Housing remains a most pressing issue in Hong Kong, despite government efforts to ease the situation.
Ordinary people can’t afford to own a home, but rents are also skyrocketing beyond their reach.
There is a growing clamor for the government to reintroduce rent control measures after the policy was abolished more than 10 years ago.
But just like any other social issue such as minimum wage, both those supporting and opposing the proposal have backed their contention with strong arguments.
The Long Term Housing Strategy Steering Committee, which has been tasked to draw up the city’s housing strategy for the next decade, conducted a public consultation on rent control this July, and 70 percent of the submissions want the government to reintroduce rent control measures.
According to the Rating and Valuation Department, the rental index of the private domestic property market reached 162 points in September, a record high.
The city’s grassroots population is deeply affected by the high rent environment. One low-income family said the landlord raised the rent on their flat by 20 percent and, when they said they could not afford it, asked them to move out within a week. “How can we move in such a short period of time? So we were forced to pay the high rent,” one family member told Apple Daily.
However, some people contend that rent control not only runs counter to the city’s free-market principles, but will also work against the people that such a measure intends to protect.
Landlords, for example, may decide not to lease their apartments because of the lower rent. Such a move will further limit the number of flats available for rent, thus pushing up the price.
Some property owners may ask the tenant to pay for the rental of other items such as furniture and appliances, in addition to the apartment rent, as a way to compensate for the lower rent.
For free-market believers, the issue is about the imbalance of supply and demand. The only solution is to increase the housing supply. By increasing the number of homes, the rental price will drop. They insist that artificial measures such as rent control will only distort the operation of market forces.
Acting Secretary for Transport and Housing Yau Shing-mu made the same argument this week when he said it is still not the right time to reintroduce rent control.
However, even the United States, the world’s premier free-market economy, has found flaws in this laissez-faire model, especially after the 2008 financial tsunami. The collapse of the subprime mortgage market was the result of letting the “invisible hand” of the market do its work without intervention from the government.
It cannot be denied that increasing the supply is a long-term solution to the housing problem, which cannot be done in a snap of fingers. But finding ways to ease the situation must be done right now.
Rent control is not about limiting the rent to a certain level. It is more about regulating the percentage of increase of rent within a certain period, about making the increase more reasonable and affordable.
In 1973, the government imposed the rent control measures. When the previous contract has come to an end, the law prohibited landlords from raising the rent above 90 percent of the prevailing market rate within the next two years. It also barred them from raising the rent more than 30 percent when they negotiate a new lease contract with the tenant. It also required them to extend the contract with existing tenants who were willing to pay the rent.
However, rent control was abolished in 1998 after the Hong Kong property market was battered by the Asian financial crisis.
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