Baishizhou: a tale of Shenzhen’s housing challenge

Shenzhen’s housing policies have been the focus of intense online discussion in recent months, with many commentators and analysts comparing them to Hong Kong’s. The city’s plans to build 1.7 million new homes by 2035, at a rate of more than 80,000 per year, are unthinkable for Hong Kong, where the government has said it hopes to build 10,000 new social-housing units in the next three years. Moreover, Shenzhen has made it clear that 40% of its housing supply will be earmarked for subsidized housing – in comparison with its neighbor, where 29.1% of households live in public rental housing and another 15.5% in subsidized home ownership housing.

However, Shenzhen is not without challenges of its own in achieving these goals. And sometimes, examples come to light showing the complexity of the city’s housing market. One such case is the redevelopment of the Baishizhou neighborhood.

The largest urban renewal project in this city of 13 million registered residents goes to the heart of its challenges in managing growth: the large number of residents who do not have a hukou, or household registration. There are believed to be as many as nine million of them in Shenzhen, based on recent data compiled by the city government through advanced surveillance technology. In other words, Shenzhen’s real population is 22 million.

As Shenzhen continues to grow, the mainland’s richest city faces tough choices in how to manage the explosion of its population. Despite being constrained by tight land supply after 40 years of breakneck growth, during which the once-sleepy farming and fishing village became a beacon for migrant workers, Shenzhen is renowned for its welcoming policy toward new arrivals. It remains China’s fastest-growing city, adding 498,300 new residents last year alone.

Recently, however, it has become clear that Shenzhen cannot continue like this. As the city strives to live up to its designation as a Pioneering Zone for Socialism with Chinese Characteristics, it is having to become more choosy in whom it allows to live here. Housing policy is increasingly being focused on ensuring the cost of living remains competitive with other cities, especially Guangzhou, as well as the two other Tier-1 cities of Shanghai and Beijing. Why? Because, lacking elite universities, Shenzhen needs to continue to be a magnet for talent graduating from top tertiary institutions around the country. It can only do this, however, if it clears out parts of the city that have been covered by informal housing, so that it can take better control of housing supply, and keep a lid on rising prices and rents.

The result is that neighborhoods like Baishizhou are being redeveloped. But this is no easy task, as tens of thousands of residents are being forced out, making way for a new development that would clearly be less affordable to them. 

Shenzhen’s mounting housing challenge leads to neighborhoods like Baishizhou being redeveloped.

Winners and losers

With rumors of removal circulating for years, Baishizhou was first listed for redevelopment in 2014. However, it was not until June when tenants began to receive formal eviction notices. About 150,000 people, mostly migrant workers who moved to Shenzhen for manufacturing jobs, will have to find new homes, change jobs or even move back home, though official data put the number at 83,000. According to an online poll conducted in July, about half of 1,031 respondents said they may have to find another job, and they were concerned about their children’s education, SCMP reported.

On the day of a recent visit, the area seemed quiet. Yet local media reports said hundreds of tricycles and vans had recently been shuttling back and forth in the community, carrying and transporting luggage and furniture for those who are moving out. 

One man carrying luggage, who said he had been doing it for months but asked not to be named, said some landlords were not yet satisfied with the terms being offered. “A large number (of tenants) have moved out in July and August after the notice was issued,” he said. But the terms, which include swapping 1 sqm of self-built buildings for 1.03 sqm of redeveloped flats, plus an undisclosed amount in “compensation fee,” have apparently not been agreed to by some owners.

Hundreds of tricycles and vans had recently been shuttling back and forth in the community, carrying and transporting luggage and furniture for those who are moving out.

Yuan Sijia, who shares a flat with two other girls at RMB 1,000 a month each, has lived in Baishizhou for a year. She will have to move out soon, but it’s not easy to find a place near a commercial area with as low a rent as Baishizhou, she said.

“I have no idea when I have to move out, and where I can move to,” she said.

Indeed, not everyone is crying about the change. There are believed to be around 2,000 people who own a property in Baishizhou, and the amounts involved could be life-changing for them, especially those that built the properties back in the days when the area was rural.

According to China Newsweek, each local household in Baishizhou is estimated to own an average area of 500 to 600 sqm, with one in five owning more than 1,000 sqm. Real estate prices for new homes in the surrounding Nanshan district are worth more than RMB 100,000 per square meter.

However, none of them, until now, have been able to sell their properties – unless on the black market – because they were never registered officially with the city government. Now they stand in line for a windfall from the redevelopment buyout offer.

Baishizhou is not the only one of Shenzhen’s so-called “urban villages” – areas that grew in a haphazard manner over the years due to a surge in migrant workers coming to the city. These have come to cover around 31 percent of total developable land. Since 2009, many have been earmarked for massive renewal plans. According to its major economic scheme covering the years from 2016 to 2020, Shenzhen is planning to redevelop a land area of 30 square kilometres and renovate more than 100 urban villages.

Such urban villages, packed with shabby multi-floor buildings, narrow alleys as well as exposed electricity wires, are a feature not only of Shenzhen, but many Chinese cities that have experienced rapid population growth since the start of the Reform and Opening era in 1978. They have long been the targets of urban renewal plans, as cities seek to replace them with modern malls, hotels and high-end residential projects.

Baishizhou is Shenzhen’s largest. It has understandably been the key, most sensitive, focus of the city government’s plans for redevelopment.

The project, with an estimated developable area of some 3.5 million sqm, will mainly consist of 1.25 million sqm of houses and 2.17 million sqm of commercial premises with offices and shops.

Such urban villages, packed with shabby multi-floor buildings, narrow alleys as well as exposed electricity wires, are a feature of many Chinese cities.

It was recently awarded to a consortium of developers. The lead developer, Hong Kong-listed LVGEM, issued a notice to the Hong Kong Stock Exchange recently announcing that it had taken a stake in the local entity that had been granted the rights to develop the project. LVGEM has a track record dating back to 1998 in urban renewal projects, which account for 90 percent of the land it has developed. The company has gross margins as high as 50 percent, 30 percent higher than its rivals, according to Jiemian.

The company has not announced the final details of the project, such as launch date of construction, because it is still negotiating with property owners in the area.

Others in the surrounding neighborhoods look at the issue with a more realistic, yet nostalgic, view. Mr. Xu, a 77-year-old retiree who lives in the southern part of Baishizhou – which is not part of the redevelopment project – said he would miss being able to walk through the main street of the neighborhood where he has lived for 16 years in a 80-sqm flat with his wife and two daughters.

He also owns a 53-sqm flat nearby, which is currently shared by six tenants working as waitresses in the restaurants nearby, at RMB 4,000 a month in total. “The landlords (of the northern part) will earn a golden mountain – and of course I am jealous!” he said.

The 53-sqm flat owned by Mr. Xu is currently shared by six tenants at RMB 4,000 a month in total.

Changing times

How these landlords got to be in this position is an issue that the city government has struggled to deal with. It has chosen to be pragmatic.

Baishizhou has roots going back to the early 1990s. The late paramount leader, Deng Xiaoping, set off a frenzy of land speculation here in 1992, with his famous “southern tour” that reignited  the country’s Reform and Opening process. Shenzhen focused on the need to expand beyond its original Special Economic Zone boundary, and started a large-scale urbanization plan that acquired rural land-use rights from local residents. But in many cases, before the government could start to redevelop the land, the farmers themselves built multi-storey houses on it.

Like many aspects of development in a city growing at Shenzhen’s speed, the farmers were operating in a grey area. These buildings were never formally recognized by the government, which meant they could not be traded in the city’s property market. But they could rent them out – and they soon found strong rental demand from migrant workers.

The surge of migrant workers had created huge rental market in the urban villages.

It wasn’t until fairly recently that the pressure on the city’s land bank started to be felt acutely. As recently as the early years of the current decade, Baishizhou was still considered the “far west” of Shenzhen, a long journey by bus from Luohu (Lowu), site of the first cross-boundary crossing linking the city to Hong Kong. But then Shenzhen’s rise as a technology hub began to take off. Today, the 600,000 sqm piece of land, divided into northern and southern parts by the major thoroughfare of Shenzhen – Shennan Boulevard – is close to Shenzhen’s landmark theme park “Window of the World” and surrounded by some of the most valuable commercial real estate in Nanshan district, which is home to many of the city’s top technology companies, including Tencent and DJI.

While Baishizhou is awaiting its rebirth, there are a few other redevelopment projects that will likely take the media’s attention away from it. Ambitious designs, including tall skyscrapers, are coming to fruition in the Caiwuwei and Hubei villages, located in the Luohu district. Caiwuwei has been called “Shenzhen’s Manhattan” while Hubei, which has  buildings dating back to the Qing dynasty, is set to become a cluster of cultural facilities and transport projects with a large-scale underground area of 200,000 sqm.

Other urban villages in the Bao’an and Futian districts, meanwhile, are geared toward industrial-use projects, building bases for new industries in technology innovation, in collaboration with investors from Hong Kong, according to the developers.

What will Baishizhou become? Will it retain any of its old character? It seems unlikely. That is not the Shenzhen way. There is no room for nostalgia in this fast-growing city, where modern progress is not just a mantra, but an identity and a way of life.  

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