Why is there a market for small property houses?

Small property right house is an important topic of concern to all walks of life at present. The discussion on the legality of its property rights has become the focus of academic debate. The theory of property rights economics holds that "property rights are a bundle of rights". By changing, defining and maintaining the existing property right structure, we can create a property right system with low transaction cost and high efficiency. [Exclusivity and independence of property rights and clear separation of boundaries can effectively allocate risks and improve incentives. From this point of view, small property houses built on rural collective land will inevitably face all kinds of transaction risks brought about by incomplete property rights, and the regulatory policies issued by the central and local governments should not be a big problem. However, according to incomplete statistics, the area of small property houses in China is about 6.6 billion square meters, which even accounts for one third of the local housing market in some large and medium-sized cities. In addition, in recent years, the conflict caused by the demolition of small property houses has become a serious social problem, but in fact, more small property houses have escaped from public view because they have not faced the demolition disputes. The research question of this paper is, why are the small property houses strictly prohibited by formal laws and policies repeatedly banned? Is there a social mechanism behind large-scale existence to support its emergence and persistence?

At present, there are many discussions on the causes of the phenomenon of small property houses in academic circles. Because there are many such documents, this paper classifies them into three types: market supply and demand theory, urban-rural dual land system theory and policy supervision loophole theory. The theory of supply and demand means that in recent years, a large number of migrants pouring into cities have turned to buying relatively cheap small property houses because they can't afford expensive commercial houses, while farmers or village collectives in urban villages and suburbs have made profits by building and selling small property houses. [4] institutionally, because local governments monopolize the primary land market and obtain land transfer fees through auction of state-owned land, collective land can only be auctioned after government expropriation. The difference between compensation for land expropriation and land transfer fees has promoted the villagers and village collectives to make profits through building houses. [5] Vulnerability theory refers to the fact that small property houses are in a blank area of policy or legal supervision, and the weak supervision of local governments and the acquiescence or even disguised encouragement of township governments provide them with room for growth. [6] The above ideas restore the causes of the phenomenon of small property houses from different angles, but still leave some doubts. First, the above research focuses on the analysis of the system level, ignoring the actual process of the transaction of small property houses. Take the market supply and demand theory as an example. If the low housing price is the incentive to buy a small property right house, but this illegal transaction will bring risks to the parties, then how to understand the buyer's behavior? Second, these studies focused on policy analysis, and did not extract a set of analytical framework. Taking the dual land system as an example, if the secondary land market promotes the emergence of small property houses, how to understand that there are regional differences in the distribution of small property houses under the same dual land system? Therefore, in order to understand the reasons for the existence of small property rights houses, we must re-explore the mechanism of their emergence and maintenance with the help of the framework of property rights transactions.

Second, the reconstruction of civil contract framework: a theoretical hypothesis

In the article "Coase Paradox and Cognition of Property Rights Parties", Liu started with solving Coase Paradox, and put forward the topic of why informal transactions are possible besides legal property rights supervision. He pointed out that because the two sides have reached an understanding on a certain right, this understanding goes beyond or violates the provisions of the current formal policy, and cooperation on this basis will produce new property rights structure arrangements. All parties involved in this new structure will gain new benefits from it, but they will face the transaction risk brought by the lack of legal property supervision and severe punishment of legal property rights. [7] The enlightenment of this study is that in real life, three conditions are needed to realize the transaction order inconsistent with the statutory property rights: the new property rights structure formed by both parties outside the statutory property rights has greater benefits for each other; Due to the restriction of legal property rights, both parties to the transaction will adopt strategies to avoid various risks arising in the transaction process; Both parties can avoid the punishment from the third party with legal property rights, and the third party will also pay the corresponding regulatory costs. Due to the limitation of space, Liu did not discuss this point in his article. This paper will point out that this new property right structure is a kind of civil contract reached by both parties in violation of existing policies or legal constraints, and the next discussion on the transaction contract of small property houses will supplement this view with new materials.

This new property right structure, free from legal property rights, is a civil contract signed by both parties voluntarily. Without violating the existing laws, it has the same legal effect as a formal contract. For example, the written loan signed by both parties is an example. Sociologists' thinking on folk contract is divided into two main lines under the theme of generalized contract research. The first one is a dialogue with neo-institutionalism economics, taking the formal enterprise contract as the test object, and discussing how this trading relationship is embedded in the network of institutional, cultural and social relations. [8] This kind of research is to examine the traditional topics of economics with the framework of sociology and explore whether it contains sociological variables, thus enriching the theoretical framework of contract research. The second is to explore the preconditions and principles for the realization of this kind of contract with the folk contract as the research material. Sociologists in China pay attention to the change of collective property rights. [9] This kind of research is to bring the phenomenon that economists think is abnormal or off track into the analytical framework and explore various social factors that affect the conclusion of civil contracts. The research topics are different, but both contexts have distinct sociological colors, that is, folk contracts, as a market transaction order, are embedded in the formal system and social relations network. [10] The contract for the sale of small property houses belongs to the second thread. Once this kind of house is traded, it violates relevant policies and laws. However, the fact that a large number of small property houses exist shows that a wide range of civil contracts have been formed outside the formal system.

Re-introduce the third person who represents the legal property right, and try to construct the analysis framework of civil contract. As long as either party to the transaction recognizes the current housing property rights policy, the contract will not be signed, and both parties have zero income, zero risk and zero punishment. If both sides oppose the current policy and trade privately, they may benefit from each other, but they will face the punishment of trading risk and legal property rights. Therefore, it is imperative to carefully analyze the benefits, risks and penalties arising from private contracts. The research hypothesis put forward in this paper is that as long as the benefits obtained by both parties are equal to or greater than the penalties for transaction risks and legal property rights, this private contract that is outside the supervision of the formal system may be realized. The distribution ratio of income, risk and punishment contained in this folk contract is closely related to the current formal housing policy arrangement in China, which will help people understand why this folk contract that violates relevant laws and policies will exist for a long time. Wechat pays attention to Guo Hui Law Firm for more legal knowledge.

Logical verification of three hypotheses: realistic analysis

The transaction of small property right houses mentioned in this paper refers to a simple stranger transaction. The buyer is not a resident of the village, and the seller is a villager who builds a house and sells a house on the homestead (excluding the village collective). Government refers to local governments at or above the county level, and township governments will not consider it for the time being. If this simple civil contract can be successfully realized, the small property houses sold in the name of the village committee will be more justified, and the risk of buying small property houses through acquaintances will be less, and the acquiescence and encouragement attitude of the township government will further promote its development trend.

(1) Buyers and sellers of small property houses: each takes what he needs.

From the perspective of property rights economics, there are many problems in the transaction of small property houses. The central and local governments have repeatedly warned buyers that this kind of transaction is not protected by law, and once a legal dispute occurs, it will bring losses to the parties. However, what are the losses and how big are the losses? These details are not clear. In other words, if both buyers and sellers oppose the existing laws and policies on small property houses and adopt private contracts, it is possible to form new contracts outside the formal system.

1. Interests in private contracts

Compared with the commercial housing in the same lot, the property right house is relatively more cost-effective, because it has not paid the land transfer fee and missed a lot of taxes and fees. For property buyers, spending a small amount of money can solve the housing problem; For villagers, the profit from selling self-built houses (selling land to build small property houses) is much more cost-effective than simply farming or starting a business, so "planting houses" in the urban villages and suburban areas provide housing. [1 1] As long as both parties are satisfied with the signing, they can benefit from each other. The only question is whether the benefits of both parties can offset the risks from the trading process.

2. The transaction risk in the contract

The contract risk of small property right house transaction mainly comes from unilaterally tearing up the contract. At present, the root of the transaction dispute of small property right houses is the rise of land price brought by urbanization. The original landlord who sold the small property right house before found that the original money was not worth the current house price, so he repented and went back to the original house to get more compensation for demolition. The following will be from the demolition compensation disputes, housing transfer disputes and housing quality hidden dangers one by one analysis of three situations.

(1) urban demolition compensation dispute

The above-mentioned small property houses are not protected by law, and both parties cannot sign formal documents similar to commercial housing contracts, so civil contracts are used to regulate trading behavior. Some people may doubt the validity of this contract, especially when the compensation price for house demolition is higher than the original house price, the original landlord will tear up the contract and check out, and the new landlord will lose everything. However, this situation requires at least three conditions. First of all, small property houses will encounter urban demolition. If there is no demolition, then the dispute will not arise immediately. In other words, assuming that the original landlord is expected to face urban demolition soon, it is the best choice to expand the original house (first-class house), and there is no need to sell the house at all, because demolition will bring a lot of compensation. Admitting this premise, we can infer that the small property right houses such as Japanese trading may not face urban demolition immediately. This means that a group of small property houses will not cause property disputes because of demolition, so they become silent groups. Second, even in the case of demolition, if the compensation given by the local government is lower than or equal to the original selling price, there will be no dispute, because the original landlord did not get a huge difference from it. Third, in case of demolition, and the policy compensation price is higher than the original house price, the original landlord will consult with the new landlord before resorting to the law, and mediation will not achieve a lawsuit. After all, both sides should consider the cost of time, money and energy brought by court proceedings. In short, small property houses will only resort to the court when they encounter urban demolition, the compensation for demolition is much higher than the original house price, and the mediation between the two parties fails in private. Three conditions are progressive one by one. As long as the previous article is not satisfied, there will be no property disputes. As the research results of sociology of law show, most judicial disputes are settled before court proceedings, which will eventually form a pyramid dispute resolution model. [ 12]

However, once three conditions are met, property disputes begin. According to Article 52 of Chapter III of People's Republic of China (PRC) Contract Law, the court will point out that if the civil contract originally concluded by both parties "violates the mandatory provisions of laws and administrative regulations", then the contract will be deemed invalid. Article 58 of the Contract Law also stipulates: "The property acquired as a result of this contract shall be returned. If it is impossible or unnecessary to return it, it shall be compensated at a discount. The party at fault shall compensate the other party for the losses suffered as a result. If both parties are at fault, they should bear their respective responsibilities. " In addition, from the perspective of judicial practice, in terms of contract subjects, urban residents do not have the membership of rural collective economic organizations and are not suitable for buying small property houses on collective land; In the content of the contract, if it violates the mandatory provisions of our laws, it should be invalid. [13] If this is the case, firstly, the risk of this contract is not so great for the original landlord, even if it is possible, because before he goes to court, he will consider whether the benefits brought by the invalid contract are greater than the compensation for the other party's losses. This is only if the original landlord is at fault. If both parties are at fault, the loss of the original landlord may be smaller. Second, for the new owners, the main reason for the dispute over the small property right house is that the original landlord claimed the house because of the rising land price. It stands to reason that the new landlord is not the wrong party, so after the contract is deemed invalid, the new landlord will get the original purchase price according to law while checking out, and may also get additional compensation from the other party. For the new owner, there are two situations: the risk is greater than the income, and only the loss is not bought; If the risk is less than or equal to the income, at least you won't lose money, and you may make a small profit, so you may buy it. Judging from the current contract law, the situation of the new landlord is likely to belong to the latter situation.

(2) housing transfer and compensation disputes

Because the civil contract signed by both parties has no legal effect, if the property right house is to be transferred, it will not be protected by law. The risk of house transfer means that the buyer cannot resell it to a third party, nor can he give it to others as an inheritance in the future. And if the small property right house is only used by the buyer for self-occupation rather than investment, then there is no transfer, and this transaction risk is naturally avoided. Even if it is transferred to others, if both parties can avoid risks through private contracts in the first transaction, the same method can be adopted in the second transaction. Civil contracts that violate the law will be regarded as invalid in case of disputes. If the contract is beneficial to both parties and does not harm the interests of the third party, it is binding on both parties.

(3) housing quality and compensation disputes

The housing quality and supporting facilities of small property houses are important issues that owners need to consider. Governments at all levels have repeatedly reported these hidden dangers, but why can't people stop buying them? There are two situations here: if the quality and facilities of small property houses are reliable, it is not much different from commercial houses; There is a problem, but it can be big or small, but once it appears, it will attract the attention of buyers. Let's look at the first situation first. The central and local governments have repeatedly warned that there are risks in the quality and supporting facilities of small property houses, but how big this risk is and how long it will turn into actual danger needs actual investigation, not just a few typical cases. If there is a problem with small property houses, many commercial houses in China have similar problems at present. Let's look at the second situation. There are generally two channels for small property houses: one is that rural residents build houses on their own homesteads and sell several sets themselves; The other is that the village Committee cooperates with some small and medium-sized developers to build houses on homestead or collective enterprise land. In addition to giving part to the residents of the village to live in, some will be reserved for sale to other villagers. If there is no difference between the living conditions of the original landlord and the house sold, the quality of the house is naturally reliable, and the second type of channel is similar to the first type. The key is what if there is something wrong with the quality of the house? Both parties (buyers and rural residents or village committees) will reach a private contract before buying a house, indicating the solution to the quality of the house and supporting facilities. If the quality of the house is worrying and the above-mentioned house is worthless, then the buyer will also ask for the house payment by invalidating the contract.

Attitude of local government: poor supervision.

The loopholes in local government's supervision of small property houses can be summarized as building houses and selling houses. First, from the perspective of building a house, this kind of house will only become a small property right house if it is sold to non-residents of the village, which brings great difficulty to the government to identify a small property right house. Article 43 of the Land Management Law of the People's Republic of China stipulates: "Any unit or individual that needs to use land for construction must apply for the use of state-owned land according to law; However, the establishment of township enterprises and villagers' use of land collectively owned by farmers of the collective economic organization is approved according to law, or the use of land collectively owned by farmers is approved according to law for the construction of public facilities and public welfare undertakings in townships (towns) and villages. "It should be noted that many people may think that small property houses are illegal buildings that occupy rural cultivated land. This situation does exist, and the clear attitude of the central government towards farmland protection means that this kind of small property right house will take great risks. On the contrary, other cases of using rural collective construction land and homestead to build small property houses according to law are more standardized and hidden. For example, Gan Zangchun, deputy inspector general of the Ministry of Land and Resources, pointed out: "There are only four situations in the construction and use of rural collective land: one is farmers' homestead, the other is land for rural public facilities, the third is village-run enterprises or joint ventures established in rural areas, and the fourth is that according to the guarantee law, rural collective land can be used when it is mortgaged. In addition, it is also not allowed by the current law. " [14] In other words, those houses with small property rights that illegally occupy cultivated land or have not been approved by procedures will be considered as illegal buildings, but the houses on the above four types of land are not illegal.

Secondly, from the perspective of housing sales, it is difficult for the government to find such a civil contract when the two sides reach an agreement on the sale of small property houses. The construction and management of houses on rural collective land do not belong to the jurisdiction of the construction department. Only when villagers sell them to non-villagers can they become small property houses. If the two parties can sign the contract privately, there will be no disputes, which will inevitably increase the cost of the government's identification of small property houses. To say the least, even if there is a dispute, it will only attract attention when it comes to court proceedings. At present, the opinion of the "Contract Law" on the handling of disputes in small delivery rooms is that the previous contract is invalid and requires restitution. As mentioned above, this kind of folk contract is beneficial to both parties, even if there is a dispute, there is no clear punishment for both parties, which makes this kind of property right transaction contract possible. In addition, when local governments find small property houses and demolish them as illegal buildings, it will also affect social stability. In fact, small property houses exist all over the country, and the proportion is still very high in some places, which makes it very difficult for the central government to deal with this problem. If it is not solved, it will be more troublesome in the long run; Solving problems varies from place to place, and it is difficult to formulate a unified policy.

(3) Other types of small property houses: suppliers, demanders and regulators.

The above is only the simplest transaction process of small property houses, and the contract types of small property houses in reality are much more complicated. From the supply side, in addition to the small property houses built and sold by individuals on the homestead, there are also small property houses built and sold in the name of the village Committee. Taking the construction of new countryside as an example, some village committees can make rational use of the collective construction land in the village and build houses without occupying cultivated land, from land approval to urban and rural planning to house sale, so as to reasonably avoid the punishment of local governments. Selling a house in the name of the village Committee is more credible and the transaction is more hidden than selling a house by a single villager. [15] From the demand side, buyers and sellers may be purely market transactions. If some small property transactions are introduced by acquaintances, private contracts embedded in social networks can reduce transaction risks. From the supervisor's point of view, the land revenue driven by urbanization has become the object of the game between local governments and grass-roots governments. Because the land leasing income is in counties and cities and above, in order to increase the fiscal revenue of grass-roots governments and avoid the loss of land income, grass-roots township governments will adopt an ambiguous attitude on the issue of small property houses, and even issue property certificates in the name of towns and villages, so small property houses are also called "township property houses". If the grass-roots government is included in the supervision, we will find that when the sale of small property houses is linked to rural economic interests, the township government will acquiesce or even encourage it. As a result, the strict order of the superior prohibits a big discount in the grassroots government. [16] township governments are not very active in the face of small property houses, and even encourage them in disguise because of interest association, which makes local government supervision more weak.