Secretary for Development Michael Wong Wai-lun is right in saying that Hong Kong people’s living space is generally too cramped. At a news conference last week, he pointed out that Hong Kong people’s living space falls far short of international levels.

For example, the per capita living space in Tokyo is roughly 210 square feet; that in Shanghai is 260 square feet; that in Singapore is 270 square feet; and that in Shenzhen is 300 square feet. Even if Hong Kong’s per capita living space were to increase by 10 percent, it would still be merely 215 square feet, similar to that of Tokyo, but far behind that of most cities. 

I have long been unhappy with the proliferation of “nano flats” in Hong Kong — tiny flats barely over 200 square feet, which is a disgrace to our beloved city, which claims to be a global city and aspires to be a leading livable city in the world. I applaud the suggestion to set a minimum size for flats, but I have reservations for raising the standards for public housing flats. At this juncture, the priority should be to uplift those living in extremely crowded and abject conditions as quickly as possible. Presently, while Wong says a four-member family typically lives in a public rental housing flat of less than 400 square feet, those who are crammed into small cubicles are putting up with 100 square feet or less and the household size could be three, four or more. 

Putting everything in perspective, I would recommend leaving the responsibility for home upgrading to the private sector. The government should focus on providing an adequate supply of decent but basic housing to those who cannot afford better homes. For those who want to live in more-spacious homes, let them resort to private real estate developers. Our private developers will continue to bid for land at prices that will help finance our increasing fiscal expenditures

Wen Wei Po published a story in December about a family of six, involving a couple and their two children and their own parents, who used to live in a cubicle of just 100 square feet and pay a monthly rent of HK$5,000 ($643) plus HK$2,000 in utilities, and who were overjoyed in being the beneficiary of a transitional housing project that offered them a flat short of 400 square feet. In the words of Mr Tang, the householder, this was like “coming back from a living hell to the world for human beings.” They had lived in such conditions for four long years. For the first time, the children, the couple, and the grandparents all have their own room; and for the first time they also have their own kitchen and toilet. Recalling how six people shared the sleeping space between two bunk beds in the cubicle, the wife exclaimed: “Now that I can sleep on my own bed and can turn my body, I know how blessed I am!” 

While the secretary for development looks forward to the day when a four-member family can have a 480-square-foot flat of the Public Rental Housing program at an affordable rent rate provided exclusively for low-income families, this would mean people would have to wait much longer to get a PRH flat. Those who can afford a decent private home will also be less likely to leave, given the better quality and deeply discounted rent.    

The government may think that if it makes the effort to drastically increase land supply, the queue can be shortened. Chief Executive Carrie Lam Cheng Yuet-ngor also said that future developments are expected to involve more for-sale flats and relatively fewer for-rent flats. Certainly that means for-sale flats should also be bigger and more attractive than the PRH flats, and these for-sale flats will also be priced affordably.  

When asked whether the ambitious land development projects risk emptying the fiscal reserves and leaving a huge debt, Lam said that land development has always been a financially rewarding venture. “Indeed, it is like a profitable business. So I am confident.” 

The question is whether all this is feasible. If high quality and still affordable homes are provided in bulk by the government, the living space for private developers will be squeezed. They will develop fewer private flats if the government raises the supply of public housing. They will certainly bid far less for the land to build private flats if these flats are selling for less. 

Moreover, I investigated the correlation between Hong Kong’s fiscal revenues and Hong Kong’s housing prices some years ago, and I found that it was significant and positive. If the housing market turns south, there is little doubt that our fiscal revenues will do the same.     

There is also the implications for the middle class who have purchased comparatively smaller flats at premium prices. These days, the mortgage term is typically over 20 years and many over 25 years. Over the past two years, about 34 percent of new mortgage loans have a loan-to-price ratio of 80 percent or higher, while the stock of mortgage debt has now surpassed 60 percent of the gross domestic product, which is a historic high.  

Putting everything in perspective, I would recommend leaving the responsibility for home upgrading to the private sector. The government should focus on providing an adequate supply of decent but basic housing to those who cannot afford better homes. For those who want to live in more-spacious homes, let them resort to private real estate developers. Our private developers will continue to bid for land at prices that will help finance our increasing fiscal expenditures.   

The author is director of the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.

The views do not necessarily reflect those of China Daily.