An ‘unceasing war’ on land development on the urban fringe of Beijing: A case study of gated informal housing communities

Cities 60 (2017) 139–146

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An ‘unceasing war’ on land development on the urban fringe of Beijing: A case study of gated informal housing communities Pengjun Zhao Prof. ⁎ Department of Urban and Regional Planning, Peking University, China

a r t i c l e

i n f o

Article history: Received 7 November 2015 Received in revised form 26 June 2016 Accepted 18 July 2016 Available online xxxx Keywords: Informal housing Gated informal housing community Institutional discrimination Urban fringe Beijing

a b s t r a c t The existing literature about informal development in China's cities is dominated by studies of conventional informal housing in urban villages, while a new type of informal housing, gated informal housing communities, has rarely been studied. The paper aims to contribute to the existing literature by discussing why and how these gated informal housing communities were developed, looking at the case of Beijing. The results of the analysis show that institutional discrimination against rural areas with respect to land use rights, revenue redistribution, policymaking procedures and the hukou-related social welfare system the major drivers of development of informal communities. In particular, informal development is influenced by the ways land value is captured by, compensated for and allocated to the state government rather than rural villagers in the process of its transfer from rural to urban land. For future policy, more institutional innovation or reform is imperative in order to adequately deal with the emergence of gated informal housing communities. Institutionally inclusive land and housing policies, rather than intense top-down control, are needed in China. © 2016 Published by Elsevier Ltd.

1. Introduction In the field of urban planning, ‘urban informality’ refers to modes of human settlement and trade or exchange that occur outside formal legal structures and processes. Urban informality has become a key issue in urban planning theory and practice (McFarlane, 2012; Porter, 2011). Not only is there a growing recognition that the informal housing and other sectors have negative effects on the local environment, but also that they have a significant impact on local economic and social development. In particular, these informal sectors usually have a strong relationship to the daily lives of the disadvantaged, such as migrants and low-income earners. In addition, urban informality is irreconcilable with mainstream planning theory. It is a form of illegal or unplanned urbanization which needs to be mitigated according to rational planning doctrine and planning laws. Informal housing and related property rights have increasingly attracted the attention of planners and politicians. ‘Informal housing’ refers to houses developed on squatted land or houses that have insecure land tenure, do not comply with building regulations, or have inappropriate infrastructure (Jimenez, 1985). Informal housing represents a large portion of the housing market in developing countries (The United Nations, 2004; UN-Habitat, 2003) and has been widely studied (Brueckner & Selod, 2009; Roy & Alsayyad, 2004; Smith & Scarpaci, ⁎ Corresponding author at: Room 3267, Building Yifu 2, Department of Urban and Regional Planning, College of Urban and Environmental Sciences, Peking University, 5 Yiheyuan Road, Beijing 100871, China. E-mail address: [email protected].

http://dx.doi.org/10.1016/j.cities.2016.07.004 0264-2751/© 2016 Published by Elsevier Ltd.

2010; Wu, Zhang, & Webster, 2013). Informal housing also has a significant effect in the European region. A recent report by UNECE (2009) stated that the informal housing problem is significant in almost half of the UNECE Member States (including the US), and affects the lives of over 50 million people. In China, the amount of informal housing has been growing rapidly, especially since the 2000s. It has been reported that the floor area of informal housing increased by 7.6 billion m2 during the period 1995 to 2010 (CICURC, 2011), equivalent to 8% of the total floor area of housing in cities and towns during the same period. In particular, informal housing is thriving in China's large cities. For example, in Beijing, where strict controls over informal housing have been implemented, a total floor area of 4 million m2 of informal housing was developed during the period 2006 to 2010. In the private rental market, informal housing accounts for an even higher share. Many researchers have conducted studies on informal housing development in China (Wu et al., 2013; Zheng, Long, Fan, & Gu, 2009; Zhu, 2002). However, this paper will further contribute to the existing literature in two ways. Firstly, the existing literature about informal development in China's cities is dominated by conventional informal housing in urban villages. However, a new type of informal housing, gated informal housing communities, has been rarely studied. Since the 2000s, a large number of gated informal housing communities have been developed on the urban fringe, even though many countermeasures have been introduced by the central and municipal governments. These new informal housing communities usually cover a large area and consist of high-quality buildings and living environment. The appearance of this new kind of informal housing reveals the growing

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tension between state control and village development activities in the rural areas. In order to fill this research gap, we conducted an in-depth analysis of gated informal housing communities in Beijing. These newly developed gated informal communities could provide fresh input concerning the unceasing conflict over land development on the urban fringe of Beijing and other cities in China. Secondly, many researchers have claimed that the existing dual land tenure system is a primary factor causing informal development in China (Deng & Huang, 2004; Ho, 2005; Tian, 2008; Wang, Wang, & WU, 2009; Zhang, Zhao, & Tian, 2003; Zhu, 2004). However, this may not be the complete truth. The existing dual land tenure system has been present in China since the 1960s. As such, why has informal housing grown so rapidly only in recent years? This suggests that the existing dual land tenure system may be a precondition rather than a direct factor, or at least not the only factor, in the emergence of informal housing. There are other factors influencing the development informal housing. We argue that institutional discrimination could be a major factor behind the increase in informal housing development, especially with respect to gated informal housing communities. It is believed that institutional discrimination against disadvantaged groups plays an important role in creating informal housing in developing countries (De Soto, 1989; UN-Habitat, 2003). However, this is often neglected by researchers studying the newly emerging gated informal communities in China. In this paper, several major forms of institutional discrimination against rural areas will be discussed, including: discrimination between urban and rural areas which is enabled by the hukou system; the unfair distribution of incremental value from farmland development between farmers and governments; and the imbalance in fiscal rights and responsibilities for local development between the central and local governments. The key research question in our study is how these forms of institutional discrimination affect the formation of gated informal communities. The findings and conclusions of this paper will bring our existing knowledge of informal development in China up to date. 2. Literature review: discrimination

Informal

housing

and

institutional

Informal housing is one of the typical aspects of urban informality. It refers to housing developed on squatted land, housing that has insecure land tenure or housing with quasi-legal land transfer. Such housing is usually built with no regard for ‘formal’ management procedures, such as following building regulations or providing appropriate infrastructure (The United Nations, 2004; UN-Habitat, 2003). Institutional discrimination refers to the unjust and discriminatory treatment of a group of individuals by formal organizations such as governments and corporations, financial institutions, public institutions and other societal entities. Institutional discrimination is typically codified into the operating procedures, policies, laws or objectives of such institutions. It is widely believed that institutional discrimination against one group with respect to land ownership or land use rights and related benefits is one of the major reasons for the appearance of informal housing or squats (Brueckner, 2013; Friedman, Jimenez, & Mayo, 1988; Jimenez, 1984). A lack of property rights for low-income or underclass people is a key factor ‘pushing’ these people to develop informal housing in the Middle East, Latin American and South Asia (Alsayyad, 2004). The institutional barriers to the participation of disadvantaged groups in land use or development policymaking is another main factor ‘pushing’ people to ‘spontaneously find’ an informal way of meeting their essential needs (Webster & Lai, 2003). In the case of China, there are several typical forms of institutional discrimination against rural areas. One is related to the land development management system. Urban land and rural land are treated unequally in the land market, as rural land (farmland and farmers' housing lots) is not allowed to be directly transferred in the land market but must first be sold to the state government, which usually offers a

much lower price than that of the market (Wang, Wang, & Wu, 2010). This is one of the major factors leading rural villages to develop rural land themselves. However, as a result of the institutional rules, the housing developed by villages on rural land is considered illegal. The hukou system is another typical form of institutional discrimination against rural people. The hukou is a resident registration system. According to hukou policy, the population of the entire country was classified into two categories: people with urban hukou and people with rural hukou. In the pre-reform era, a household's hukou served as the basis for the allocation of many goods and services, such as basic foodstuffs, housing and jobs, as those with urban hukou consumed more goods and services than those with rural hukou. After the 1980s, the hukou system was relaxed to a certain extent. However, in most cities, rural migrants are still not allowed to enjoy local urban services, including access to schools, social housing and government-subsided housing. In Beijing, those who do not have local hukou are not even allowed to buy a house on the open market unless they have worked and paid social insurance and tax for five consecutive years. This is another factor creating informal housing in China's cities (Zhao, Lu, & Woltjer, 2009). When it comes to the policy responses to such institutional discrimination, two different opinions are held by previous researchers. Many researchers argue that informal housing development should be led into the institutional arena and completely prevented through a legalization process (Martínez, 2014). However, others believe that squatting or informal housing development is not only a political activity but an economic activity because it provides economic and social benefits to squatters who are mostly marginalised in society (Pruijt, 2013). Therefore, it is not necessary to legalize squats or prohibit squatting completely, at least not to institutionalize informal housing development activities by subjecting them to a system of state legitimation. A sort of ‘flexible institutionalization’ which creates spaces for negotiation between the state and squatters is more suitable. It has been argued that socioeconomic inequities will also stimulate the development of informal housing. Firstly, a land tenure system itself reflects social and economic inequalities, as the disadvantaged usually only have limited land use rights or no land use rights at all (Galiani & Schargrodsky, 2010; Peters, 2004; Russett, 1964). Secondly, most informal housing involves settlements for low-income earners (UN-Habitat, 2003). Thirdly, informal housing developed by the disadvantaged themselves or their organizations (e.g. rural villages in China) may actually help them improve their living conditions or promote local social development. Hernando De Soto has argued that: ‘the informal economy (including informal housing) is the people's spontaneous and creative response to the state's incapacity to satisfy the basic needs of the impoverished masses’ (De Soto, 1989, p.14). This means that the social needs and economic interests of disadvantaged people could be the primary drivers of urban informality, including informal housing, if their needs cannot be met otherwise. 3. Method 3.1. The context of the gated informal housing communities We chose Beijing as a case study to explore the effects of institutional discrimination on the development of gated informal housing communities. There are two main reasons why we chose Beijing. Firstly, Beijing is the capital of China. As such, state policies that are designed to stop informal housing development should be strictly implemented in Beijing. However, gated informal housing communities are still being developed in the city. Our study of Beijing will clearly reveal the growing tension between state control and village development activities on the rural fringes of China's cities. Secondly, the number of gated informal housing communities in Beijing is much higher than in most other large cities in China. During the period 2006–2010, more than 4 million m2 of informal housing was developed in Beijing. This figure is higher than those for Shanghai, Guangzhou and other large cities which are thought to

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also have a serious problem with informal housing development. Beijing is thus a very typical and representative case with respect to gated informal housing development. Beijing has a land area of 16,410 km2 and its total population was 20.89 million at the end of 2012 (Fig. 2). Informal housing in Beijing has mainly been developed in suburban areas, and has primarily occurred in two stages in Beijing (Table 1). Before the 2000s, informal housing was mainly developed in urban villages on the urban fringe. The buildings were low-storey apartments or individual rooms, developed on the farmers' own housing sites and by villagers themselves. The geographical scale of this type of informal housing was usually small and the main beneficiaries were individual local villagers. The quality of this type of informal housing was very poor, often with very small rooms, and some even without a toilet, bathroom or kitchen. The rent for these houses or rooms was very low, with many migrants, the unemployed or young graduate students choosing to live in these informal dwellings. These urban villages with a large number of informal dwellings are often seen as ‘slums’ (Zhao, 2013). However, since the 2000s, a new type of informal housing, the gated informal housing communities, has been developing rapidly on the urban fringe in Beijing. These gated informal housing communities have different features from traditional informal housing. Firstly, in relation to location, informal housing developed in urban villages is mainly found relatively close to the city centre or the main urban area, while gated informal housing communities are usually located on the rural area and outer suburban area. Secondly, with respect to price, informal housing in urban villages is usually much cheaper than common commodity housing. However, some informal houses in informal gated communities are spacious villas, which have a relatively higher price than other informal housing and common commodity apartments, although their prices are much lower than common commodity villas. Thirdly, in relation to developers, informal housing in urban villages is built by individual villagers, while the gated informal housing communities are usually developed by rural village committees in the name of a village or collective enterprise. The houses in these gated informal communities are on average quite spacious, and there are basic urban facilities such as shops, as well as gas, heating, electricity, waste collection and parking. The living conditions in these informal communities are much better than the informal houses in urban villages. Fig. 1a shows the largest informal housing community in Beijing, Super Jade Garden (Taiyuyuan). It has a land area of 133 ha. The total floor area of housing in the community is 2.5 million m2, accommodating 30,000 residents at the end of 2012. The price of informal housing in these communities is higher than the

Table 1 The comparison of informal housing development before and after the 2000s. Before the 2000s

After the 2000s

Informal house types Main developers

Apartments or rooms

Geographical scale Locations

Individual low-storey buildings or rooms Urban villages in the urban areas On villagers' housing site

Apartments, townhouses, houses, villas Village, development companies Gated communities with several buildings Rural villages in the rural areas

Collectively owned land Main benefits Beneficiary Distribution of houses Quality of building Quality of living Rent price Source: the author.

Individual villagers

Rents Individual farmers

On farmland

Low

Selling Collective villages, villagers, developers Clustered and gated as new communities Relatively good

Low Lower

Relatively good Low

Sparse

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informal housing in urban villages. In some areas, entire informal communities of luxury villas have even been developed (Fig. 1b). For example, the villas built in the Xiangtang Villa community were valued at CNY 20 million on average. Although the price was higher than other informal apartments, it was still lower than a commodity villa located around that area. 3.2. Study cases The number of gated informal housing communities has grown rapidly, at an unexpected speed. At the end of 2013, the municipal government identified 108 informal housing communities that had been built since 2008, with the total floor area of informal housing in Beijing reaching 110 million m2 by November 2013. Fig. 2 shows the distribution of informal housing communities identified by the municipal government. There were no informal communities in the central urban areas, with 76% of the informal housing communities located in the urban area. Previous studies have found that it is in this area in which sprawling development often occurs in Beijing (Zhao, Lu, & de Roo, 2010). We will examine the effects of institutional discrimination on the development of gated informal housing communities through a descriptive analysis of the 85 cases located in Beijing. This entails a general or overall analysis of the circumstances surrounding these cases. We have also undertaken detailed surveys and interviews in three of these gated informal communities. Some of the interview results have already reported in Zhao and Zhang (2016). In this study, we focus on the general and overall situation, introducing some details relating to all of the communities. 4. An analysis of the effects of institutional discrimination 4.1. Land tenure system and informal housing As introduced above, the existing land tenure system is widely believed to be the main factor behind informal housing in China's cities, including Beijing. China has a dual land tenure system in which land ownership is separate from land use rights. Land ownership is divided into two categories: state-owned land and collectively owned land. Individuals, single legal entities and other organizations can only acquire land use rights. In the centrally planned system in the pre-reform era, housing and development land were allocated through administrative orders that were determined according to the economic plan. Land was not considered a commodity and had no ‘value’ (or market price) (Ding, 2003). Housing was seen as a form of social welfare rather than a commodity and it was provided to all employees for free or at low rent by Danweis (Ma, 2004). Housing ownership was dominated by public ownership. Since the 1980s, when urban land reform and housing reform were implemented, market rules mediated by price mechanisms have emerged in the allocation of land use rights and housing ownership. As a result, land markets and housing markets have now emerged in China (Chen, 1998; Dowall, 1993). In the urban land-market reform process, land use rights have been separated from state-owned land. Land use rights can now be transferred according to a determined monetary value (Walker & Li, 1994). At the same time, non-government organizations and developers have been given legal access to a land use right transfer system (Xie, Parsa, & Redding, 2002; Zhang, 2000). However, collectively owned land has been treated unfairly in the process of land marketization, as only the land use rights from stateowned lands are allowed to be transferred. In other words, stateowned lands have full land use rights and can be sold on the market for urban development under the management of urban planning. Collectively owned land is not allowed to be sold on the market for urban development, and this limits land use rights. Collectively owned land in rural areas includes farmland and land on which farm houses are

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a

b

Fig. 1. Two examples of gated informal housing communities in Beijing. Note:1) source: Google Earth; 2) a. the Super Jade Garden (Taiyuyuan), and b. Xiangtang Villa.

built. The Land Management Act of China states that: ‘the land use rights of collectively owned land in the rural areas must not be sold, transferred or rented for non-agricultural use’. If a piece of collectively owned farmland in a rural area is sold for housing development, it must be first transferred into state-owned land. This means that the farmland has to first be given back to the state, and then the respective municipal government will sell the land on behalf of the state. In actual fact, land transfer from collective ownership into state ownership is a process of expropriation by governments. In most cases, the process is manipulated by the government and practised by private developers. Of course, farmers would sell their land use rights if the compensation was fair, as discussed above. However, the reality is that the compensation provided by municipal governments for expropriating farmlands is much lower than the price for which the land is sold on the market by the municipal government. As a result, villages, or even individual villagers, tend to build houses on their farmlands and sell these houses themselves in order to gain economic benefits from their land. This is where informal housing occurs. Like commodity housing, informal housing developed by a village or a developer in a rural village can also obtain a Housing Ownership Certificate. However, this certificate is issued by the local township council and is considered illegal by the municipal and the central governments. In addition to farmland, sites on which farmers' houses are built are also not allowed to be transferred. This is because the land is collectively owned, although the farmers have ownership of the individual houses. This means there is a separation between housing ownership and the ownership of the land on which the house is built, which is also the case with houses and apartments developed on state-owned lands. However, a commodity house on state-owned land can be freely sold or transferred to any buyer in the market. There is full housing ownership. A farmer's house on collectively owned land in rural areas is not allowed to be sold on the market. It may only be transferred between villagers who live in the same village. This means that there are only limited ownership rights for farm houses. The houses which villagers build on their own sites are also seen as illegal. This type of informal housing is very common in urban villages in Beijing (Wang et al., 2009). One of the reasons for the emergence of these informal houses in the urban villages is that they can bring rental income to local villagers. For example, in Beijing, informal housing owners may receive a monthly rental income over CNY 10,000. In some cities, for example in Taiyuan, the villagers who rent informal housing have become high-income earners, a group that is usually dominated by government officials, state-owned enterprise officials and university lecturers (Liang, 2013).

4.2. Who develops gated informal housing communities? These gated informal housing developments are initiated by rural villages or developers. In practice, a village committee manages the development of the gated informal housing communities. These village committees constitute a form of local governance within a municipality in a rural area. Each village has one committee, which is responsible for the daily management of the village under the supervision of a township council, which is another type of local government body within municipal government. A village committee is composed of representatives of the village who are selected by the villagers themselves. The leader of the village committee is the secretary of the Communist Party in the village branch. There is a clear development process for an informal housing community. Firstly, village committees submit an application to a township council for urban development in the name of village renewal or building a new socialist village. A kind of development permission fee is paid by the village to the township. In most cases, the township will permit the development application. Afterwards, the village committees will set up a special development organization dealing with the development of the informal hosing. The leader of the organization is also the leader of the village. Village committees develop informal housing in different ways. One method is to sell collectively owned land to developers and gain one-off revenue from the land sale. The developers are then responsible for developing, building and selling the housing. These developers are usually not state-owned enterprises because such enterprises can be easily and strictly controlled by the central government and the municipal government. Therefore, the developers are usually township enterprises which are owned by local villagers or local village leaders. For example, the developer of the Waterside Villa Community is Hongfu Group, which is a township enterprise. The township enterprise is led by the leader of the township, who gives permission to develop informal housing to villages. Another method involves the village committee developing informal housing themselves. In this case, they only need to sub-contract the construction work to private companies. After the informal houses are built, village committees then sell the housing themselves or through real estate agents. The village committees decide the prices for which the housing should be sold, and also organize their own community service companies to operate the business of maintenance of the informal housing community's public properties, for example, cleaning, parking and gardens. The residents must pay a body corporate fee for this. Development undertaken in this way provides much greater benefits to

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Fig. 2. Distribution of informal housing communities in Beijing. Source: the author, edited from government documents.

the village committees than the method of selling land to developers. There have been other cases in which informal housing was developed by a joint partnership between developers and the village, where the latter contributes the land as an investment in development. The villages then receive economic benefits in terms of the share of this investment. In Beijing, over 60% of informal housing communities have been developed by private developers. More than 30% have been directly developed by village committees (Fig. 3). Those who buy informal housing will receive a contract from the village committee. The contract is signed by the leader of the village and stamped with either the official administration seal of the village committee or township government. The contract ensures that the buyers have property rights to the informal housing developed by villages. However, the contract is seen as illegal by the municipal government. Why does the municipal government have no strict control on development actives in townships? This is mainly due to the process of political decentralization which has been underway in China since the 1990s. This will be discussed in the following section.

Fig. 3. Informal housing development agents. Source: the author, edited from government documents.

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4.3. Why are gated informal housing communities developed? The pursuit of economic interests by local villages is the most important reason for the development of informal housing communities. Over the past decades, economic inequality between urban and rural areas has been growing in China, including Beijing. Since the 1950s, an urban-rural dualist system and state-owned enterprise system operated as two major pillars of the socialist economic system. In the urban-rural dualist system, national economic development opportunities, investment and related sources were poured into cities rather than rural areas. As a result, cities have better roads, communication, medical and education services than rural areas, meaning there are now severe social inequities between urban and rural areas in China. The hukou system was also introduced to maintain the urban-rural dualist system. As introduced above, the hukou system divides the population of the whole nation into two categories: people with urban hukou and people with rural hukou. Before the 1980s, rural residents were not allowed to migrate freely to the city. People with urban hukou consumed more goods and services than those with rural hukou. This system was seen as an ‘invisible’ wall dividing urban and rural areas (Yang, 1993). Since the 1980s, a series of policies have been initiated to promote the development of rural areas and reduce the social inequalities between urban and rural areas. In particular, following the sixteenth and seventeenth CCP (Chinese Communist Party) National Congresses, convened in 2002 and 2007 respectively, a national urban-rural integration strategy was launched in order to achieve harmony in the development of urban and rural areas. The problems with the agricultural sector, rural development and farmers' quality of life were seen as three vital issues, ‘sannong wenti’ (‘three problems in rural areas’). As a result, there was a growing and strong need for social and economic development in rural areas. However, apart from abolishing agricultural taxes and slightly reforming the medical insurance system, to date, few practical policies have been introduced to increase rural residents' income. In the Beijing municipality, the annual income of rural residents is on average much lower than urban residents. The income gap between the rural and urban areas has been growing even more rapidly since the 2000s, with the annual income ratio between urban residents and rural residents increasing from 1.9 in 1996 to 2.2 in 2011. One of the main reasons for this that is the economic value of farmland is relatively low. For example, in Beijing, the average economic value of land producing agricultural products was approximately CNY 800 per mu in 2010 (1 mu equals 666 m2). In Beijing, rural villagers held on average 0.2 mu of agricultural land per capita. The loss of agricultural lands has been accelerated in recent years due to rapid urban expansion, with the amount of agricultural land decreasing by 1728 km2 between 1989 and 2010. As a result, many farmers must now look for work in the city. Villagers are keen to receive more economic benefits from their lands. The unfair distribution of the incremental value of farmland development between farmers and municipal governments is another reason for the emergence of informal housing. Villages and their residents prefer to develop housing on their land by themselves rather than transfer their land to the municipal government. This is because villagers receive poor compensation for ceding their land use rights to the municipal government, as mentioned above. Between 1995 and 2005, for example, the municipal government of Beijing expropriated farmlands totalling an area of 88.7 km2 in Chaoyang District. Such a huge land expropriation brought billions in revenues to the municipal government. It also led 107,300 farmers to lose their land and become urban residents with urban hukou (Phoenix New Media, 2013). These people received little compensation. Almost 40,000 of these villagers were of working age and were found employment in factories by the municipal government. However, 80% of these rural workers have since been laid off by employers or changed jobs. Many of them have become low-income urban residents. Meanwhile, the municipal government has benefitted from most of the incremental value in the land trade process.

In most cases, the villages received less than 5% of the sale price of the land as compensation. Clearly, the villages would receive greater economic benefits if they could sell their farmland directly to developers in the market. However, as we saw above, existing law does not permit this, with their farmland strictly controlled to ensure it is used for agricultural purposes. Only the municipal government has the right to expropriate farmers' land on behalf of the state and then sell the transferred farmland on the market. Consequently, villages tend to develop housing themselves. In other words, informal housing is one way by which villagers can recapture their farmland's value.

4.4. Why do township councils give permission for informal housing development? A town council is the direct management authority of rural villages. It is also the basic administrative unit of state governance in rural areas in China. In the process of informal housing development, these township councils have provided direct support, issuing permits to villages for informal housing development, as we saw above. Townships also issue certificates of housing ownership for informal housing even when this is refused by the municipal government. Townships are managed by a district or county council, which is a local body representing a municipal government in China, including Beijing. Why do townships give permission to informal housing development even though they know it is illegal? Apart from growing urban-rural inequalities, another major reason is that the imbalance in the distribution of fiscal rights and responsibilities between the central and local governments push townships to look for alternative sources of revenue. China has been undergoing an obvious transformation, which is characterised by three contemporary and interrelated processes: decentralization, marketization and globalization since the 1980s, (Chow, 2007; Wei, 2001). In the process of transformation, local governments gained more rights in making decisions about economic development, local investments, urban planning, environmental management, market supervision, social warfare management, and so on. Local governments also received more responsibilities for local investment (Wei, 2001). In particular, after the fiscal reform in 1994, the share of revenue income for local governments decreased drastically, from 77% in 1993 to 43% in 1994, and has remained below 50% since then. However, central government income grew quickly, while at the same time the central government's share of local management responsibilities continuously decreased in the context of decentralization. Local governments were left with more responsibilities for local development but had less control of fiscal revenues. As a result, local governments are keen to increase their existing revenue and find new sources of revenue. On the other hand, local government has tended to relax strict controls of development. Many local governments, including township councils, actually turn a blind eye (‘opening one eye’) to local land development, including informal housing development. (Zhao et al., 2009). Therefore, local governments in the form of township councils hesitate to control informal housing, although the state and the municipal governments have a very clear position on informal housing: it is illegal and should be stopped. In fact, they appear to hold an ambiguous position with respect to informal housing: on the one hand, they demonstrate strong opposition to informal housing development, while on the other, they issue permits which allow villages to develop informal housing. One of the major reasons for this is that the township gains economic or other benefits from such development. For example, in Xiangtang Village, the village committee needs to deliver the planning and construction fee, which is about CNY 10,000 per mu, to the township government in order to receive development permission from the township government. After the township government receives the payment, it gives the village an official receipt with a red stamp which justifies the rural land development.

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4.5. Who buys the informal housing and why? A recent survey done by the Workers Daily shows that in Beijing the people who have bought informal housing fall into one of five groups: migrants, local working class, real estate speculators, high-income earners and government officials who have land or tourist resources (Zhang, 2007). The migrant group is the largest, buying over 40% of all informal housing in Beijing due to low price of informal housing. Housing prices have been soaring since 2008 when the 29th Summer Olympic Games were held in Beijing. The average housing price in 2015 was seven times that of 2003. Soaring housing prices have caused serious problems with housing affordability for low-income earners (Fig. 4). However, the price of informal housing was about 20–30% of commodity housing on average in any one region. For low-income earners to meet the basic need for housing, it is worth the risk to buy an illegal dwelling. The high-income earners and real estate speculators are another major group who buy informal housing. Some high-income buyers buy informal houses as their second or third properties. Nearly 20– 30% of dwellings in informal housing communities have been bought for investment purposes. After speculators buy informal houses, they sell or rent them to other people. Since housing supply has fallen far behind housing demand, informal housing prices and rents have been increasing in a similar manner to commodity houses. For example, in the Super Jade Garden (Taiyu Yuan), the average price of informal houses increased from CNY 4600 per m2 in 2009 to CNY 8600 per m2 in 2013, nearly doubling. The rent for a two-bedroom apartment rose from CNY 1600 to CNY 3100 per month on average during the same period. For speculators, the economic benefits of informal housing are high. At the same time, it should be recognized that even though the rents and prices of informal houses have been growing, they are still lower than those of commodity houses. One of the results of housing speculation is that a large proportion of residents living in informal housing communities are tenants rather than owners. For example, in the Super Jade Garden, 35% of residents were tenants in 2011 (Liu et al., 2008). 5. Conclusion In China, institutional discrimination by the state against rural areas in relation to land use rights, revenue redistribution, policymaking procedures and the hukou-related social welfare system have become the new drivers of development of informal communities on the urban fringe. The unfair distribution of the incremental value of farmland between farmers and governments is a major reason why villages prefer to develop informal housing. The rapid growth of informal housing has been strengthened recently by increasing inequities in social development between urban and rural areas and the development needs of local villages. For many villages, the development of informal housing has become one efficient way of promoting local social and economic development and improving the quality of life of the villagers. To

Fig. 4. Housing prices and income gaps between high and low-income earners in Beijing. Source: the author, edited from Beijing Statistical Yearbook (BSB, various years).

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some extent, informal housing in China is the result of local villages' spontaneous response to the state's incapacity to satisfy the basic need for social development in rural areas. These results from Beijing shed light on the debate over the capture of land value and the issue of social equity. It is widely agreed that incremental increases in land value arising from urban development should be captured for future investment. However, one key issue facing planners is how to create equal opportunities through the planning system for different groups to capture land value in a fair way. In China, overcoming the existing institutional barriers to equitable land value capture between the state and rural villagers is a key issue. In other countries, for example, in the UK, finding a proper and fair way to distribute incremental value might also be an issue, for example, in relation to the betterment levy. Wherever the issue arises, when it comes to land value capture, planning should pay more attention to the effects of the system on social equity. For future planning in China, it may be time to acknowledge the existence of informality, including informal housing, in the context of social and political transition. Governments should not ignore the benefits that informal housing brings to rural villages, the villagers themselves and low-income earners. Informal housing has become one of the main sources of dwellings for low-income earners, some of whom achieve their dream of housing ownership by purchasing an informal dwelling. Others are able to rent a spacious dwelling in an informal housing community, where the living environment is relatively pleasant. The demand for informal housing seems to have been strengthened by growing income inequity between the rich and the poor and soaring housing prices. In this sense, to some extent, informal housing in China is a spontaneous response to the state's incapacity to satisfy the basic need for housing or affordable living space in the current process of rapid urbanization. Stronger planning controls designed to tackle the issue of informal housing will not be equitable and/or efficient unless the institutional constraints of the existing land tenure system are addressed. Acknowledgements The paper is funded by the NSFC project No. 41571147. The authors thank Prof. Jieming Zhu for great comments. References Alsayyad, N. (2004). Urban informality as a "New" way of life. In A. Roy, & N. Alsayyad (Eds.), Urban informality: Transnational perspectives from the Middle East, Latin America and South Asia (pp. 7–30). Oxford: Lexington Books. Brueckner, J. K. (2013). Urban squatting with rent-seeking organizers. Regional Science and Urban Economics, 43, 561–569. Brueckner, J. K., & Selod, H. (2009). A theory of urban squatting and land-tenure formalization in developing countries. American Economic Journal: Economic Policy, 1, 28–51. BSB. (various years). Beijing Statistic Yearbook. Beijing: Beijing Statistic Bureau, China Statistical Publishing House. Chen, A. (1998). ). China's urban housing market development. Problems and prospects. Journal of Contemporary China, 7, 43–61. Chow, G. C. (2007). China's economic transformation (2 ed.). London: Blackwell Publishing Ltd. CICURC (2011). The real estate development report 2011. China Industrial and Commercial Union Real Estate Committee: In. Beijing. De Soto, H. (1989). The other path: The invisible revolution in the third world. London: I. B. Taurus. Deng, F. F., & Huang, Y. (2004). Uneven land reform and urban sprawl in China: The case of Beijing. Progress in Planning, 61, 211–236. Ding, C. (2003). Land policy reform in China: Assessment and prospects. Land Use Policy, 20, 109–120. Dowall, D. (1993). Establishing urban land markets in the Peoples Republic of China. Journal of the American Planning Association, 59, 182–192. Friedman, J., Jimenez, E., & Mayo, S. K. (1988). The demand for tenure security in developing countries. Journal of Development Economics, 29, 185–198. Galiani, S., & Schargrodsky, E. (2010). Property rights for the poor: Effects of land titling. Journal of Public Economics, 94, 700–729. Ho, P. (2005). Institutions in transition: Land ownership, property rights and social conflict in China. New York: Oxford University Press. Jimenez, E. (1984). Tenure security and urban squatting. The Review of Economics and Statistics, 66, 556–567.

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