When I first visited Shanghai in 1990, I was invited into the home of a man who lived near the Bund. The house was in the French colonial style, beautiful and historic, but also tiny and made of wood. Walking up its rickety staircase we passed the room of a 90 year-old woman. It was barely large enough for her to lie down in. The man lived with his wife, his son and mother in a compact single room, so small, that minimal tasks required careful synchronization and organization. Such housing conditions were normal in urban China. When I returned to Shanghai in 2001, I gazed at a forest of endless skyscrapers that had replaced the city I knew. Throughout China, the story was similar: A towering sea of concrete, steel and glass swept away all in its path.

Since 2008, China's successful defiance of the laws of capitalist economic gravity has confounded experts around the world. The state invested in an array of public works on a visionary scale. Western analysts generally predicted that this would fail, and it would squander resources on non-profitable white elephant projects. Filming an empty town became a compulsory news story for TV crews visiting China.

Home ownership has played an important role in the last hundred years of capitalism. Indeed, in 19th century Britain, the right to vote was only gradually extended to those without property. After World War I, property ownership was promoted as an Anglo-American dream designed to generate and sustain conservative values in a revolutionary era. A series of pseudo-scientific theories associated individual and social well-being with the benefits of property ownership. This became anchored in popular consciousness throughout the capitalist world over the last century.

Illusions in the benefits of personal property ownership are manufactured and crafted by all manner of capitalists related to the real estate industry. Prices can magically rise into the stratosphere and then sink to the depths. For what is the price of a dream? The aesthetics of location that can clinch a property sale can be as transient as the fleeting aroma of ground coffee. It is a shortage of low cost rental accommodation, a lack of security of tenure, and policy tools designed to encourage homeownership, that are the material means to generate the ideology of "owning good, renting bad."

Based on this ideology, economic gurus who failed to predict the collapse of Western markets confidently predict China's impending property crash. They prophesy that such a crash will bankrupt local governments, and this will bring down the house of cards that is the "China model." In the current 12th Five Year Plan, China is building 36 million apartments, at low cost, to rent to the working class by 2015. This is 40 percent more property than the entire housing stock of the U.K.!

The blueprint for this model, however, can already be found elsewhere. Stable property prices and a low level of homeownership exist in Germany, Sweden and Switzerland; the housing quality in these countries is excellent; and they have strong economies. The ideology that preaches the need for private ownership of housing and claims that it is linked to prosperity and social stability is based on mythology. Rent controls and strong tenants rights play an important role in fostering quality and value in these rental markets. However, in much of the capitalist world laws are rigged to serve the landlords and to weaken the rights of tenants. This encourages people to fixate on escaping the clutches of landlords and to dream of becoming an owner. The desire to pass on something to your children is an added incentive to motivate buyers.

The cyclical boom-bust nature of property prices has been well recorded in most relatively free markets for housing. Each generation relives this cycle of euphoria and depression. In a boom, people are sucked into the vortex of a speculative frenzy. In a bust, some desperate people kill themselves when their homes are repossessed. In the recent phase of absurd speculation in the U.K., television played an important role by inventing simple and tedious shows in which the aspirant middle class could locate themselves within the social hierarchy by constructing their moral philosophy around owning bricks.

Over the last twenty years, China's titanic struggle to modernize sparked ferocious battles over land and the accumulation of wealth, creating many winners and losers. Although state enterprises, municipalities, townships and villages, have benefited vastly from the sale of land-use rights to promote urbanization and modernization, these wrenching processes caused upheaval in the lives of hundreds of millions of people. When real estate became a means of enrichment and corruption, it was natural that resentment was sown far and wide. Recent conflicts in Wukan reflect this justified popular anger, so it is commendable that this conflict resulted in the election of a militant local Communist to represent the people.

Falling real estate prices will be welcomed by the government and by all people hoping to buy affordable housing. But the decline in land sales will heavily impact on local government revenues. The model of recent years, whereby the local state skimmed money out of property speculation in order to finance development, is over. As real estate prices fall, other sources of local government finance will be needed. Increasing urbanization will provide local government with a myriad of means to accumulate resources and fund local services. Nevertheless, public ownership of land will still provide a valuable income source for the state.

It is widely reported that over 60 million private apartments stand empty in China, so property "experts" claim that China has a vast glut of housing. In fact, with an expected rural-urban migration of about 200 million people over the next ten years, the housing stock is entirely appropriate to meet this demand. However, the crunch question is the development of low cost rental models to transform China's housing market.

The government should encourage private owners to rent on terms that maximize low cost housing solutions for the masses. Where necessary, the carrot and stick should both be used - incentives to rent out property combined with the threat of expropriation if owners leave property idle. The state can encourage property owners to rent at low cost in exchange for lower mortgage rates and protection from foreclosure. Such methods are used even in Western capitalist countries when residential property is left empty.

The era of Anglo-American global hegemony is coming to an end, so perhaps it is fitting that the ideology it created - that private ownership of housing is the primary purpose of human existence - should be encouraged to wither away.

The author is a columnist with China.org.cn. For more information please visit:

http://www.by33321.com/opinion/heikokhoo.htm

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