The Rise of Homeowners’ Associations and Changing Neighborhood Governance in Urban China

By WEIJIE WANG

Housing reform is one important part of China’s economic reform towards a market economy.  Housing in China was once regarded as public welfare, and was provided to employees by public bodies, such as government agencies, state-owned enterprises and large collective-owned enterprises. The tenants only needed to pay very low rents which were collected to support the maintenance of public housing.  Public housing system put great burden on all levels of governments, and led to a series of serious problems such as inequality and housing dilapidation.  Housing reform was launched in 1978, soon after the start of market reform. Similar to reforms in other areas, large-scale housing reform was preceded by pilot experiments in the 1980s, and a comprehensive urban housing reform was initiated in 1988. A commercial housing market was established in 1998, and now people buy their own homes in markets.

An important aspect of housing reform is the transformation of housing management and maintenance. Housing committees of public bodies were responsible for housing maintenance under the old system; such kind of housing committees ceased to exist after the housing reform. Homeowners are encouraged to establish their own organizations – Homeowners’ Associations (HOAs) – to represent their interests in property management, and to employ property management firms for professional services. According to current regulations, Homeowners’ Associations should be made up of representatives of homeowners, and work as the standing body of the Homeowners’ Assembly. Homeowners are responsible for housing maintenance and managing communal properties such as lawn and parking lots in their neighborhoods. HOAs play more roles than just managing communal properties. It is very common that developers infringe on homeowners’ property rights, for example, developers rent out communal space in neighborhoods for benefits without homeowners’ contents. Under this circumstance, HOAs function as the organization to protect homeowners’ rights and interests against unlawful developers.

Institutional environments for neighborhood governance

Housing reform profoundly influenced neighborhood and urban governance in China. Traditionally, Street Office which is the lowest-level government and their branches in neighborhoods, Residents’ Committees, are the main decision-making bodies in urban China. After the housing reform, new players such as developers, property management firms and HOAs began to participate in neighborhood affairs.  

China’s housing market takes a pre-sale system. Homeowners pay for their homes in advance before these homes were actually built, and developers build homes partly with the money they have collected. This give developers’ advantages over homeowners; they can always break their promises of lawn and recreational facilities for various reasons. Individual homeowners can do little about this. Though property management firms should be employed by homeowners, developers have the right to employ the first property management firms when they begin to sell housing in market and when only a few homeowners have moved into the new neighborhoods. Because of this, developers usually establish their own property management firms and employ them in order to capture the profits of property management.

Individual homeowners are at a very weak bargaining position compared with developers and property management firms. Establishing HOAs is the only way to increase their bargain power. The rise of HOAs is especially noteworthy because it represents the participation of citizens in neighborhood affairs. HOAs are truly self-governing civic organizations, which are rare in an authoritarian state like China. HOAs may play positive roles in the political socialization of homeowners who constitute the newly-emerging middle class in China.

Preliminary findings and discussion

This project aims to explore how the rise of HOAs may influence neighborhood governance in China. I visited 8 neighborhoods and had in-depth interviews with 9 homeowner leaders in two cities, Beijing and Yantai, during my summer fieldwork. In addition, I also visited some NGOs specializing in homeowners’ right protection and interviewed their leaders. The fieldwork helped me to gain more knowledge about the relationships between HOAs and other neighborhood organizations such as street-level governments and property management firms. The findings of the fieldwork also supported some of the propositions that I had in mind before entering the field.

Neighborhood governance in contemporary China is highly dynamic with all neighborhood organizations trying to maximize their influences in neighborhood decision-making. These organizations control different kinds of resources and power. Street Offices and Residents’ Committees derive their power from political sources; according to current laws, they are responsible for a wide range of administrative functions, such as neighborhood safety, family planning and social welfare administration. In addition, according to regulations on property management, HOAs should be established under the “direction” of Street Offices and Residents Committees, and established HOAs must be put on record in Street Offices. HOAs derive their power in neighborhood governance mainly from homeowners’ property rights. HOAs represent homeowners’ interests and rights. Property management firms derive their power from their services – they provide sanitary services, housing maintenance, and security services to homeowners. They can threat not to provide these services, and neighborhoods will be in a mess even for a few days without property management.  Developers engage in neighborhood affairs when they have not sold out all homes, or if they also own properties in neighborhoods.

The legal roles of all these neighborhood organizations seem to be clear, however, they all try to maximize their influences over neighborhood communal properties or other properties that are not clearly delineated. These organizations engage in a game and take a variety of strategies to maximize their interests, resulting diverse neighborhood governance structures. One typical governance structure is that alliances formed by street-level governments and developers dominate neighborhood affairs. For example, in Rongfeng neighborhood in Beijing, the developer, developer-founded property management firms and Street Office formed a coalition based on common interests and possible bribery.  The property management is terribly bad in the neighborhood, but homeowners are charged a high monthly fee for the poor services. Therefore, homeowners try to establish their HOA in the hope of firing this terrible property management firm. However, they had great difficulties in establishing HOA. Street Office and Residents’ Committee are unwilling to cooperate with homeowners, and they actually set barriers one after another. Homeowner activists were violently beaten by some unknown mobs and were threatened not to participate in establishing HOAs. Homeowners thus have little control over their communal property, Street Office, Residents’ Committee, developers and property management firms benefit from their coalition in Rongfeng neighborhood.

A second kind of governance structure is HOA-dominated neighborhood governance. Homeowners successfully overcome difficulties and establish HOAs. HOAs then function as the main decision-making body in neighborhood affairs surrounding property management. In Tiantian Jiayuan neighborhood in Beijing, the HOA secured its status as the main decision-making body in their neighborhood. The HOA succeeded in firing previous property management firm, and employed a new firm that offers better services at a much lower price. The HOA also has formed a cooperative relationship with Street Office and Residents’ Committee – The HOA help Street Office and Residents’ Committee to do some administrative tasks, and the Street Office respect the HOA’s decisions regarding property management.

A third kind of governance structure is more chaotic with no dominating bodies in neighborhoods. This usually happens in neighborhoods where power relations among neighborhood organizations changed. In Beijing’s Shangdi Xili neighborhood, which was once known for its successful and powerful HOA, Residents’ Committee began to encroach homeowners’ interests when the HOA’s internal conflicts intensified and actually paralyzed the HOA.

Further research

These are just some preliminary findings from the fieldwork. An in-depth analysis of the data collected in the fieldwork will be conducted soon. Further analysis will focus on the comparisons among these different governance structures, and will try to examine what caused these differences. This project may help to understand the highly dynamic neighborhood governance in contemporary urban China.

Click here to view projects of other 2011-2012 USCI Graduate Summer Fieldwork Grant receipients.