Mr. Chen had not slept in his second apartment for years. No one did. In that small apartment in a very old building in Shanghai, there was no sofa, television, or wardrobes. In the living room, there was an urn with his wife's ashes, next to a photograph, some candles, and offerings. Chen had turned a home into a tiny private mausoleum because, when it came down to it, it was cheaper to reserve an apartment for the deceased than to pay for a tomb.
Now he has just sold it. And the buyer was the city government itself.
This case summarizes two of the problems that have intersected this year in China. On one hand, the country has too many homes and a real estate market that has been trying to recover from its biggest crisis for five years. On the other hand, in big cities, there is a growing shortage of affordable burial places for an aging population. From this combination, the guhui fang were born, literally "apartments for ashes," empty apartments transformed into family sanctuaries. An unorthodox solution to a quite earthly account: residential usage rights typically last 70 years, while a cemetery plot has a maximum utilization cycle of 20 years.
This year, the Chinese government decided to put a stop to it. The new funeral regulation stipulates that residential homes cannot be specifically used to store ashes. The unusual business of buying a house for a deceased person had also become an unexpected consequence of the real estate collapse. And here is where Shanghai comes in. While many now have to remove urns from empty apartments, the local government wants to introduce tenants into thousands of old homes that have lost buyers.
The financial capital has launched a new experiment: state-owned enterprises buy small second-hand apartments from owners who want to sell, renovate them, and incorporate them into the affordable rental market. The state simultaneously acts as a buyer, renovator, and landlord.
The initial success convinced authorities to expand the trial. The districts of Pudong, Xuhui, and Jing'an had acquired 523 homes in just a month and a half. They are mainly looking for well-connected apartments, under 70 square meters, and priced below four million yuan (around 530,000 euros). The goal is to rent them below market price to young people, newly arrived workers, professionals from tech companies, and other residents facing difficulties in accessing housing.
This is not a minor help in one of the most expensive cities in the country. The average residential rent in Shanghai was around 85 yuan per square meter in September. A 60-square-meter apartment would cost, on average, about 5,100 yuan per month (700 euros), and that's because rent is cheaper in areas further from the city center. It is important to note that the disposable income per capita in this city, where nearly 30 million people live, was 91,987 yuan in 2025 (1,330 euros). For a young person earning a modest salary who arrives alone in Shanghai, living close to their workplace remains a disproportionately high expense.
The mechanism also has a second intention. In neighborhoods filled with the so-called laopoxiao - "old, small, and rundown" apartments, many built decades ago - the owner who wants to move to a better home finally finds a secure buyer. In several districts, they receive a kind of voucher equivalent to the transaction amount that can be used to purchase another property. This aims to set the entire chain in motion: the government buys the old apartment, the former owner uses the money to buy another, and the acquired property ends up being rented at an affordable price. It is a small liquidity infusion into a market where there were surplus sellers and a lack of buyers for years.
The initial public data provide officials with reasons to boast about the experiment. In the first three months of the year, 54,100 old homes were sold in Shanghai, a 14% year-on-year increase. The monthly price of used homes also saw several advances during the spring. Authorities claim that the new program is helping to eliminate stock where affordable housing is most needed.
The recipe is already being replicated, with different ingredients, in other metropolises. In Guangzhou, state-owned companies have been authorized to buy old homes and convert them into social housing or accommodations for skilled workers. Shenzhen subsidizes the "sell old, buy new" scheme, while Beijing has relaxed restrictions on buyers of new homes and has raised the limits on loans granted through the public housing fund.
These are new patches for the major economic wound left by the bursting of the real estate bubble in 2021. Since then, the government has reduced mortgage down payments, lowered interest rates, lifted purchase restrictions, helped complete stalled developments, and pressured local governments to absorb part of the huge stock. Last September, they went even further by announcing a national grant of one percentage point on the interest of certain mortgages for first-time homebuyers.
China is entering a different market from the golden era of cranes. Used homes already accounted for 52% of all real estate transactions during the first eight months of this year, compared to 27% in 2020. The country that built entire cities for two decades to fuel its growth is beginning to realize that its problem is no longer building more houses but deciding what to do with the ones it has.