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China's rapid urban migration has transformed its cities, bringing vast opportunities and serious challenges. In the face of swift urbanisation, affordable housing is one of the most urgent issues, particularly for low-income migrants. The surge in urban populations has driven real estate prices to new heights, exacerbating the struggle for migrant workers to find suitable accommodations. How has Shanghai's housing policy evolved to address the needs of its expanding migrant population amidst these escalating costs —and what challenges remain?

Beneath the Skylines: Migrant Struggles Amidst Shanghai’s Housing Crisis

The influx of migrants into China's bustling financial centre, Shanghai, has placed a significant strain on Shanghai, impacting public services and environmental quality. Many migrants, who return to their hometowns periodically, cluster in specific urban areas, driving intense regional growth and urban transformation. In response to these pressures, Shanghai has embarked on extensive residential development projects aimed at accommodating the growing migrant population. Though innovative and ambitious, these efforts prompt serious concerns about sustainability and the long-term viability of Shanghai’s urban planning strategies, raising questions about whether they are truly forward-thinking or just reactive.

Shanghai's housing crisis is deeply rooted in historical and systemic issues, with rural migrants bearing the brunt due to stringent hukou restrictions. Migrants, crucial to the service economy, often live in informal and overcrowded housing, from "urban villages" to basements, due to their lack of urban hukou. This forces them into second class citizens, barring them from property ownership and adequate public services. Despite recent reforms, nearly four million unsold apartments and ten million unfinished homes highlight the persisting affordable housing crisis. Redevelopment projects, while modernizing parts of the city, have displaced many lower-income residents, further exacerbating their living conditions and limiting economic opportunities

Cuts in mortgage rates or down payment requirements are insufficient to revive housing demand, as they do not address the fundamental barriers imposed by the hukou system. The property slump and the broader economic recovery hinge on resolving these deep-seated inequalities. Current hukou reforms, although easing some restrictions, fail to substantially improve migrants' living conditions or provide meaningful access to opportunities.

Shanghai’s Housing Evolution: From State Stewardship to Socio-Economic Stratification

Shanghai's dramatic shift from state-controlled to privatized housing over the past seven decades has entrenched systemic inequalities. Initially, from the 1950s to the 1980s, housing was allocated through public or subsidized units tied to work units, which, despite being equitable, struggled to meet all needs. The 1984 relaxation of migration controls, which introduced temporary domicile certificates apart from the hukou system, spurred a surge in rural-to-urban migration, fueling Shanghai’s urbanization and economic growth.    

In the 1990s, Shanghai’s housing privatisation allowed existing residents to purchase subsidised homes, while newcomers faced steep private market prices. This shift exacerbated homeownership disparities and led to the redevelopment of low-income neighbourhoods into commercial areas, displacing many to the outskirts. Although framed as an economically necessary adjustment, this move has, in reality, pushed the less affluent to the margins—both literally and figuratively.          

Shanghai's bid to become a global economic powerhouse has come at a steep social cost. Further in the mid-1990s, the city’s migration policies were designed to attract skilled labour with blue stamp hukou cards which enabled their legal relocation to the city. However, this approach further widened the gap between the haves and have-nots. By favouring skilled migrants and sidelining those deemed "unqualified," the city has fostered a segregated urban landscape. 

Government Interventions and Their Limitations

Shanghai’s housing market is in disarray, with real estate investment plummeting by 9.6% in 2023 and residential investments falling by 9.3%. The construction sector is in decline, with new projects down 20.4% and ongoing projects shrinking by 7.2%. Despite a 17% increase in completed floor space, this does not alleviate the deeper issues, as commercial sales dropped by 8.5%.        

High rents are a major concern; for instance, property agent Zhang Jing spends 4,000 yuan ($580) a month on a small apartment, half of his salary. This mirrors a city-wide trend of 5-10% annual rent increases. The national scene is even grimmer, with housing sales dropping 6.5% for the year and a dramatic 17.1% in December. The real estate climate index is at 93.36, signalling distress, exacerbated by the massive debt crisis of companies like China Evergrande. This crisis highlights that Shanghai's real estate troubles are systemic, eroding consumer confidence and economic stability with widespread national consequences.    

In response, the Chinese government has introduced various measures to stabilize the market. Shanghai plans to build thousands of rental homes for low-income residents and tech professionals nationwide, 750,000 new rental units will be added in 2022. The People’s Bank of China eased home buying restrictions, reducing down payments and mortgage rates. Shanghai also relaxed its rules for non-local buyers and lowered the required tax payment period. While these actions are designed to boost demand and stabilise the market, they only address symptoms rather than the systemic issues at play. Minister Ni Hong’s focus on affordable housing and urban renewal is crucial. Yet, the depth of the crisis suggests that these measures might be insufficient to fully resolve the underlying problems.

Redefining Shanghai: Striving for Inclusivity Amidst Urban Challenges

Shanghai must adopt comprehensive reforms to address its housing crisis and support migrants, who are crucial to the city's economy. Recognizing this need in 2001, Shanghai's Master Urban Planning (1999–2020) aimed to establish the city as a global economic powerhouse through a "multi-layer, multi-core, multi-axis" strategy. These plans largely failed to tackle overcrowding, with nearly half of Shanghai’s households still overcrowded and 16% experiencing severe congestion. The follow-up 2017-2035 master plan's ambition to make Shanghai an "excellent global city" is also hindered by the complexities of decentralised governance, which has fragmented decision-making and exacerbated challenges in managing land use and urban development.

To address these issues, Shanghai must overhaul the hukou system to ensure equal access to public services, develop inclusive housing policies with rent subsidies and mixed-income developments, and involve communities in redevelopment to prevent displacement. Essential measures include fostering public-private partnerships, providing microfinance for housing, strengthening tenant rights, repurposing vacant properties, and integrating sustainable urban planning. Additionally, targeted education and employment programs for migrants are crucial. Regular monitoring and transparency will drive equitable growth and social stability in Shanghai.    

Shanghai's housing crisis, rooted in deep historical issues, demands urgent action. Ensuring affordable housing and improving living conditions for migrants is not only an economic need but a fundamental human rights issue. The city thrives on the contributions of its migrants, and failing to provide them with equitable opportunities and decent living conditions will undermine both its social fabric and moral integrity. Addressing these challenges is crucial for Shanghai’s future as a just and inclusive global city.

This is Part 2 of the series on ‘Urban Integration: How China's Mega-Cities Are Handling the Migrant Influx’, exploring China’s recent household, education and social service policies and its impact on migrant access to urban resources. Read Part 1 here.