July 19, 2012 / 3:14 AM / 7 years ago

China state audit finds affordable housing cash misuse

BEIJING, July 19 (Reuters) - China’s local governments misused nearly 3 billion yuan ($471 million) of funds in 2011 earmarked for affordable housing projects, spending it instead on commercial housing and infrastructure, the National Audit Office said.

The audit found 21,000 ineligible families living in affordable housing in 42 cities and counties last year, while 14,600 designated affordable housing units were empty for over half a year in 32 cities and counties.

“There were 22 agencies using 2.955 billion yuan of project funds in non-affordable housing projects,” a report on the National Audit Office website, www.audit.gov.cn, said.

The report said about 2.65 billion yuan had been returned from 11 agencies and 3,856 of the ineligible households in seven cities and counties had been disqualified from affordable housing. It did not specify what disqualification entailed.

The report added that 209 units of idle affordable housing in two cities and counties had been sold or rented since.

The report reviewed affordable housing projects in 66 cities and counties from November 2011 to March 2012.

Funding shortages and management flaws have dogged Beijing’s ambitious $800 billion plan to build 36 million government-subsidised homes for low-income families between 2011 and 2015.

Many investors see China’s public housing programme as key to its economic health. They hope widespread building of affordable homes can take up the slack of falling private sector development in a slowing economy.

But investors also have doubts about the financing capacity and political will of local governments to invest in public housing at a time when a cooling economy and property market are denting revenues. Local government finances rely heavily on revenues from land sales transaction taxes.

China aims to start building 7 million public homes in 2012 and to finish 5 million in the year. That compares with actual new starts of 10.4 million units and completion of 4.3 million in 2011.

Beijing said in its 2012 budget the central government planned to spend 212 billion yuan on affordable homes, about 10 percent of the bill for this year’s public housing schemes. The balance would be funded by local governments, banks, developers and other private firms.

$1 = 6.3702 Chinese yuan Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Nick Edwards

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