From Growing Crops to Houses

China's real-estate market has been booming for most of the decade, and this past year was no exception: in December alone, prices in 70 of its large and medium-size cities rose by 7.8 percent. As the boom continues, metropolitan areas are expanding outward into surrounding villages and countryside, and well-connected real-estate developers often use their pull to take land away from local peasants and farmers.

According to Chinese law, the developers have to compensate the farmers for their land grabs. But the formula for assessing the land often results in a payout much lower than market value. The developers exploit this formula—as well as their ties to local party bosses—to gobble up China's countryside on the cheap.

However, some enterprising farmers are twisting the system to their own advantage. During the property assessments, after the value of the land is factored in, payouts are determined in large part by the size of a farmer's home. So when word of a new development reaches villagers, peasants switch from growing crops to "growing houses": adding stories or new structures for the express purpose of netting a bigger payout. In some cases, groups of peasant speculators, known as "house planters," move to areas slated for development and build large, ramshackle structures, often lacking windows and cement foundations, to earn a compensation windfall once the wrecking crews arrive.

Though house planting is illegal, it is "extremely common" in the outskirts of cities throughout China, says Wen Tiejun, head of the School of Agricultural Economics and Rural Development at Renmin University in Beijing. Until China deals with both endemic corruption in its real-estate market and the widening gap between urban and rural incomes, unsettled farmers will continue to grow whichever crop is most profitable—and that includes the housing crop.

From Growing Crops to Houses | World