As housing prices in China's large and medium-sized cities continue to soar, policymakers should increase their efforts to provide low-cost accommodation for the urban poor.

The State Council recently approved in principle suggestions addressing the housing difficulties faced by urban low-income families. The policy framework states that all low-income earners will be covered by a low-rent housing system by the end of 2010, and that more low-rent accommodation should be provided through construction, purchase, renovation and other means.

This is a welcome policy move. It is belated recognition of the government's duty to ensure basic housing for needy families in urban areas.

Low-rent housing has been part of the country's social security system for years. However, implementation of this policy has been far from satisfactory. It was reported that the country has about 4 million families on minimum wages, but only 268,000 of them had benefited from low-rent housing or subsidies by the end of last year. Now, by including low-income families, the low-rent housing system will cover about 10 million families - 5.5 percent of those living in China's urban areas.

Lack of funding used to be the major sticking point for developing a low-rent housing system. Since 1998, only 7.08 billion yuan (US$932 million) has been spent on building low-rent housing across the country. To meet this basic need for the country's 10 million low-income urban households, the government needs to spend up to 50 billion yuan (US$6.6 billion) annually between 2006 and 2010.

Fortunately, China's robust economic growth in recent years has significantly fattened the national coffers, making it possible for the government to fund a massive expansion of low-rent housing.

The State Council's latest move is a signal that it's ready to increase expenditure on causes that allow all members of society to take a share in the country's development in a fair way. After all, basic housing for low-income families is an obvious measure of the country's progress in building an overall well-off and harmonious society.

Another benefit of an expanded low-rent housing system is that it will help prevent a housing bubble from developing. In June, new commercial housing prices in 70 large and medium-sized cities were up 7.4 percent year-on-year.

Soaring urban housing prices not only add to the pain of homebuyers, but also inflate asset prices to an increasingly risky level that could pose a threat to the country's sustainable economic growth.

More low-rent housing for families in need will directly reduce demand on the property market, and improve confidence in the government's commitment to stabilize housing prices.

(China Daily August 5, 2007)