"Could you imagine, there used to be a BMW parked beside our building, usually on the weekends," Shen says.

The Beijing Municipal Construction Committee hadn't established minimum and maximum income guidelines for buyers, so a number of wealthy people took advantage of the loophole and bought apartments that they resold later for large profits.

Finally, in 2000 the Beijing municipal government said that the low-cost apartments would only be sold to families with an annual income below 60,000 yuan.

Four years later, the Ministry of Construction, together with the National Development and Reform Commission, the Ministry of Land and Resources and People's Bank of China established the country's first regulation on managing low-cost housing. Among other criteria it specified the building quality, legal buyers and prices. The regulation also required most of the homes to be between 60 and 80 sq m.

At the end of 2007, seven ministries led by the Ministry of Construction further tightened the controls over the housing, stipulating that the government has priority if the homes are sold and that no sales would be allowed until after five years of the purchase.

The government has also increased the supply of low-cost housing. This year Premier Wen Jiabao said in his work report this year that the government earmarked 6.8 billion yuan ($995 million) in its 2008 budget to build low cost housing for the urban poor in the western and central parts of the country. That's 1.7 billion yuan, or 33 percent, more than last year. Qi Ji, the vice-minister of construction, said the central government has decided to allocate 70 percent of the land supply this year to build homes for middle- and low-income families and the needy.