Nearly 5.8 billion yuan (S$1.2 billion) was embezzled last year from State funds for affordable housing, involving 360 projects and organisations, China's top auditing authority said on Friday.
The money was used to pay back loans, to invest or ensure cash flow, the National Audit Office said in its annual audit report on affordable housing projects for 2012.
About 20,000 auditors took part in a nationwide audit from November to March, covering 391 cities and 2,546 counties. They checked 34,200 affordable housing projects, 26,400 government organisations and companies as well as 248,500 households.
They found that more than 401,000 square meters of space for affordable housing in 12 projects was used for commercial property development, and 110,000 families produced false documents to qualify for assistance unfairly, the office said.
About 18,300 affordable housing apartments, which, according to State policy, should be reserved for people on low incomes, were sold by 34 construction companies on the market with much higher price tags to make profits, while nearly 5,400 apartments were used in contravention of government rules, auditors said.
Of the 7.6 million affordable housing units being built last year, 4.5 million have been completed, benefiting 26.7 million people from 9.5 million families.
China plans to build 36 million affordable housing units from 2011 to 2015, with the programme receiving nearly 880 billion yuan last year, the audit office said.
This effort has increased housing supply and curbed a sharp increase in property prices, the office said, adding that it also helped boost the economy and generate job opportunities.
House prices averaged 10,300 yuan per square meter in July, according to the China Index Academy, up 7.9 per cent year-on-year and from 7.4 per cent in June.
Auditors also discovered some policy violations during their inspections.
In Ordos, Inner Mongolia autonomous region, 1,048 affordable housing units and 1.4 million yuan in subsidies were given to 1,452 families that were ineligible for government support;
In Chongqing, a State-owned investment company was found to have used 293 million yuan from government subsidies to pay its debts;
In Lanzhou, capital of Gansu province, auditors uncovered irregular selling of more than 6,600 houses from a shantytown renovation project.
Many factors contributed to the problems found during the inspections, and the affordable housing project has many defects, an unidentified official in charge of auditing social welfare projects said, according to the audit office.
The official said China has a long way to go before a well-functioning system that can ensure every person's housing rights is established and properly maintained.
Improvements must be made in the management of funds, background checks of affordable housing applicants and in the allocation of housing, the official said.
After the audit, local governments urged the organisations involved to correct their irregularities or violations.
Some 4.1 billion yuan in embezzled funds has been retrieved and 19,800 houses that were misused liquidated by the end of June.
Many local governments have stepped up checks on public housing projects and applicants' backgrounds.
In Nanjing, the capital of Jiangsu province, family assets are taken into account, in addition to personal income and per-person living area, to decide whether applicants qualify for affordable housing.
The affordable housing programme, first approved in 1999, is designed to provide less-costly housing for wage-earning workers and low-rent homes for poverty-stricken residents edged out by runaway property prices in recent years.