Housing rental market needs stricter oversight

JIN DING/CHINA DAILY

Danke Apartment, a company that takes rental apartments from landlords to rent out to people, has been in the news for all the wrong reasons.

Those looking to rent apartments have paid the rents, but the owners of the apartments have not received their payment for months. While the former insist on living in the apartments, the latter want their apartments to be vacated.

The problem is related to Danke’s business model. The housing company rents apartments at higher than market rates. They pay monthly rent to apartment owners, while collecting annual rents from those who rent the apartments, using the excess money to expand their market. Since not everyone can afford to pay annual rent, Danke makes them sign a loan agreement with some banks.

The model should have worked like a well-oiled machine, but obviously things went wrong somewhere.

Even if the apartments were to be vacated, the company would still have to pay monthly rents to the owners of the apartments, or risk facing a bad credit history. Apartment owners could be brought to take the company to court for reclaiming their own apartments for which they have not received rent for months.

So far, there has been no official response from Danke on the matter. There is little the authorities can do to help, as the losses are visible to all. They can at best help spread the losses. What is needed is stricter market surveillance to prevent such cases from happening again. The involvement of banks and loans made the risks even higher. Given the unsustainability of Danke’s business model, it is time for financial supervisory services to consider establishing stricter financial rules prohibiting such risky practices.

About Gertrude H. Kerr

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