How to promote house-for-pension scheme

Recently, the State Council issued a proposal promising a complete social care network for people over the age of 60 by 2020. One solution proposed is the house-for-pension program, which commonly known as “reverse mortgage". Under such program, the elderly can deed their house to an insurance company or bank, and get paid every month depending on the house value and the applicant’s life expectancy. Though the financial institution has the ownership of the house, senior can still live in his/her house.

As a supplementary option, house-for-pension program in China may mainly serve the childless and elders with deceased children only having one house. After taking out the reverse mortgage, these elders can improve their lives.

However, such program faces great challenges. The first is China’s 70-year leasehold for real estate. Though The Property Law issued in 2007 regulated that the leasehold can be automatically extended, the cost of lease extension is not specified. Also, volatility of the property market also adds to financial institutions' hesitation over the program as they worry a possible plummet in housing prices may undermine their interests, especially when there’s great potential risk of the realty bubble bursting. With uncertainties of policy and property market, several house-for-pension pilots carried out several years ago finally all failed without any achievement.

But even so, it is feasible for the government to seek other ways to make house-for-pension scheme easier for the retired, and allowing people to use their property as a means to increase their pension.

For the current living distribution of population, a kind of mismatching exists: for young people who go to work in downtowns, they live in the suburbs, and they rush about every day. And seniors live in houses with an area of 40 or 50 square meters in city centers. For seniors living in Chinese cities, what they need is fresh air, sports fields, greenbelt, and forests etc. which are very rare in city centers. In city centers, there are large supermarkets, cinemas, KTV, various hotels, and even convenient traffic is not their musts due to their lack of going out.

Therefore, for a senior who has only one set of house, through the ways of renting or replacement, living out one’s life in retirement in the suburbs, the land rent price premium between city centers and suburbs can provide them more abilities to pay and can raise their living standards. And what only needs the government to carry out the system design is to promote the feasibility of area exchange. Of course, such a mode for living out one’s life in retirement can only benefit the seniors living in urban core areas. But due to historical reasons, the situation that seniors live in urban centers is actually very common.

Then, what obstacles need to be overcome for such a system design?

For real estate projects, we may know from common sense that for a good real estate for seniors, there should be handrails in rooms, the corners should not be sharp and smooth treatment should be carried out for them, and in rooms there should be multiple calling devices for an alarm. In case of the permission from an owner, the community property can check the situation in rooms through monitoring, there is the design for the convenience of wheelchair entrance and exit, and elevators should be suitable for stretchers etc. Taking Shanghai as an example, for the current so-called “houses for the elders” in suburbs, the facilities of the real estate projects themselves do not aim at seniors, for the supporting of parks, hospitals, vegetable markets, transport and sport fields, it is the further problem that the developers cannot solve by themselves.

Therefore, what the government should do is to promote intensification and scale, turning the matter of establishing aging communities in outer suburbs into a profitable matter. For example, for taxes and dues, privileges should be given for houses that are suitable for seniors to live in; privileges should be given for developers for gaining the land, and the practice may imitate the subway real estate, parks, restaurants and parent-child amusements should be developed, utilizing the consumption abilities of seniors and the group of their visitors. For matters beyond the abilities of developers, the government should provide supporting hospitals; public transport supporting should be established for the convenience of the trips of seniors and the visits of their children.

In brief, to smoothing the life improvement of the elderly after retirement by moving from downtown to suburbs, government’s policies are the key.

On the one hand, intensification and scale are promoted through policies to reduce costs for the elderly living in suburbs and cause that the price premium of districts can afford the cost for decent life. On the other hand, the supporting construction led by policies can also form the effective supply that is needed for seniors. Finally only when both of them play roles together, can the feasible house- for-pension program be carried out.

On another level, the problem is the psychological factors. Under the market circumstances of a modern society, based on the consideration of costs, scale and intensification is required, and the requirement for concentration is needed. Viewing from a certain sense, for hospitals and sanatoriums, one big role is for concentration and separation, peeling off “children”, “seniors” and “patients” from other people, and they are intensively put into the specialized social setting up of schools, nursing homes and hospitals, liberating labor force and facilities. Such a practice is very “efficient,” but it is not humanistic. Living in nursing homes, aging communities is like living in hospitals, one person can often encounter the death of the surrounding people, and the psychological effect is genuine. Therefore, this certainly will cause the instinctive disgust of seniors on nursing homes. But the community environment that “does not aim at seniors,” i.e. the “home-based care for the aged” in general meaning, not only is located in city centers but also is very expensive viewing from the current reality due to that the services can not realize intensification.

Originally published on http://www.chengdu.cn | 2013-9-17