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April 21, 2014

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Rush to buy homes near elite schools worsens education gap, fuels bubbles

EAGER as the government is to rein in home prices, a certain type of housing seems to defy even the strictest curbs on runaway prices.

Xuequ fang, or school district housing, is increasingly sought-after by parents willing to splurge on even a cubicle for the sake of their children’s education.

For the size of perhaps only a toilet, an aging, poorly furnished home in the catchment area of a prestigious school in the city’s Jing’an District can fetch a staggering 80,000 yuan (US$12,903) per square meter.

The main reason this type of housing is coveted is that pupils are admitted to schools nearest to their homes, and they must have the proper hukou, or household registration to prove residence.

China’s educational resources are unevenly distributed, and some schools are immensely popular because of their talented teachers, quality education and privileged status as feeder schools to other prestigious schools.

Thus, parents clamor to send their children to these elite schools, so as not to, in their words, “let them lose from the starting line.” To meet the proximity criteria, resourceful and desperate parents are rushing to buy homes in certain school districts.

Real estate brokers, speculators, and homeowners have capitalized on this mania, sending prices to vertigo-inducing levels. For instance, homes adjacent to the Jing’an Education College Affiliated School, a well-regarded primary school, sell for 45,000 yuan to 60,000 yuan per square meter. Even so, the price didn’t scare off buyers, the Oriental Morning Post quoted Zhang Chao, a real estate broker, as saying on Thursday.

All over Shanghai, the prices of homes in the immediate neighborhood of schools increased 20 percent from the same period last year, in spite of policy curbs like higher mortgage rates and restrictions on the purchase of second homes. In Beijing, the price has surged beyond our wildest imagination. In an extreme case, a 13-square-meter single-story house went for 2.6 million yuan — averaging 200,000 yuan per square meter —  merely because it is near the Beijing No. 2 Experimental Primary School, a “key” institution.

This urge to send children to better schools through homeownership increasingly is a burden for school admission officials. The quest for a spot in the aforementioned Jing’an prep school has swelled the annual number of applicants from a mere 20 to around 150 over the past few years, said headmaster Zhang Renli.

“Many parents chose to leave the newly bought house vacant. Once their children were admitted, they sold the property right away,” Zhang told the China Business News. He added that those apartments usually change hands twice or even more in five years. Rampant speculation in the sale and resale of school district houses has prompted authorities to act. On Wednesday, Jing’an’s education bureau issued a new rule saying that the same registered homeowner and hukou-holder can apply only once within five years for a school inside the district. The move is intended to crack down on speculation.

Cooling measures

The previous limitation on the time between applications is three years. The extended duration, some argue, has signaled the end of official tolerance of the frenzied market.

But the effect of the prolonged waiting time between applications is in dispute. Experts say the new rule may not be effective, since  the majority of parents would choose to hoard a school district house for at least five years, and sell it afterwards, to other eager parents. The reasons are straightforward. Purchase and swift resale of a house can amount to huge transaction tax payment. And a house’s value appreciates over time.

Under these circumstances, it’s easy to see why school district housing is a lucrative investment that pays off in the long term, and why it will be hard to cool it down at the current stage.

Besides putting extra strains on already inadequate educational resources, the mania for houses near top schools also violates the principle of equal opportunity for all. A few pundits argue that compared with sponsorship fees — money paid for the admission of otherwise ineligible candidates — purchasing a house is relatively fair and transparent, because it prevents the corruption and murky dealings that abound with sponsor fees.

However, they fail to see that if the right to attend better schools is decided solely by individual buying power, this simply constitutes another form of inequality. In addition, the practice runs counter to the government’s proximity principle in terms of access to schooling.

To discourage the pursuit of homes close to elite schools, authorities ought to come up with tougher measures, such as prohibiting owners of the coveted homes to leave them vacant.

But the essential solution would be distributing educational resources more widely and fairly, rather than concentrating them permanently in a few favored “key” schools. If necessary, experienced teachers should be assigned from top schools to mediocre ones.

Leveling the playing field will fundamentally secure fair access to quality education for all. It is understandable that parents want the best for their children. But when their well-meaning choices have inflated bubbles of epic proportions, it’s time for them to burst.




 

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