxurious] abalone or shark fin,’” Qi Junjie, a well-known economics commentator said on his social media channel. “People who are hungry now just want to be fed first.” 

Butterfly Effect 

According to sociologist Cai He, another reason local governments are reluctant to loosen the restrictions on the ability of migrant children to access nearby public schools is that they worry a relaxed policy will increase demand and further burden their districts. In bigger cities, the best schools are generally concentrated in one or two districts.  

Zhou Feng is director of a Guangzhou real estate research institute run by Homelink, a leading Chinese realtor. He revealed that in the Dongshankou area of Yuexiu district, home to a large proportion of Guangzhou’s top-ranked schools, house prices have climbed to more than 70,000 yuan (US$10,650) per square meter, more than 3.5 times Guangzhou’s average house price based on China Real Estate Association’s 2016 statistics – regardless of how shabby, run down or old the houses were.  

“How could people who only spend several thousand yuan to rent a house enjoy the same rights as those who have spent millions? Even if the Ministry of Education agrees, we parents don’t,” Cao Gang, who is planning to buy an apartment near a good school in Beijing for his six-year-old daughter, told NewsChina.  

Truth be told, conflicts have already occurred between locals and migrant people as a result of education stress. With increased media coverage of the plight of migrant children in big cities, many Beijing locals have complained that too many outsiders have grabbed their resources, and said they were not willing to send their children to schools that service migrants.  

Earlier this month, renters and homeowners in a building in Shenzhen reportedly fought over the public resources of the building, including access to parks and parking lots. While owners said they had spent more money in the building and should have priority access, renters argued that since they rented their apartments from the government they should have the same rights to enjoy the common resources.  

After Beijing’s “equality” policy was issued, a local netizen posted on a popular internet bulletin board where parents discuss education issues, asking local landlords to increase rents. “We should not allow outsiders to seize our resources,” said the post. Although the author was criticized, some netizens saw his rallying cry as pragmatic. 

“I cannot decide on my rent before detailed rules are issued,” Guangzhou landlord Wang Xia told NewsChina. “I believe any landlord would charge additional fees if their renter wanted to use the enrollment quota bound to the house.” 

Her words were echoed by another local landlord, Lu Yang. “Rents will definitely rise,” he said. “If an apartment’s [enrollment] quota is used by the renter, that means their apartment will no longer have access to that quota for five years [according to the local policy], which will decrease the value of the house if the owner wants to sell it within that time period. Of course they will transfer these hidden costs to renters,” he told NewsChina.  

“You cannot imagine what people will do to exploit this policy,” said Wang Hong, head of the School of Professional Development and Research on Primary and Secondary Education at South China Normal University. “I’m worried that new problems would arise if the ‘equality’ policy was implemented amid the huge shortage of education resources,” Wang said. “Even though the government does not wish to drive up rents, how can it control the market?” 

“If the government enforces ‘equality,’ how will the schools and their heads find so many positions?” Wang asked. “Any policy will have unpredictable results if it is bound to education … the ‘equality’ policy will bring great difficulties if the government does not provide enough resources and work out supporting measures,” she added.  

At the time of writing, neither Beijing nor Guangzhou had released detailed implementation guidelines for the “equality" policy. The education bureau of Guangzhou refused NewsChina’s requests for an interview and instead directed enquiries to the Guangzhou Housing and Urban-Rural Construction Committee (GHUCC). But speaking on condition of anonymity, a source close to the GHUCC told NewsChina the “equality” policy had not been proposed or designed by the GHUCC, and that they could not predict any of its possible effects before the local education bureau clarified how it would be implemented.