China strengthens regulation on asset-light housing rental enterprises

Beijing-based rental expert Danke Apartment defaulted on rents in 2020 as a result of pandemic-induced cash crunch. /CFP

China has issued a guideline to strengthen regulation on asset-light housing rental enterprises and clarify regulatory measures for those engaged in sublease operations.

Housing leasing companies and individuals subleasing more than 10 houses (rooms) are required to register as market entities in accordance with law and obtain business license, said the guideline jointly issued by the Ministry of Housing and Urban-Rural Development and other five government bodies.

To defuse financial risks, the guideline required housing rental companies to set up a regulatory account for rental funds at local commercial banks. If the companies collect rents for more than three months at a time or deposits for more than one month at a time, they should include the funds in the account.

The guideline also prohibited these enterprises from carrying out financial businesses in a disguised way, such as embedding housing rental consumption loans in the lease contract, use tenant's credit to obtain consumption loans or tempt tenants to use the loans.

In recent years, China's housing rental market has developed rapidly and is generally stable. However, some asset-light housing rental companies engaged in sublease operations infringed the legitimate rights and interests of tenants by controlling housing supply, bidding up rents and even fraudulently obtaining credit funds.

Source(s): Xinhua News Agency