In May, China’s central government urged more than 200 cities to purchase unsold homes to reduce the surplus supply. Fast-forward three months, and only 29 cities have taken the plunge.

This snail-paced implementation – mainly due to the unappealing financial aspects for local governments – underscores President Xi Jinping’s monumental challenge in rescuing the country’s record-breaking property market crash. This crash could derail China’s growth targets.

The plan was to encourage real estate investment, aiming to stabilise the sector while meeting Xi’s lofty goal of providing more affordable housing. Yet, the underwhelming progress only adds to the mounting pressure for more drastic measures as China struggles to manage its excess inventory of 382 million square metres—equivalent to the size of Detroit.

Meanwhile, property sales by the top 100 developers have nosedived yet again, and the ongoing housing crisis is pushing down consumer spending. At the same time, geopolitical tensions ramp up ahead of the U.S. election.

So, what’s the hold-up? Local officials are trying to balance Beijing’s demands with fiscal prudence. Buying up unsold apartments makes little financial sense, as prices are expected to fall by at least 30% in major cities before stabilising, according to Jefferies Financial Group. And the potential returns from converting these properties into affordable housing don’t stack up well against the cost of financing. In top Chinese cities, rental yields averaged just 1.4% in 2023, compared to the central bank’s financing rate of 1.75%.

Some cities are trying to negotiate hard to minimise their risks, further testing the patience of struggling developers. In Foshan, the local government offered to buy at no more than 50% of the prices of similar nearby projects. In Dongguan, plans are afoot to price affordable housing at about 50% of new home values, meaning purchase costs could be even lower.

For now, the numbers aren’t adding up. By the end of June, only 4% of the 300 billion yuan central bank lending programme had been tapped, and local governments seemed hesitant to take on more debt for minimal returns. Unfortunately, the low rental yields hardly justify the risk.