In Daxing District in the southern suburb of Beijing, 1.2km away from Yinghai station, the terminal of Metro Line 8, there is a closed community composed of 20 new residential buildings – runtang Yinghai. This is the largest collective land rental housing project in Beijing so far. At present, the project has been completed and filed. It is expected to provide shelter for nearly 7000 “Beipiao” and commuters in Beijing, Tianjin and Hebei after operation.
The rent income ratio exceeds 30%, the floating population accounts for nearly 40%, the housing rental market is in short supply for a long time, and there are a large number of collective construction land in the state of inefficient utilization in the urban fringe… The superposition of these factors makes the collective operating construction land an important starting point for Beijing to vigorously promote the construction of affordable rental housing.
Last July, the top-level design for the development of affordable rental housing at the national level was issued, which made it clear that all localities “give full play to the role of market mechanism” and “mainly use collective operating construction land” to develop affordable rental housing, and “the government will provide policy support for land, finance, taxation and finance”.
Subsequently, collective operating construction land with relatively low land cost has become the focus of raising affordable rental housing in many provinces. In addition to Beijing, the pilot work of “exploring the use of collective operating construction land to build affordable rental housing” is being carried out in first tier cities such as Shanghai and Guangzhou and large provinces such as Zhejiang.
In early February, the Ministry of housing and Urban Rural Development released the second batch of “list of replicable and popularized experience in the development of indemnificatory rental housing” (hereinafter referred to as “the list”), in which the Beijing runtang Yinghai project jointly invested and developed by China Resources Youchao and vision group was included.
In addition, the list also includes the government experience and practices of Shanghai, Guangzhou, Xiamen, Xi’an, Chengdu, Hefei, Zhejiang, Guangdong and other provinces and cities, involving many leading real estate enterprises such as Vanke and Longhu, policy and commercial banks such as CDB and CCB, as well as many local urban investment platforms State owned enterprises and other construction parties and relevant stakeholders of indemnificatory rental housing.
The Ministry of housing and urban rural development disclosed that 2.4 million affordable rental housing units will be built and raised in 2022. With the frequent emergence of various favorable policies at the local level, will affordable rental housing become a new outlet for strategic investment of real estate enterprises? What are the advantages of making use of collective operational construction land? How can the affordable rental housing project go out of the development path of “low profit and sustainable”?
collective land “entering the market” ushers in an opportunity period
Indemnificatory rental housing has the characteristics of small house type, low rent and no income threshold restrictions. It is conducive to solving the phased housing difficulties of new citizens and young people in large cities with large floating population and high rent, and controlling the increase of urban rent. It is the top priority of housing system construction during the 14th Five Year Plan period.
In order to realize low-cost development, collective operating construction land has become an important preparation channel for accelerating the development of affordable rental housing.
According to Kerui real estate research, for indemnificatory rental housing, if you want to obtain a net cash flow distribution rate of no less than 4%, the land price can only be equal to 5% ~ 8% of the land price of surrounding ordinary houses.
The newly revised land management law, implemented since 2020, has removed legal obstacles to the entry of collectively operated land into the market. In July 2021, the general office of the State Council issued the opinions on accelerating the development of indemnificatory rental housing, which made it clear to further improve the land support policy and explore the use of collective operating construction land to build indemnificatory rental housing.
At the same time, the “market entry” of collectively operated construction land is also regarded as an important way to promote the overall development of urban and rural areas and increase farmers’ property income. For example, Zhejiang, which is building a demonstration area of common prosperity, mentioned in the guiding opinions on steadily and orderly promoting the pilot market entry of collectively operated construction land (Exposure Draft) issued in December 2021, “We can explore the use of collective operating construction land to enter the market to build indemnificatory rental housing and profit-making projects such as pension, education, scientific research, medical and health care, culture and sports.”
With the emergence of supporting policies, some real estate development and asset operation enterprises smell the business opportunity of using collective operating construction land to build rental housing (hereinafter referred to as “collective rental housing”).
“Runtang Yinghai project adopts the land circulation development mode, obtains a series of government land, finance and other support policies, and forms a replicable model in terms of cooperation mode, business mode, product design and financing form.” Ling Lanyu, head of runtang Yinghai project, told China first finance and economics.
As one of the first 13 cities in China to carry out the pilot of building rental housing with collective construction land in 2017, the main mode of collective rental housing construction in Beijing is the village collective leasing the management right of collective construction land. In July 2020, Beijing Vanke Boyu Chengshou Temple project, the country’s first collective land long-term rental apartment project, was officially opened. The project is a cooperative development project between the rural collective and Vanke with the land management right. Vanke is responsible for all construction cost investment and obtains the 45 year operation right of the project. The village collective enjoys the minimum income and operation dividends.
The difference is that the land obtained by runtang Yinghai project has been transferred.
Prior to the transfer, the first-class development of the plot has been completed, which is the “clean land” sorted by the government, that is, the ownership of the land and aboveground attachments and buildings (structures) is clear, the compensation and resettlement are in place, there are no legal and economic disputes, the planning conditions are clear, and the basic conditions necessary to start the development are met.
Due to the completion of “entering the market” of the project plot, the separation of land ownership and use right has been realized, in which 100% of the use right is transferred to the project company. “The innovation of the project is that the private enterprise vision group and the central enterprise China Resources Youchao, as investment and construction enterprises, jointly took shares in the project company of the collective land, obtained the long-term land use right and won a more stable operation cycle.” Ling Lanyu said.
Ling Lanyu also said that although there is no great difference between the redevelopment mode of collective land after “entering the market” and the cooperative development mode in terms of income distribution, when financing, because the project company has complete property rights, the financing mode is more flexible, and funds can also be obtained through market-oriented channels in the future, such as issuing bonds. “Yinghai project has the conditions to be a real estate trust and Investment Fund (REITs). In the next few years, we will continue to explore in this regard, and strive to replicate the runtang Yinghai model and obtain more sources of funds.”
Many people in the industry told first finance that low-cost development is the main measurement basis for real estate enterprises to choose indemnificatory rental projects. Therefore, the layout of indemnificatory rental housing projects by using collective operating construction land has become a common choice for many leading real estate enterprises and other social capital.
In the second batch of list released by the Ministry of housing and urban rural development, another benchmark project mentioned in the aspect of “construction using collective operating construction land” is the Mudu project of Longhu Guanyu in Suzhou. The project is operated after the overall lease of Longhu Guanyu. Longhu Guanyu pays rent to the collective economic organization every year. The operation period is 15 years, and the village collective economic organization gives a decoration rent free period of 6 ~ 8 months.
In addition to the collective rental housing project in Suzhou, first finance and economics learned from Longhu that the Fuzhou Xiushan project of Longhu Guanyu will be officially opened next year. This project is the first collective rental housing land sold in Fujian and the first collective rental housing land sold by bidding in Fujian, It has been included in the first batch of “replicable and popularized experience list for the development of affordable rental housing” of the Ministry of housing and urban rural development.
As a long-term rental apartment brand of Vanke, the information provided by Vanke poyu to first finance and economics shows that at present, there are 6 collective land projects in poyu Beijing, with a total supply of more than 20000 rental houses. Among them, two houses with a total of 4000 houses have been opened successively, and the remaining four houses with about 16000 houses are expected to be put into market operation from 2021 to 2023.
It is worth noting that most of the housing enterprises involved in the construction projects of indemnificatory rental housing such as collective rental housing adopt or cover the mode of heavy asset operation. “Heavy asset operation can ensure stable housing supply, which is the root of leasing operation.” Ling Lanyu said.
long term financing channels are gradually opened
The housing rental industry is a low profit industry, especially for the indemnificatory rental housing projects whose rent threshold is constrained by the government’s guiding price.
Ling Lanyu told first finance that due to the stable business model of the project, runtang Yinghai has mainly obtained Shanghai Pudong Development Bank Co.Ltd(600000) long-term loans for long-term rental projects. In the process of issuing loans, Shanghai Pudong Development Bank has made many breakthroughs and innovations, providing great support for the development of long-term rental communities. In addition, in the project financing stage, loans were obtained in the form of mortgage management right and shareholder credit guarantee.
Bank loans and corporate credit bonds are the main ways for real estate enterprises to carry out debt financing in the field of Housing leasing. The threshold of traditional creditor’s rights is relatively high. As an emerging industry, housing leasing generally lacks enterprise credit. Due to the lack of high-value collateral, it is difficult to obtain bank loans.
The above opinions on accelerating the development of affordable rental housing also pointed out that financial support should be further strengthened. Increase credit support for the construction and operation of indemnificatory rental housing, and support banking financial institutions to provide long-term loans to self-supporting entities of indemnificatory rental housing in a market-oriented manner; Improve the loan statistics suitable for indemnificatory rental housing, and give differential treatment in the implementation of real estate credit management.
On February 8, the central bank and the China Banking and Insurance Regulatory Commission issued the notice on excluding the loans related to affordable rental housing from the concentration management of real estate loans, which made it clear that the loans related to guaranteed rental housing projects were not included in the concentration management of real estate loans, and encouraged banking financial institutions to increase their support for the development of guaranteed rental housing in accordance with the principles of legal compliance, controllable risk and commercial sustainability.
The people’s Bank of China said that in the next step, the people’s Bank of China and the China Banking and Insurance Regulatory Commission will accelerate the establishment and improvement of the housing rental financial system, continue to increase financial support for the construction of affordable housing and the development of the long-term rental housing market, and promote the virtuous circle and healthy development of the real estate industry.
In view of the fact that bank loans for affordable rental housing still belong to the subject of development loans, Li Yujia, chief researcher of Guangdong housing policy research center, said that according to the logic of development loans, up to 80% of the total investment is lent, and 20% is the project capital. The specific loan proportion is closely related to the main body of project construction, location, rental rate prediction and other factors.
Since July last year, the bank has increased its support for the construction and leasing of housing.
According to the second batch of lists released by the Ministry of housing and urban rural development, in terms of policy banks, CDB provides long-term credit products up to 25 years to support all kinds of Housing leasing enterprises and enterprises with idle land and houses to increase the supply of affordable rental housing through new construction, reconstruction and transformation. At the same time, it has done a good job in communication and docking with local governments, and has signed cooperation memoranda or strategic cooperation agreements with government departments and key enterprises in Sichuan, Anhui, Xiamen, Shenzhen and other places. By the end of November 2021, the development bank had supported 68 projects in Beijing, Shenzhen, Suzhou and other cities, with a credit of 43 billion yuan, an investment of 10.8 billion yuan, and supported the raising of 120000 houses (rooms).
In terms of commercial development bank, China Construction Bank Corporation(601939) is one of the first financial institutions in China to support the construction of indemnificatory rental housing. By the end of November 2021, China Construction Bank Corporation(601939) affordable rental housing loan credit was 93.881 billion yuan, invested 37.18 billion yuan, and supported the raising of 300000 units (rooms).
“Although the state strongly encourages guaranteed housing loans, due to the low interest rate of guaranteed housing, most of them are not guaranteed by collateral or high credit rating, and the enthusiasm of banks is not high.” Li Yujia said that it remains to be seen how large bank loans can be in the future. For a long time, banks will still focus on state-owned enterprises, central enterprises, large high-quality private enterprises and local urban investment platforms.
In addition to traditional debt financing, REITs has also been placed high hopes.
Recently, the national development and Reform Commission has clearly included affordable rental housing in the pilot of public offering REITs. However, a person close to the competent department of a local government disclosed to China first finance that at present, the threshold of REITs is high, and there are strict restrictions on the scale of underlying assets, the assessed net value of real estate, the rate of return on assets, property rights and other conditions, which makes it difficult for affordable rental housing to open up the REITs channel.
CCB long lease is a professional housing leasing operation company jointly initiated and established by CCB’s CCB, which is responsible for promoting the development of Housing leasing business in Guangdong Province, and Fangyuan group, one of the top 100 real estate enterprises. Hu bin, the deputy general manager of Finance and economics, told the company that the core interest of the company’s exit is to further pursue the safety of the company. In the previous five years, the development of indemnificatory rental housing is more reflected in the traditional Charter (second landlord) model. The average profit margin of a single project is only about 10%. At the same time, it does not have the conditions for capital withdrawal, which leads to that traditional capital did not invest too much in indemnificatory rental housing in the past.
“As an international financial city, Shanghai has set an example in this regard.” Hu Bin said that in Shanghai, the government transferred part of the land at a lower price to relevant real estate enterprises or housing leasing enterprises, designated for Housing leasing. On the one hand, it solves the problems of subsequent mortgage financing and REITs exit. On the other hand, the acquisition cost of enterprise property rights is low, which can be gradually balanced with the income from Housing leasing, and greatly improves the investment confidence and investment desire of social capital.
institutional “bottleneck” to be broken
“Even so, the burden on enterprises is still very heavy.”
Ling Lanyu said that in the collective operating construction land, the land cost of runtang Yinghai project plot is not low, and the taxes and fees generated in the early land transfer process have not been reduced, which also increases the financial pressure of enterprises. “The investment payback period of the project should be more than 25 years.”
When talking about the collective rental housing project in Guangzhou, Hu bin also said that the collective circulation willingness of local villages is low. Even if the circulation is agreed, for rental housing enterprises, the way to recover funds is monthly rent, but the one-time circulation cost is high and there is a capital mismatch.
“In addition, the past financial support policies can not support the transfer of land acquisition fees.” Hu bin added.
In addition to the existing tax relief policies, which make some social investment worry or wait-and-see psychology, the “bottleneck” problems such as the mismatch between the tenant demand of supporting facilities in affordable rental housing communities and the existing standards, the unclear disposal method of stock transformation projects, and the “getting in and getting out” of asset light operation enterprises also perplex rental enterprises.
For example, when using collective land to build rental residential communities, real estate enterprises basically follow the planning and design standards of ordinary houses (residential design code) and ordinary residential areas because there is no fully matched public supporting standards at the national level.
The game of underground garage proportion is a difficult problem caused by standard mismatch. Ling Lanyu said that due to the combination of complete set and non complete set in the preliminary planning of runtang Yinghai project and the comprehensive dormitory indicators, the final parking space ratio is 0.3 vehicles / household. The reduction of this proportion reduces the waste of underground space and cost support.
According to the opinions on Further Strengthening the planning and construction management of collective land rental housing in the city issued by Beijing in early January, residential rental housing is set according to the principle of 0.6 ~ 0.9 vehicles / household.
Previously, according to the state-owned land standard, the ratio of residence to parking space needs to be 1:1.
In the stock reconstruction project, the unclear disposal method is reflected in whether the original property can be demolished and the indemnificatory rental housing can be built on the premise of conforming to the planning and unchanged ownership.
“For example, in the reconstruction project of an old factory building, the construction party wants to change the plot ratio and demolish the original property for the sake of cost, rate of return or safety. However, there is no clear implementation rules for whether the demolition will be regarded as changing the historical and cultural features of the old city.” A person familiar with the construction of affordable rental housing told China first finance and economics.
For asset light operators, the institutional “bottleneck” is also reflected in the unclear exit mechanism. The above industry insiders said that for relevant enterprises, if they only participate in the operation without holding the project property rights, there will be barriers in financing, and it will be difficult to make profits if they cannot obtain a sustainable and stable source of funds. The intervention will cause an embarrassing situation of “getting in and not getting out”, which will damage the enthusiasm of participating enterprises.
Guangzhou you + Youjia international youth community recently participated in the first “work to rent” project in Guangzhou. Liu Yang, chairman of the company, said in an interview with China first finance that in the early stage of the development of indemnificatory rental housing, no matter what asset operation mode of real estate enterprises, it is by no means easy to explore a “low profit and sustainable” development path of indemnificatory rental housing business under the background that the government guided price is lower than the market price, which depends on greater efforts in policy and finance More precise support.
In addition, Liu Yang said that while vigorously developing affordable rental housing, local governments should also pay attention to the orderly connection between the housing security system and the housing market system.
“On the one hand, market-oriented leasing enterprises should focus on providing personalized products to meet the different needs of diversified leasing groups; on the other hand, the government and private enterprises should advance and retreat together.” Liu Yang said that if the government guidance price of affordable rental housing significantly lowers the market-oriented rental price, the original service quality and property level of market-oriented rental products will be affected, which is not conducive to improving the happiness level of rental groups.
