City officials must encourage greater mobility and consider a more rigourous tenant compliance policy

All three candidates for the post of Hong Kong chief executive have accepted that provision of housing for all sectors of the community will be one of their key priorities should they be elected later this month with Carrie Lam agreeing in her manifesto that “the housing ladder needs to be rebuilt to provide families in different income brackets with the opportunity to become home owners”. The reality, of course, is that currently there is no clear ladder as such and we only, in effect, have three options – public rental housing (PRH), Home Ownership Scheme (HOS) and the private housing sector – and there are major financial and supply challenges associated with transition from one to the other. This limited choice has contributed much to the social disharmony obvious in society today.

Adjusting the original premium for inflation, rather than the uplift in market value, could be a possible solution for Hong Kong’s housing woes.
Adjusting the original premium for inflation, rather than the uplift in market value, could be a possible solution for Hong Kong’s housing woes. © EPA

If we accept that it is important to increase both the range of choices and the mobility within the market and that we need not only to encourage greater home ownership as well as the development of improved private rental stock, then there is clearly much to be done. Each of the candidates accepts the need to find more land for housing and that this will involve an acceptance in society of the requirement for give and take in order to come to a balanced solution which addresses the needs and concerns of the community as a whole. I have advocated for some time the need for a detailed independent audit of all potential sources of supply and I still believe that this should be the starting point of any new supply policies.

Be that as it may, I think there needs to be an early discussion about the future of public rental housing with focus on the long term liability it represents, the need to encourage greater mobility and the adoption of a more rigourous tenant compliance policy. Any such discussion, however, needs to be underpinned by access to affordable alternatives and although somewhat radical perhaps thought could be given to ring fencing existing and future public rental housing supply at or about present levels and moving to a model where all new government provided stock is for purchase and takes the form of home ownership scheme, albeit with more varied financial entry formats and a revised calculation basis for premium payment on resale.

At the end of last year there were some 282,000 applications for public rental housing, representing a waiting time of 4.8 years and only 7,000 units per annum have been recovered by the housing authority for re-letting, similar to the roughly 1 per cent of the total stock over the last five years. The government is currently targeting building 280,000 new rental/home ownership scheme flats over the next ten years and it would obviously dramatically change the housing landscape if all these were to take the form of subsidised/incentivised purchase in some form or another.

In her manifesto Lam refers to the provision of “starter homes” and indeed this is a serious gap in the market and we are seeing part of the response to this in the recent rise in the number of micro flats being offered for sale. However, these units are still beyond the means of many would-be new households and again we need to look at a range of possible models.