Ho Lok-sang proposes making apartments affordable while preventing PRH owners from over-profiting from their sale will serve everyone’s interests, especially youth’s
The housing problem has been widely cited as one of the key drivers behind the massive protests that have been taking place over the past three months. Although the majority of households have been accommodated in our low-cost public housing, bought a Home Ownership Scheme (HOS) or Tenants Purchase Scheme (TPS) apartment, or their own private apartment, it is said that our youngsters cannot afford to buy or rent their own apartment given the steep prices of today. Without an apartment of their own, they cannot raise a family.
I have doubts whether this is a key driver behind the protests. But assuming it is, it is not really that difficult to deal with the problem. The question is: Do we throw darts in the dark, or do we adopt the right approach?
In his 2015 Policy Address, Leung Chun-ying, Hong Kong’s then-chief executive, proposed to designate selected apartments originally intended for public rental housing as for sale to Green Form applicants and at a deeper discount than typical HOS units. It was hoped that this would allow some public housing tenants to become homeowners while releasing more public rental housing (PRH) apartments for PRH applicants. I consider this plan to be throwing darts in the dark, and believe it will not alleviate the housing problem.
Consider the fact that an apartment bought under this program in 2016 was recently resold at a profit of HK$1.45 million (US$185,400), or close to 90 percent net of taxes. What is the signal to the public? What will be the results?
To help solve the housing crisis for young people, I have proposed allowing young couples to buy a modest apartment at a price equal to 10 times the median household income, with above-average-quality apartments selling for more and below-average-quality apartments selling for less
Such a windfall is on top of the benefit of very low rent, and additional benefits such as “rent holidays” that are often handed out on Budget Day to PRH tenants.
Clearly, that program would lure many more people to line up for PRH and lure more Green Form applicants to try to take advantage of the plan. Because of the greater demand, needy people need to wait longer, and the chances of success in buying under the Green Form Subsidized Home Ownership Scheme will be lower.
To properly tackle the housing problem, the Housing Authority instead should strive to reduce any profit incentive from applicants of PRH or HOS housing, and should strive to “conserve” all public housing units so that they will always be available to serve the purpose of filling the housing needs of needy people.
I had voiced my objection to the Tenants Purchase Scheme on the account that it undid the benefits of the policy to make richer tenants pay higher rent. In both 1996 and 1997, the number of PRH apartments returned to the Housing Authority was close to 10,000 units. With the announcement of the TPS, tenants who otherwise would need to hand their PRH apartments back to the Housing Authority were allowed to buy their own apartments. Many TPS owners have also made huge profits. I have no objection to anyone becoming rich, but if the very precious resources that Hong Kong society owns that can help tackle our acute problem serve instead to line the pockets of some people, we will never be able to help the truly needy ones.
To help solve the housing crisis for young people, I have proposed allowing young couples to buy a modest apartment at a price equal to 10 times the median household income, with above-average-quality apartments selling for more and below-average-quality apartments selling for less.
This is a once-in-a lifetime right. I would dispense with income and asset limits, but will strictly enforce the following restrictions: Apartments can be resold only back to the Housing Authority, at the original purchase price plus any inflation since then based on the consumer price index; apartments can be occupied only by the buyers themselves and must not be rented out; owners of these apartments must not be allowed to own any real property in Hong Kong.
Given these restrictions, buyers of these apartments will not be able to pocket the big profits associated with real estate investments. Those who can afford their own units and those who want to make big profits on Hong Kong’s real estate will certainly not buy these apartments. This way, we can dispense with the income test and the asset test, and still target those with the desire for affordable accommodation only.
Assuming that the special administrative region government can use the Lands Resumption Ordinance to repossess the agricultural land now in the hands of our developers, all that is needed is to repossess a large chunk of that land and start producing public housing for sale under the proposed terms and for rent.
Then we will have a dichotomy of markets: a truly private market for those who can afford better housing and those who want to invest in Hong Kong’s residential market; and a publicly provided “basic housing” sector for those who need accommodation. We will do away with all the Special Stamp Duty, Buyer’s Stamp Duty, and Ad Valorem Stamp Duty for properties beyond one unit already owned.
The author is a senior research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
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