Study On Investment Incentive Mechanism Of BOT Financing Mode On Low-renting Public Housing

In order to solve housing problems of "sandwich class", the central economic conference in December2010clearly stated that "make great development in low-renting Public Housing." For achieving this goal, one of the core issues is how to solve the funding problem. Some scholars propose that draw on BOT mode of infrastructure and introduce private capital into low-renting Public Housing construction. However, ratios of rent to selling price of most cities in China are extremely low, commodity houses do not have access to income through renting, and low-renting Public Housing with lower rents than commodity houses cannot recover the cost relying on rental income only; the premise of private capital to participate in construction is to recover costs and earn a reasonable return on investment. Therefore, in order to successfully introduce BOT mode in low-renting Public Housing construction, the government should design good incentive mechanism of investment to ensure the realization of "win-win" situation in the process of cooperation between the government and investors.Considering the basic situation, economic and legal conditions of low-renting Public Housing construction in our country, focusing on the main line, game analysis between government and inversors in BOT mode-investment incentives and effectiveness-game analysis between government and inversors after adopting inverstment incentives, viewing the analysis of economic behavior of government and investors as the core, this paper makes comprehensive and systematic analysis on investment incentives mechanism of low-renting Public Housing in BOT mode through the game theory, investment incentives and other basic theories, and makes empirical analysis on effectiveness of investment incentives. The main contents of this paper include:1.The feasibility study of developing low-renting public housing with BOT mode. First,this paper analyzes the feasibility of applying BOT mode into low-renting pubic housing project based on the qualitative; then make a quantitative analysis:for attracting private capital to participate into the construction of low-renting public housing, it is necessary to make the investments profitable for them. When investing in low-renting public housing, private capital may give up other investment opportunities (including opportunity of developing commodity house), so profit function π of modified opportunity cost after taking risk into consideration should be established. Only in the case of π≥0, it is possible that private capital participate in low-renting public housing construction.The object of Government introducing BOT mode is to reduce financial expenditure and keep the Government’s utility function u≥0. For this purpose, a investment game mode of Government and investors could be established in the case of no investment incentives of Government, and then the current social phenomena (private capital take a wait-and-see attitude toward investing public-rent housing) is explained through empirical analysis.2.The investment incentive mechanism study of low-renting public housing with BOT mode. First researches the investment incentive mechanism of developing low-renting public housing with BOT mode form financial incentive; then from property right perspective; and last from risk allocation point of view.3. Game analysis between government and inversors after adopting inverstment incentives.Based on the previous study of investment incentives in terms of economic, property rights and risk-sharing, this article makes analysis on the game policy of government and investors after adopting comprehensive incentives mechanism; and this paper proposes that the optimal incentive for government to attract private capital to participate in low-renting public housing construction is to make them just obtain the modified average revenue of market after considering risk.The main innovations of this paper:1.Formed financial incentive mechanism of developing low-renting public housing with BOT mode. For the characteristics of low-renting public housing and BOT mode, this paper studies on the feasibility and effectiveness of economic measures such as tax preferential policy, extending the concession period, increasing rent, providing security, preferential interest rates (including loan discounts), providing subsidies (including construction subsidies and operating subsidies), etc., and thus form a complete economic incentive mechanism of government developing low-renting public housing in BOT mode.2.Formed property incentive mechanism of developing low-renting public housing with BOT mode. For the characteristics of low-renting public housing and BOT mode, this paper studies on the feasibility and effectiveness of property rights measures such as land allocation, construction of commercial projects, property rights of garages, part of the houses for sale, property right of low-renting public housing conditionally belonging to investors after the concession period etc., and thus form a complete property right incentive mechanism of government developing low-renting public housing in BOT mode.3.Formed risk allocation mechanism of developing low-renting public housing with BOT mode. For the characteristics of low-renting public housing and BOT mode, this paper studies on the feasibility and effectiveness of risk sharing incentives such as inflation risks, interest rate risk, policy change risk, completion risk, market risk and other measures, and thus form a complete risk allocation mechanism of government developing low-renting public housing in BOT mode.4. Formed a complete and practical theory system of introducing BOT mode into low-renting public housing. This paper studies a series of topic from the game analysis in BOT mode between government and investors, investment incentive methods and effects to the game analysis between government and investors after applying incentive mechanism, then forms into a complete and practical theory system of introducing BOT mode into low-renting public housing, which provides a strong theoretical basis for successfully applying BOT mode into low-renting public housing construction, therefore it promotes the development of low-renting public housing project in China.