The Progress Report on Hong Kong’s Long Term Housing Strategy (LTHS) was released last week. Upon reading it, I believe that Hong Kong’s housing policy has much room to improve, and in particular, it needs better focus and more cohesion.
The report describes the LTHS as being “supply-led” and following a “flexible” strategy. This is well said. I agree that increasing supply should be a priority as it is a shortage that caused the price surge, but I am worried that the government is not addressing the most pressing issues. There are more effective ways to deal with Hong Kong’s current housing problems.
To “avert the current supply demand imbalance”, the report says three directions have been taken: to provide more public rental housing (PRH) units and to improve the efficiency of utilization of the stock of available units; to provide more subsidized sale flats and to expand the forms of subsidized home ownership and facilitate market circulation; to combine land supply increases with demand management and “good sales and tenancy practices for private residential properties.”
Given our limited resources, it is far more important at this juncture to lift those in unacceptable, unhygienic and even unsafe living conditions out of those conditions than to further improve the well-being of those already enjoying acceptable housing. We should focus on increasing the supply of public rental housing and that of starter home for-sale flats (subsidized sale flats, or SSFs) which meet the basic needs of the typical core family. I do not see the need to “expand the forms of subsidized home ownership” if this entails quality levels that go beyond basic starter homes. Focusing on “basic starter homes” will better cater to the needs of those who are most vulnerable. More-desirable homes, on the other hand, will attract households that are less in need. If the government has a better focus, it will be more effective in this matter of high priority.
In the 2015 Policy Address, the Chief Executive proposed to increase the supply of subsidized sale flats by converting flats developed by the Urban Renewal Authority (URA) that were originally intended for the private market to SSFs. A total of 338 such flats in the Kai Tak development were later converted in this way, with size ranging from 332 square feet to 568 square feet in saleable area. Many of these flats directly compete with private flats but were sold at an attractive discount. One wonders what was the point.
A 2018 LegCo “Statistical Highlights” showed that 62.5% of the SSFs sold in 2017 were under the Home Ownership Scheme/Green Form Subsidized Home Ownership Scheme; 33.4% were under the Tenants Purchase Scheme (TPS), 3.8% were sold by the HK Housing Society under the Flat for Sale Scheme or the Sandwich Class Housing Scheme. Only 0.3% were sold as “other SSFs” under the HK Housing Society and the URA. This proliferation of schemes shows a lack of cohesion and consistency rather than a demonstration of flexibility. As things turned out, many of these sales ended up as handsome profits for the lucky ones who got the right to buy the TPS flats through the PRH tenant status or who were lucky enough to win the “lottery” for heavily subsidized flats. The policy clearly would attract more people to apply for PRH.
The same LegCo Statistical Highlights show a much higher over-subscription rate for White Form applicants than for Green Form applicants. In general, White Form applicants need to meet the Housing Authority’s income and asset limits and other requirements, but Green Form applicants are not subject to these requirements. Since PRH tenants may continue to live in their subsidized rent flats as long as their family income does not exceed 5 times the PRH income limits or their total net household assets do not exceed 100 times the required income limits. The reason White Form applicants are so keen to buy these flats is that they have a far more urgent need than Green Form applicants, who usually are already living in a subsidized rental flat under the Housing Authority or the HK Housing Society.
Instead of defining different and complicated eligibility criteria to enter different housing lotteries, which has been rendered even more attractive in recent years because of deeper discounts in the sale prices, the government should focus on the supply of small and modest starter home flats that may not be attractive to the well-to-do. It is far better to rely on “self selection” than “income and asset limits” if we want to help the needy. Even without income and asset limits, the well-to-do will opt out of subsidized flats if the owners of such flats are not allowed to own other properties and must live in the purchased flats. Because they are modest starter homes, when financial conditions improve, their owners will have the incentive to sell and move on to a private flat.
This is far better than the present system, under which people are encouraged to take up a low-paying job in order to retain eligibility for the housing lottery.
The author is a senior research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
The views do not necessarily reflect those of China Daily.
