Shanghai, China’s commercial hub, is set to begin a major initiative next year aimed at redeveloping urban villages, representing one of its most extensive citywide renewal efforts to date.
Announced during a late July session of the city’s legislative assembly, this project is part of a three-year plan and reflects a more comprehensive and vigorous approach to transforming urban villages compared to earlier attempts.
As China’s financial centre and most populous city, Shanghai ranks second only to Shenzhen in mainland housing prices, making its real estate market a key barometer of national trends, South China Morning Post reports.
Along with the urban village redevelopment set to begin in 2026, Shanghai plans to renovate small, thin-walled housing by 2027 and continue improving aging residential neighbourhoods, according to Wang Zhen, director of the Municipal Housing and Urban-Rural Construction Management Committee.
He shared these details during the 30th July meeting that outlined the city’s action plan for 2026–2028.
Between 2023 and June 2025, Shanghai renovated 39.1 million square metres of old neighbourhoods and identified 44 urban villages for redevelopment, according to the official report.
Urban village renewal usually entails demolishing outdated buildings and transforming the areas into modern residential and public spaces. This initiative is seen as a key driver for China’s economy, the world’s second largest, as it seeks new growth opportunities amid a wider slowdown.
In May, Qin Haixiang, vice-minister of Housing and Urban-Rural Development, stated that the project, together with other upgrades, “can effectively drive investment and consumption, boosting domestic demand.”
The redevelopment of urban villages and rundown housing is viewed as a promising new approach to revive China’s faltering real estate sector, which has been declining since mid-2021.
Furthermore, last week, Beijing relaxed housing sale restrictions even further, permitting eligible families to purchase an unlimited number of properties beyond the city’s fifth ring road.
The policy change is widely interpreted as a sign that similar regulatory relaxations could soon follow in other major cities like Shanghai and Shenzhen, where strict rules on residency, social security contributions, and property ownership remain in place.
Yao Yang, a leading Chinese economist, has suggested an ambitious state-supported “housing reserve” system as a solution to address China’s continuing real estate crisis.
“China has the China Grain Reserves Corporation and it could establish a similar ‘China Housing Reserves’ system, where the government acquires properties as affordable housing, forming a long-term financial mechanism,” he stated.
Yao Yang recommended that the government begin by purchasing foreclosed properties, estimated to exceed 1 million units in 2025, that remain unsold even though they are priced at half their market value.
Slow sales have caused these properties to accumulate in bank inventories, weighing down overall market prices.
He added that prompt government intervention would help stabilise both society and housing prices, and stressed that this effort should be directed by the central government rather than local authorities.