Xinguanren project 9. The dream of secondary landlords

konjaku: those who came to Dongguan and needed to rent a place to stay, probably rented from a “secondary landlord” 二手房东. This term was created to push the multitude of sub-lessors 二房东  into having a public and quasi-legal status. Property owners hired sub-lessors to manage their buildings and collect rent, but the responsibilities of these sub-lessors were unclear. If a tenant wanted a return of a deposit or other money paid, he or she found that the there was no way to get the sub-lessor to comply. The rental contract was between tenant and building owner, a person never met or seen, and whose location was unknown. The secondary landlord was simply not a legal entity . Efforts at reform commenced. In 2009 a notice was issued to begin to deal with the problems New Dongguaners had with secondary landlords, but as this article notes, the effort may have come too late. The boom years of Dongguan were over, and the problem was now one of too many vacancies. Therefore, this article does not take up the issue of tenants’ rights, and instead focuses sympathetically on one couple who came to Dongguan to become secondary landlords.

The Financial Crisis Roils Dongguan’s “Secondary Landlords”

2009-04-28

Nanfang  Net

Reporter Huang Donglin

Last year on 9-17, the Xinguanren Service Center issued a notice directed at everyone in Dongguan concerning sub-lessors, or “secondary landlords.” The notice stated that in Dongguan there are 300,000 public registered rental rooms, and there are more than 20,000 persons who have been contracted by others  to rent out rooms and manage rental properties, the so called secondary landlords.

“These people who rent out rooms in our city, fill a vital and important function, but in terms of the law they do not exist as a clearly defined entity or name. We request that people from all areas of society give feedback to the Dongguan city Xinguanren Service Center concerning this.“ This notice has been posted prominently in the Xinguanren Service Center and on its website, however, it may be too late to raise this issue.  Because the recent financial crisis has had a large effect on Dongguan, the New Dongguaner population has diminished, the number of vacant rooms is now high, and the secondary landlords have one after another left Dongguan, and they have taken “new jobs”  a term which refers to sinking into the general stagnation.

Those secondary landlords who remain have every day fewer customers, month by month their profits are shrinking, even to the point of suffering an overall loss. Whatever deposit money they received they have locked up tight –if the tenant leaves, it is not returned, if they stay, the same. The workers who came to make their fortune in the Pearl River triangle have suffered under the bad economic situation and left again.

Wu Xiao’an and Xiao Zhiyun (husband and wife) came to Baotun village in 2004. They have lived on the ground floor of the same small 5 story building with a yellow outer wall since then. Above the entrance gate less than a meter wide, there is a lightbox sign with “Rooms for Rent” written as 2 large characters (租房). There is also pasted by the gate a white piece of paper A4 size, on which is stated “Lawfully certified rental property.”

Entering the gate, there is a flight of stairs. In the area below the stairs is the old couple’s kitchen. To the side of the corridor, a tiny windowless room 7 or 8 meters wide is their room. There is as bed one meter wide, a 14 inch t.v. in a cupboard, a small table and a refrigerator.These five items, their entire possessions, occupy the whole room, leaving little room to pass.

“We live right by the entrance, so we can manage things well.” Wu Xiao’an said. He said he and his wife take turns on duty day and night.They want to make sure they are there if someone comes to rent, and they want to ensure the security of the building.

This building was originally leased by two sisters who came from Jiangxi in 2004. They signed a lease agreement with the owner of the building until 2008, but because of personal disagreements between them they quickly needed to sublet. Wu Xiao’an paid 60,800 yuan to completely buy out their lease, making him and his wife the “secondary landlords” of a building with 42 rooms and one commercial shop.

At that time, of the 42 rooms, 30 were already rented to long term renters. These paid 6500 yuan a month to the landlord with the couple’s net earnings 2000 a month or more. At that time, Wu Xiao’an felt his decision to “head south” was a wise one. But, beginning in the second year, as more and more residential buildings went up in the vicinity, the competition became intense, and rooms became hard to rent. Wu Xiao’an asked the building owner to lower rents to 6000 a month, and the couple still managed to clear 2000 for themselves. In 2007, they again lowered rents to 5500, and the couple were still able to earn 2000. In the first three years, they earned enough to turn a profit over their initial investment. The gradual lowering of rents year after year has affected all rental properties in Dongguan.

Wu Xiao’an’s original lease agreement expired in 2008, and he entered into another 5 year agreement with the building owner. Just as the old couple had made preparations for another period of stable earnings, the financial crisis from the West hit Dongguan, “Since the 9th month of last year, tenants have been moving out, but no one has moved in.” The first month of this year, Wu Xiao’an for the third time asked the building owner to lower the rent. The landlord saw that the couple had themselves repaired toilets when broken, and fixed ceilings, and therefore agreed to lower the rent to 4600 yuan –quite a discount from five years before.

In the same Houjie town Wang Lie, in 2006 utilized her household compound to build a six story building with 50 rooms, in all containing over 1430 square meters. After it was finished, she turned the whole thing over to a secondary landlord. Because so many migrant workers came to Houjie town, as soon as the rent notice was posted, all the rooms were filled. Because the building was close to Houjie’cun Road, the rent was comparatively high.  Wang Lie calculated carefully, and determined that this one building  could take in a rent of 11,700 yuan a month. Although every month there was a land use tax of 200 yuan, and a 230 yuan Public Sanitation Fee, this was still an impressive income.

However last year, the secondary landlord came to  Wang Lie, requesting that the rents be lowered. For the first time Wang heard this phrase,” the financial crisis.” Factories were going bankrupt, workers were leaving. and Wang Lie realized that this “crisis” had a very concrete impact on her own income. She decided to lower the rent by 1000 yuan altogether, and appealed for a lowering of the land use tax, but this was not granted. This year after the Spring Festival,  Wang Lie realized the crisis had still not ended, when the workers who had gone home at year’s end did not seem to be coming back. Her building was now barely half full. Her friend, whose building was was further from the road, had an even lower occupancy rate now, and had lowered rents by 50%.

This year I get 8000 yuan a month, that’s it! Wang Lie said, she has heard from her friends that disputes between secondary landlords and building owners this year have become intense. Reason number 1: the secondary landlords have been giving the renters their cash deposits [to get them to move in], but these renters, because of financial difficulties, ask to stay on credit, and even though they don’t pay, they won’t vacate. Reason #2: the secondary landlords pay their first month’s cash deposit, but the tenants, because of the difficulty in finding a job, run away at the end of the month.

After the Spring Festival Wu Xiao’an also realized the depth of the financial crisis. Of his 42 rental units, only 18 had occupants. He lowered rents across the board: a room that rented for 220 a month was now 180, one that had been 140 was now 120. The store had rented for 2900 last year, this year it was 2600. He had some short-stay rooms that in the second month he was renting for 20 yuan a night, amounting to 1000 yuan of profit for that month. By the third month he had dropped the rent on those to 15 yuan a night, but still only made 500 yuan that month.

Wu Xiao’an calculated that his income based on 18 rooms occupied ( a 60% vacancy) would be about 2500 a month. Add to that the rent of the store and short stay rooms, and it became 5500. To the landlord he had to pay 4600. Electricity cost 500 yuan, water 200 yuan, public sanitation fee 110 yuan. He paid out 5410 yuan altogether.

“A month’s hard work, for nothing.” Wu Xiao’an said he and his wife are getting old. If things continues this way, they will have no choice but to return home, with nothing to show for it.  But Wu Xiao’an and his wife have not given up. After the New Year, they had no false expectations of getting new tenants, Rather, they tried to upgrade the services they provide, to convince their remaining tenants to stay. By doing this, at least they won’t fall into the red.

Previously, they swept the corridors every two days, but now they do it everyday. To the best of their ability they give their renters a clean and sanitary environment.  Xiaozhi said these days when tenants return to the building from work, they take the initiative to greet them cordially and converse about small matters, as well as asking them how their work is going, to give them the feeling of “returning home.”

Husband and wife Pu Jinzhi and Zai Cuibi came from Guangyuan in Sichuan and have been renters for over a year. After last years 5-12 earthquake (in Sichuan) Zai Cuibi quit her job and went home. Pu Jinzhi was afraid he would not be able to collect his wages if he quit before the end of the fifth month was up, so he stayed in Dongguan. Zai Cuibi went home and found that their family members were all right. At the end of the sixth month she returned to Dongguan with their five year old child to begin working again.

“At that time returning to work was not easy. The factory no longer needed me, but it happened that someone who did cleaning left, so I took her job. Zai Cuibi’s salary went from 1500 yuan down to 900 yuan a month. Now her husband has still not gotten the overtime pay due him for working over the New Year’s holiday, He hasn’t been home for over a year since the earthquake, and is feeling homesick. He was just talking over with his wife about whether he should quit his job.

“Uncle Wu (Wu Xiao’an) advised my husband not to act on impulse. If he quit this job it would be hard to find another.” The couple talked it over and it was tempting to quit and leave Dongguan for good. Their living expenses here, including their child’s school experiences, were not small. They could be free of them, just like that.

Wu Xiao’an understood their feelings very well. At the same time, he didn’t want to lose good renters. Looking around for other means to keep his tenants, he heard some landlords rented a bus to take their tenants to and from work. He thought of following this example, but where would he come up with the cash?

Wu Xiao’an was born in 1940 in Changsha city Ningxiang county Meitanba town (meitan = coal). Before he retired, he managed a canteen in the office of a coal mine. His wife was in a worker’s cooperative. She ran a small eating place in the vicinity of the mines, which served light breakfasts and midnight snacks.

In 2002, in the mining area there was a person around 30 or 40 years old who made some money at a business. He went to Guangdong to see if he could develop it further. When he came back for the New Year holiday, he said you could make money in Dongguang as a secondary landlord, several 10,000s of yuan a year!

Wu Xiao’an was very interested in this, and in 2004 he and his wife came to Houjie town in Dongguan. At that time, Wu Xiao’an was able to withdraw 1000 yuan as his pension, and his wife Xiaozhi could withdraw some 600 yuan.

At first they stayed in the rented room of a fellow villager, while searching all over for a building they could lease. After two days, they found this building, in [Houjie town] Baotun village, Bantun road number 2. “At that time there were not many other residential buildings around it, just one factory. It didn’t seem like getting renters would be any problem.” What attracted Wu Xiao’an to this building was that there were windows on three sides of the apartments.

But what once was a ready source income is now like a bottomless pit eating up their savings. The fellow villager who first introduced them to Dongguan has already gone back to Hunan. “In Changsha he has built a beautiful building!” Zhaozhi said with an envious expression on her face.

The dream of the secondary landlord is to manage the building, pay the building owner a portion of the monthly rentals, take care of utilities, and still have a monthly profit. But Wu Xiao’an found this dream was not so easy.

First he had to wait impatiently for his building owner to obtain a legal certification to rent. Then he was notified that as a secondary landlord he had to report two times a year for training, in order to learn how to follow the regulations for renting in accord with Public Security requirements. In 2007 Wu Xiao’an paid 20 yuan in fees to take a qualifying exam at the Houjie town Floating Population and Rental  Management Service Center. “It was an open book test, and the questions all multiple choice.” As someone who had managed a dining facility in the mining area, Wu Xiao’an had no trouble with this sort of exam. He passed easily and obtained a license to operate as a landlord.

Now that Wu Xiao’an was qualified, he was supposed to  follow all the regulations he had studied to learn, but in practice this meant losing a lot of customers. “For instance, a short term renter may come, he cannot produce an identity card, which means I cannot legally register him as a renter.” It is forbidden to rent to anyone who cannot produce an identity card. But in order to get the income from short term rentals, Wu Xiao’an has little choice.

At times, bypassing this regulation has caused him suffering. One summer morning in 2005, he went up to the fourth floor to clean, as was his usual practice. He saw that the door to room 405 was half open. In this room was one of his long time tenants, who was always at work at this time. He pushed open the door to take a look, and saw inside a man with close cropped hair, who he had allowed to rent a room on a short term basis the night before. The man was wearing nothing but a pair of pants. He  was going through items in the room. There was a disorderly pile of clothes and things already on the bed.

Wu Xiao’an reacted immediately. He grabbed the man, and shouted in a loud voice, “I’ve got you, you thief!” The man was in his thirties, tall and strong. He thought he could throw off Wu Xiao’an easily, but Wu Xiao’an held on tightly. Seeing other people coming, the man finally used all his strength to throw Wu Xiao’an down and ran away. Wu Xiao’an staggered and fell down the 4th floor stairs. The back of his head struck the ground.

Xiao Zhiyun took Wu Xiao’an to the Houjie Family Hospital, but to examine him would cost more than 3000 yuan. Instead, she had their son take him back home to Changsha to recuperate. At the Changsha hospital they said he had suffered a cerebral concussion. “We paid 2000 yuan, and after some two months he had recovered.” Wu Xiao’an never reported the matter to the police. “After all, none of my tenant’s things had been lost, and that person had no identity documents.”

“The building owner gave me a temporary job, so at least every month I get a set income of 1000 yuan.” Wu Xiao’an sees factories around him closing, but he still can’t believe that his superior building, well-ventilated, with windows on three sides, will not continue to attract tenants.

Source Nanfang Nongcun News)