Based on the case study of Yiwu as one of the 33 pilot projects cities of “Three Pieces of Land” in China, this article summarizes the risks and precautions of the reform of homestead system from the perspective of “the Three Rights Division of Homestead”. It also explores into the origin of “the Three Rights Division of Homestead” with the reform documents analysis and the discussion of the existing problems of the homestead system. Then we conduct a case study of the homestead reform in Yiwu, and finally put forward the precautions against the risks of the “Three Rights Division of Homestead”. The research methods used in this study are text analysis and case study. The following precautions are provided in the end of the article: 1) set up the implementation organization of homestead ownership; 2) standardize the conditions for obtaining qualifications for homesteads, and establish the paying system for the use of homesteads and achieve the right of qualification fairness through prices; 3) realize the right of qualification and the right of use, and clarify the power of the rights.