Last week, Amy Liu Mei-heung urged the government to let public housing tenants own their flats. Given resource constraints, I am afraid this will defeat the very purpose for which public housing came into existence.

Generally, I like to see Hong Kong’s homeownership rate rise. A trend of rising homeownership had been in place well before 1997. The homeownership rate was a mere 28.7 percent in December 1982. By 1997, it had reached 46 percent. This increase, along with surging home prices, was a sign of growing wealth across a large section of the population. Unfortunately, this increase was short-lived. The homeownership rate peaked at 54.3 percent in 2004. It fell below 50 percent briefly, and presently is struggling at barely above 50 percent.

In December 1997, the Tenants Purchase Scheme was announced, and sitting tenants were offered the opportunity to buy their own flats at deeply discounted prices. The homeownership rate rose sharply till the launch of the TPS. To date, there are 39 TPS estates under the Hong Kong Housing Authority, and as of March 31, 2018, the number of flats sold in these estates since 1998 was 138,550. My main objections to relaunching the TPS are gross unfairness and gross policy inefficiency.

When the TPS was launched in 1998, the deep discounts offered produced a huge shock to the private housing market, and precipitated a plunge in housing prices and a deep recession in 1998. The public housing program used to provide an important source of buyers in the Home Ownership Scheme as well as the private homes market, but under the TPS, public housing tenants quickly lost interest. To see how the dearth of buyers almost immediately froze market turnover, readers can compare turnover before and after the announcement of the TPS in December 1997. As housing prices plunged, many homeowners lost their homes, resulting in a decline in homeownership for purely private homes, alongside a rise in homeownership for the public housing homes (TPS plus HOS). In the fourth quarter of 1997, the private homeownership rate stood at 37 percent. In the fourth quarter of 2001, it was down to 35 percent. The public housing homeownership rate rose from 10.8 percent to 17.4 percent during the same period.

The TPS (Tenants Purchase Scheme) is unfair because public housing tenants who bought their homes gained at the expense of private homeowners who often are also taxpayers, and because the attractive profits are luring more people to queue up for public housing

In the 18 years from the first quarter of 2002 to the second quarter of 2020, the private housing homeownership rate stayed at 36 percent. The public housing homeownership rate dropped from 16.4 percent to 14.5 percent. Such stagnant homeownership never occurred prior to the TPS.

The TPS is unfair because public housing tenants who bought their homes gained at the expense of private homeowners who often are also taxpayers, and because the attractive profits are luring more people to queue up for public housing. The public housing tenant status is a ticket for good fortune. One public housing tenant bought a TPS flat for HK$207,400 ($26,750) in 2013, and sold it off to “green form” buyers (those who are eligible to purchase a flat in the HOS’ secondary market) without repaying any land premium for HK$1.33 million. The “rent seekers” are making the wait even longer for those who genuinely need better accommodations.

I do not object to the government extending an economic benefit, like handing out money, to people in dire straits. But most TPS buyers do not fall into that category, and the government does not have the resources to hand out to everybody.

“Policy efficiency” refers to whether a policy achieves its intended goals effectively using the resources that support the policy. The TPS is an aspect of public housing policy that is supposed to help accommodate those who otherwise have to live in substandard housing. Unfortunately, a unit sold represents shrinkage in the public housing stock, which otherwise can contribute to helping accommodate those in need.

Liu’s article pointed out that when the price of the TPS flats rise, their buyers will benefit. “When they save enough money, they can then sell their old flat and buy properties in the private housing markets, thereby improving their living standards.” But the prospect of such gains will attract more people to join the queue for public housing. The government will never be able to meet all the demand. Already, the waiting period is now well over five years.

Further benefiting those who have already secured public housing support is not nearly as urgent as benefiting those who are living in substandard housing and paying stiff rents. We need to get our priorities straight.

The most troubling aspect about the TPS is that the only qualification needed to buy a TPS flat is that one must be a Housing Authority public housing tenant. There is no eligibility requirement in terms of income, ownership of other properties, or size of the household. It is important that any public flat sold should be sold only to those who do not own other properties and who meet the eligibility requirements to apply for a public housing flat. They must not use the TPS flat as an investment property. To do so would deviate from the purpose of public housing.

The author is a senior research fellow at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.

The views do not necessarily reflect those of China Daily.