LOCAL governments in China that are increasingly dependent on land-use fees for revenue have caused social problems, including rapid increases in housing prices, the official newspaper of the Communist Party of China reported yesterday.

In 2009, local governments collected 1.5 trillion yuan (US$226.2 billion) in land-leasing fees, about 46 percent of all local government revenue, according to the People's Daily report.

In some counties and cities, land-leasing fees provided up to 80 percent of revenue.

With more publicly-owned land available for development, local governments will collect about 2 trillion yuan in land-leasing fees in 2010.

After leasing land for development, local governments may also levy taxes on the building industry and real estate developers, the newspaper quoted Huang Xiaohu, vice president of China Land Science Society, as saying.

They can also levy land acquisition and land-use planning fees.

The governments collect even more if they mortgage their land for bank loans, said Ye Jianping, professor of the Department of Land and Real Estate Management at Renmin University.

Over-dependence on "land revenue" is harmful, the report said, because it leads to illegal land acquisition and soaring home prices.

Local governments are the largest stakeholder in the land-use market and will use policies to stop house prices from falling, said Zou Xiaoyun, vice chief engineer of the China Land Surveying and Planning Institute.