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But already government targets are dropping as developers and local governments balk at expanding already hefty piles of debt to pay for projects bound to low, if any, returns, that will occupy land that might otherwise be sold to developers or industries at top dollar. Most affordable housing projects appear to be handled by local government contractors: smaller real estate developers are succumbing to the downturn or selling out to bigger players, while the biggest generally are shifting to nonresidential commercial real estate, or just biding their time. Corruption and problems with construction quality have further damaged the program's credibility. In eastern China's Anhui province, some affordable housing units had huge holes in the walls and floors. In other places, local officials have taken the housing for themselves. Luxury sedans parked outside gave them away. To hit their target last year of 10 million affordable housing starts, authorities included various other housing schemes, such as factory dormitories, resettlement for urban renewal and even some luxury housing, analysts say. "If you define it wide enough, you can hit your target," said Stephen Green, an economist for Standard Chartered Bank, based in Hong Kong. Available data suggest the impact won't compensate for weakening overall property investment. About a third of last year's starts amounted to only a hole in the ground, according to the Ministry of Housing and Urban and Rural Development. It cut the benchmark for housing starts to 7 million in 2012, while the target for completions rose to 5 million, up from 4.32 million last year. An analysis by Nicholas Borst of the Peterson Institute for International Economics found that financing for affordable housing would have to nearly double to compensate for lost growth if property lending remains level with last year. The central government says it is allocating 212 billion yuan ($33.6 billion) for the program, which coupled with bank lending and debt-financed local government outlays may keep funding on par with 2011. It is unlikely to double. With most projects located in remote suburbs with inconvenient transport links and few or no schools, hospitals and other social services, many potential buyers and renters seem unimpressed anyway. Potential applicants complain that the rents, at only a 10 percent to 20 percent discount, are too high. Others object to conditions requiring buyers to wait five years before they can sell, and to then hand up to 70 percent of the proceeds back to the government. Retired worker Zhang Biqi lives with her husband, mother and 30-year-old son in a 13 square-meter (140 sq. foot) downtown Shanghai apartment that is over 60 years old. "Housing is so expensive we don't dare to even look at the downtown projects being shown," Zhang said while wandering through a real estate exhibition. But after visiting various affordable housing compounds, she said she's not even considering applying. "It's just not convenient for my son's work. And considering the locations, the prices are not all that low," she said.
[Associated
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