China is home to 1.7 billion people, which makes it the most populated country in the world. Along with increasing number of immigrants entering the country, China has recently experienced a shortage in the housing market simply because land is very limited. In response to the housing situation the government announced a new step up urbanization campaign. Thousands of crowded neighborhoods are being cleared out in an attempt to free up space for urbanized neighborhoods. A large amount of migrant workers live in various container boxes in an area known as the "container neighborhood". These people not only live, but also conducts their daily business all in one container.
The new leaders of China is estimating to spend 6$ trillion on infrastructures such as buildings and houses. They are expecting about 400 million people to become urbanized in the future. However by investing in such infrastructures means that many people will become homeless in the short run. One of the main reasons why these people choose to live in such crowded areas is because of cheap rent. Most people cannot afford the high rent rates that will be seen in urbanized rental units (2,000 renminbi compared to 400 renminbi). By removing the villages with in cities is also removing the people who have been the heart of providing economic grounds for immigration.
Over the past couple of years crowded rental units within Beijing have been clearing up, which forces a majority of its inhabitants out. An important issue of such removal is the fact that it creates a shortage. As a result of limited housing, the rental price increases. In order for prices to be driven back down to equilibrium, the government or the housing market must produce more homes to meet the demands of the people. Another indirect effect of the shortage is that the cost of labor is beginning to rise. For decades, thanks to cheap rent provided by private housing has been able to keep the cost of labor relatively low. Therefore rent and labor can be seen as complimentary goods.
The cause of the housing shortage in China is partly due to the governments poor planning and also partly due to the increasing amounts of immigrants residing within the country. Perhaps government subsidies to contractors, could give them an incentive, while making it cheaper to build more homes. Another possibility is for the political party to focus on short term losses as well as long term gains.
link to article: http://www.nytimes.com/2013/04/01/business/global/in-chinas-urbanization-worries-of-a-housing-shortage.html?pagewanted=2&_r=0&ref=businessandeconomy
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