Business, Finance & Economics

I'm losing my house? Great!

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SHANGHAI — Graffiti is the scourge of Shanghai.

Painted on old buildings in every neighborhood is the Chinese character chai (拆). No, it’s not the work of some prolific teenage troublemaker — it’s far more ominous. It means destroy, and if it’s painted on your house, you better start packing.

As Shanghai continues its centuries-long shift from tiny seaside village to one of the world’s most modern metropolises, destruction has become part of life and guessing when your house will be torn down is common conversation.

But the reaction of most locals to finding that dark mark on their property might surprise you — they’re usually happy about it.

That's because owners often end up with a windfall, courtesy of the government.

"My family’s house is about 50 years old and is very cold in the winter. We don’t even have a bathroom, and instead use a bucket which we empty every day in the communal courtyard for disposal," said Ms. Jiang, a 25-year-old office worker, whose house near Shanghai’s glitzy Xintiandi area is being torn down for development.

Modern apartment complexes in the area, like Rich Gate and the Lakeville Regency, fetch rents of Rmb 40,000 ($5,856) to Rmb 50,000 ($7,320) per month for a 200-square-meter apartment, far more than the Rmb 500 ($73) to Rmb 1,000 ($146) per month rental range for Ms. Jiang’s apartment.

"The real estate developer offered us money or a new modern apartment. I think we will take the apartment, even though it is far from the city center. They are building a new metro line near it and when that is completed we can sell it for a lot of money," Jiang said.

But demolition is not unique to upscale neighborhoods in Shanghai. From 1995 to 2003, the most recent data available, a whopping 31 million square meters of housing in Shanghai was demolished, forcing the relocation of 704,423 residents, more than the population of Boston.

Bob Chen, 27, an interior designer, recently negotiated a cash settlement with the government for his family’s 60-year-old house, which was in the way of a road-widening project. With that money, he was able to buy a new, more modern apartment and still had enough left over for a car.

"Our family lived in that place for over 60 years, so we have a lot of memories," Chen said. "Overall, we're happy, though, because the new place is a lot more comfortable and doesn’t leak like the old one. We definitely received an acceptable compensation."

However, the process is not without its problems. Many residents can’t help feeling nostalgic for the housing complexes that generations of their relatives and neighbors grew up in, and for the quickly modernizing city itself. Residents of housing slated for demolition are given many options for new apartments, scattering members of a single community throughout the city.

"My dad was pretty emotional about the house and leaving the neighborhood," Chen said. "Our old house was in Hongkou District which used to be the Japanese Quarter. There's a lot of history in that area that should be preserved. I’m not saying that nothing should be torn town, but the city planners have to be thoughtful. As a designer, I hope that as the city develops, it can retain its original flavor and style."

In addition, the lack of transparency in negotiations — families don’t know what compensation their neighbors receive — occasionally results in small protests. The demonstrations are not usually against the principle of tearing down the house, but instead are used as negotiation tactics to get a better deal from the government or developer.

"In my complex, there is a single old man who wrote a slogan on his T-shirt protesting his house being torn down. Everybody knows that he is doing it because he wants a better deal for a house closer to our neighborhood," Jiang said.

Despite the problems, however, for many poor residents having your house chosen for demolition in Shanghai is like winning the lottery. For example, Liu, a single man in his 60s who sells phone cards on the street, earning about Rmb 1,000 ($146) per month, eagerly announced that he was leaving his regular corner.

"They are tearing down my house. I will move to a small apartment in Xinzhuang (a suburb of Shanghai)," he said, beaming a smile. "I’m very happy. They are giving me Rmb 1,000,000 ($146,338)!"

That's more than he’s ever seen in his life.

 More dispatches on real estate:

The Chinese housing bubble

Is the American dream a nightmare?

A Communist legacy