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Wednesday, May 29, 2024

Lessons From the East: China and Housing

If you want to teach budding engineers about concrete, have them build a canoe. That way, they can isolate the extreme properties of concrete, and that is where learning takes place.

The same is true with business in China. It’s hardly a place that American business owners should hold up as an example of how to live in a free society. But watching enterprise thrive under extreme conditions is a great way to learn about the essentials of free markets.

And the construction of new housing is one of the most instructive areas in China today.

If you think parts of California have seen a housing boom during the past five years, you should see Beijing, whence I recently returned.

I counted 40 cranes , not birds , during the short ride from the airport to my hotel. Later, I learned more than 1,000 cranes rise above the city, many of them working around the clock. Other Chinese cities are the same.

Any California city would be hard-pressed to claim a dozen.

The scale of construction in China is unprecedented. New housing is the top priority. Not just in words, but in actions. In China, they know that talking about housing is not the same as building housing. Sticks are in the air.

As China embraces free enterprise, it is seeking to create a middle class. They know without housing and homeownership, they cannot be successful.

And the Chinese have come up with a novel way of meeting their housing goals: Encouraging homebuilders.

And Californians are helping. Chip Pierson of the Solana Beach architects, Dahlin Group, opened a Beijing office four years ago. They are designing housing projects and winning design competitions across the country. Their most popular homes are exactly the same as those you would see in any California community. Classic California designs with family rooms, large master suites, exotic bathrooms and high ceilings.

The only thing missing is the three- or four-car garage. The Chinese make due with a single garage and a bicycle.

Chip’s associate, Miss Lie Fei, showed me three projects, named Napa Valley, Yosemite and Forest Hills. Model decorations were designed by Ryan Young Interiors of Chula Vista. Beijing homebuilder, Kum Dai, told me he is selling homes for $250,000 to $1 million and many of his buyers pay cash , no mortgage.

Chinese homebuilders and architects are regarded as national assets. Not greedy developers.

All land in China is in government ownership as opposed to California where 50 percent is under the control of government agencies all the time, the rest part of the time.

Demand for new homes is so great that the government puts pressure on developers to meet deadlines and speed up delivery. Model homes must be opened in 90 days and the first deliveries within six months.

I asked Mr. Dai how long it took him to get his land entitled for a typical 200-home development. He said about one year. He could see the look of shock on my face when I told him a similar project in California could take 10 times longer. Even then, it might never get approved.

He did not know how Californians could build enough homes under that system. Neither did I, I told him. But perhaps he could ask a member of the Sierra Club next time he met one.

I asked him about development impact fees, and how much the government charges new homebuyers in additional costs. He replied there are no development fees. After all, wouldn’t that prevent more people from owning homes, he asked?

And surely newspapers that represent the working class would report that, wouldn’t they? When I told him most newspaper reporters and editors believed that making housing more expensive had nothing to do with how many new homes are built, he acted as if he did not quite believe me. Then suggested they had a thing or two to learn about business.

And they could learn it right there in China.

Litigation , there is no litigation. I asked him about NIMBYs, or not in my back yards, and protestors. He told me people who think new homes are a bad idea are not looked upon very favorably.

Perhaps they just need an adjustment in their feng shui.

Mick Pattinson is president of a California homebuilding company and a former president of the California and San Diego Building Industry Association. He also is a member of the Board of the National Association of Homebuilders.


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