Five percent of income earned from land sales by China's urban authorities must be utilized to build low-rent apartments, according to a Ministry of Finance circular made available to Xinhua News Agency Monday.

The circular also requires municipal authorities to allocate more funds to low-rent housing in their annual budgets while the central government is to provide subsidies to local governments for such accommodation. 

Cheaper apartments are an essential part of China's housing security system. They're either built or sourced by the government and provided to poor urban families at discounted rents.

Previously, funds for low-rent housing came mainly from interest earned by the Public Housing Fund, which is a mortgage reserve paid by urban employees intending to buy their own houses and their employers.

According to the Ministry of Construction, the Chinese government has spent only 4.74 billion yuan (US$593 million) on low-rent housing since the early 1990s, benefiting just 329,000 households.

Prior to 1990 apartments were mainly provided by the government or employers, which means China has little experience of providing low-income housing since the country's real estate market was reformed to allow private sale and ownership.

As soaring housing prices in major cities have drawn public criticism of the country's housing policy, the central government has recently taken a number of measures to improve it.

To date 70 of China's 291 cities at or above prefecture level are not providing low-rent housing. A recent document ordered the 70 cities to establish a subsidized housing system by the end of 2006.

The new circular from the Ministry of Finance also encourages donations to the system by providing tax rebates to the donors.

(Xinhua News Agency July 18, 2006)