Housing is central to the well-being of a city’s residents. John Lee Ka-chiu, the chief executive of the Hong Kong Special Administrative Region, has devoted much of his latest Policy Address to housing. His proposal for requiring subdivided flats to be improved to qualify as “basic housing units” has attracted a lot of public discussion. On Saturday, a news magazine story that aired during prime time looked at the issue of requiring subdivided flats to upgrade to basic housing units, and reported that a number of tenants have now been given notice to move out. Many subdivided-flat owners and operators are quitting the business for fear of violating the law and possible financial losses due to substantial conversion costs, particularly in view of the existing laws to protect tenancy rights.
Pursuant to the Landlord and Tenant (Consolidation) Ordinance (Cap7), under Part IVA, tenants are effectively guaranteed four-year security of tenure. In order to start the conversion work to comply with the new requirements for upgrading to basic housing units, the subdivided-flat owner or operator will have to stop leasing out any vacant room while waiting for others to move out to complete the conversion works. Many existing tenants cannot afford the much more costly, regulation-compliant flats. They also worry that they cannot benefit from the Light Public Housing program because they do not qualify.
Changing the rules about the qualifications for the Light Public Housing would totally change the nature of Light Public Housing, which is meant to offer relief to the households that have been on the waiting list for regular public rental housing (PRH) for three years or more, with priority given to family applicants. Moreover, many tenants currently living in the subdivided flats have not applied for public rental housing.
To me, there is only one way out of this impasse, and that is to set a lower standard for basic housing units that aims only to ensure hygiene, safety, and fairness. To aim for too high a standard will inevitably reduce supply and raise costs. If we really want to help people in need, we have to ensure adequate supply of the basic housing units that meet their needs, which must include affordability. This cannot be just assumed. We need to ask ourselves: Can we devote public funds to ensure this? Given the current large fiscal deficit, we certainly cannot fill the gap that the private sector will leave open.
To me, fiscal sustainability is an issue also with our public rental housing and the Home Ownership Scheme housing. Today, because many of our PRH units are of a sufficiently high quality and located in highly desirable areas, even households which have become quite well-off and can afford private housing still choose to stay there. In most cases, even if they are found to be “well-off households”, their rents are still far below free market levels. This has exacerbated the need to build more PRH housing than is needed if the PRH flats were truly devoted to needy families. In the past, under the Tenants Purchase Scheme, PRH tenants could even benefit from a handsome profit by reselling their acquired flats to middle-class families who were their “benefactors” because the latter had paid more taxes than the former, if they had paid any taxes at all.
The HKSAR government should make “basic flats” available to all Hong Kong families, at an affordable price of eight times the annual household income of economically active households. These should not be built on highly desirable locations such as Kai Tak. Providing the motivation to move out when the households can afford better homes is important for government fiscal sustainability
Singapore also offers heavily subsidized flats under the Public Rental Scheme (PRS) for families or singles who have no family support or other housing options. They need to renew their leases periodically, and three months before the current tenancy is due to expire. The PRS is run also by the Housing and Development Board. Tenants and applicants under the program must not have any ownership, interest or estate in any property (local or overseas, building or land, residential or otherwise). In December 2021, Singapore launched the Joint Singles Scheme Operator-Run (JSS-OR) Pilot program that include partitioned flats to house two or three people per flat with shared appliances and facilities. The pilot program was expanded in September 2023 from three to six sites, and from a total capacity of 400 to 1,000 people.
Today, around 78 percent of Singaporeans live in owned HDB flats, which are open for sale to all Singaporeans. They do not run a lottery-type system, and these flats are quite roomy. This is luxury to Hong Kong people, but Singapore has more residential land than Hong Kong. Of the total land area of Singapore, about 7 percent is used for private housing; and 8 percent is used for public housing. Hong Kong has a much bigger population but only has 80 square kilometers for housing, much less than the 108 square kilometers in Singapore.
It is interesting to note that the percentage of households in Singapore who own HDB flats today is down from the 88 percent recorded in 1998, indicating that Singaporean families are trading their HDB flats for better private flats in the market. When they do this, the burden on the government will be reduced. We should follow Singapore’s approach. The HKSAR government should make “basic flats” available to all Hong Kong families, at an affordable price of eight times the annual household income of economically active households. These should not be built on highly desirable locations such as Kai Tak. Providing the motivation to move out when the households can afford better homes is important for government fiscal sustainability. Aiming at dream homes and selling at deeply discounted prices will only attract bidders and make buying such a dream home a lottery win.
The author is an adjunct research professor at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute and the Economics Department, Lingnan University.
The views do not necessarily reflect those of China Daily.
