hen local authorities in the city of Wenzhou, Zhejiang Province, recently announced that local homeowners would have to pay a fee worth two-thirds the value of their homes to renew their 70- year land use leases, it led to a public outcry. Although officials later claimed that the published requirement was a “misinterpretation,” it offered no comfort for Chinese homeowners who have long wondered precisely what their property rights are.
Under current Chinese law, all urban land resources belong to the State. When this land is designated for commercial or residential use, developers and homeowners are granted a 70- year “land use” lease. What happens after this lease expires has changed alongside government policies. A decree issued by the State Council in 1990 stipulated that, upon the expiration of a 70-year land use lease, the State has the right to reappropriate the plot in question and redevelop it without compensating the former leaseholders.
Then, in 2005, China’s Property Law was amended with a stipulation that leaseholders can submit an application with the authorities one year prior to the expiration of their lease to request an extension. Whether such extensions, if approved, would be granted free of charge was never clarified, though the common public assumption is that a small administrative fee would be imposed.
The Wenzhou authorities’ recent announcement is believed to be an attempt to gauge public reaction to the levying of steep renewal fees, perhaps an indication that land use lease renewals might become an option for raising revenue at a time of continuous economic slowdown. Uncertainty over the land use lease issue has not only fomented persistent public anxiety among homeowners, it has also exposed how the authorities could abuse their monopoly on urban land resources to further squeeze the general public.
After three decades of economic liberalization that created a booming real estate market, China still lacks any effective protection of private property rights. Under the current legal framework, only the property rights of the State, not individual citizens, are seen as sacred.
The authorities must acknowledge that home ownership is of paramount importance to every Chinese family. In recent years, soaring housing prices, largely a byproduct of so-called “landgrant fees” levied by local governments, have been a major public grievance and a source of political instability. As growth in the real estate industry has substantially slowed, depressing government revenues, the authorities have started to contemplate levying a property tax on homeowners. Critics have responded by asking how the State could require those technically leasing their homes to pay tax on land resources they don’t in fact own.
As the central leadership has repeatedly emphasized that it aims to establish effective rule of law with its ambitious reform program, it should take concrete action to demonstrate respect for people’s property rights and acknowledge popular sentiment on this issue by pledging that 70-year land use leases will be automatically renewed upon expiration at no substantial cost. If the authorities continue to prevaricate, or even begin to seriously consider dredging yet more revenue from people who have, in most cases, already sunk their life savings into their homes, disastrous economic and political consequences could follow, further eroding popular trust and confidence in other reform pledges.