From Day 1 of his election campaign in 2012, Chief Executive Leung Chun-ying emphasized housing policy.
During his term of office, however, property prices, rents and the number of people on the waiting list for public rental flats all hit record highs — and the number of subdivided flats increased 30 percent in 18 months.
The housing crisis in Hong Kong is deteriorating.
Unfortunately, in the Long Term Housing Strategy released on Dec. 16, the first since 1998, the government once again fails to listen to the public outcry and to address fundamental housing issues.
Our city will face an even deeper housing crisis unless the government acknowledges its mistakes and puts things right immediately.
The government’s biggest mistake lies in believing in the free market.
The strategy remains dominated by the doctrine of demand and supply without paying any attention to the fact that the housing market is completely distorted and manipulated by oligarchs.
To make matters worse, the government seems to have confused “housing needs” with “homeownership needs”.
It believes in the myth that by drawing more potential buyers into homeownership, thereby increasing the proportion of homeowners to renters, social wealth can be built through home equity and the long-term housing problem can be resolved automatically.
However, although local residents do need a flat, they don’t necessarily want to buy one. In fact, many who favour mobility would rather rent than buy.
In his campaign platform back in 2012, Leung promised that, if elected, he would seek a long-term and complete resolution of the issue of subdivided flats based on new and appropriate safety and hygiene standards; that he would provide hostels for young people; that he would ensure the average waiting time of family applicants and single, non-elderly applicants above the age of 35 for public rental flats would be no longer than three years; and that he would increase the number of interim housing flats.
These promises, which gained him political support during his campaign, could indeed ease many of our housing problems.
However, none of them was mentioned in the strategy unveiled last week.
The document continues to blame the inadequate supply of housing on a shortage of land.
But while the government keeps arguing, on one hand, that there isn’t enough land to build public rental flats, it is, on the other hand, selling loads of land to big developers to build luxury homes.
It keeps turning a blind eye to the fact that a lot of land in Hong Kong is being occupied by powerful people, rich indigenous clans, big businesses and highly exclusive private clubs and golf courses.
Instead of renegotiating terms with the rich and powerful who occupy this land so as to reclaim it for housing, the government would rather go after land occupied by the average, vulnerable citizen, sometimes through unfair procedures and an unjust process.
The government’s estimate of demand for public rental flats turns out to be way off.
It says it will build an average of 20,000 public rental flats and reclaim more than 10,000 units a year from former tenants who have become homeowners under the Home Ownership Scheme (HOS).
However, given that an average of 50,000 to 60,000 new applicants are added to the waiting list for public rental flats annually, it doesn’t take a mathematician to figure out that the pace at which the government is providing new flats will never meet the existing demand, and the gap is quickly widening.
Besides, HOS flats are now put on sale at a mere 30 percent discount to the market price, which means a single-family flat can cost between HK$3 million and HK$4 million, far exceeding the affordability threshold of most households who rent public flats.
About 2.4 million households in Hong Kong live in private housing.
But there are 2.6 million private homes in the housing stock, which means roughly 200,000 units are being left vacant, most of which are owned by investors or speculators.
To boost housing supply in the short run, I suggest the government introduce a property tax on vacant units. It would raise the cost of hoarding flats and reduce the rate of vacancies.
Although the public has been calling for years for the reintroduction of rent control, the government simply ignores it, arguing that interfering with the free market would lead to undesirable side effects.
Ironically, these “side effects” the government is referring to — such as less supply, landlords choosing tenants on an unfair basis and overcharging of fees — are already growing rampant in the rental market in the absence of rent control, and things are getting worse.
The rationale behind the strategy’s decision to deny rent control is simple: to guarantee landlords and developers lucrative returns.
In the past five years, rents for family apartments have already soared 70 percent.
In fact, the city is witnessing its worst rental affordability crisis in decades.
The strategy says it expects the Urban Renewal Authority (URA) to provide through its redevelopment projects more small to medium-sized flats that meet public needs.
However, exactly the opposite is happening now.
In the past 10 years, the annual supply of small, affordable flats in urban renewal projects has continued to decline, because many of the flats the URA and its private-sector partners build are designed and marketed as luxury homes.
For example, several years ago, the URA offered owners in Lee Tung Street in Wanchai (“Wedding Card Street”) only HK$4,000 per square foot for their properties.
But when the redevelopment is completed next year, the luxury flats are expected to be sold at a whopping HK$20,000 per sq ft. Even the cheapest unit may cost about HK$6 million.
Lee Tung Street is just one of many examples of how precious urban land is snatched and redeveloped into lucrative real estate projects at the expense of the public.
Leung’s government always tries to create the impression that it is doing everything it can to ease our grave housing problems, but in fact it is not, and it could do substantially more.
Rather than giving us hope, the strategy simply projects a grim picture of how our housing crisis will persist.
I can foresee another 10 years of despair, marked by a continued surging of rents and an ever increasing number of subdivided flats. And there is nothing we can do about it.
Who wants a housing strategy like that?
This article appeared in the Hong Kong Economic Journal on Dec. 22
Translation by Alan Lee
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