Among the main themes of the chief executive’s policy address this year are tackling housing and poverty.
The Hong Kong Poverty Situation Report 2013 suggests poverty improved in 2013 from 2012.
There is a close connection between poverty and housing.
We hope to look into two issues here:
1. How does housing affect poverty?
2. How are different types of housing related to the degree of poverty?
The Joseph Rowntree Foundation, a British voluntary organization that studies social policies, released a report in 2013 in which it said low-cost and high-quality housing could improve people’s livelihoods by increasing their households’ disposable income, alleviating their shortage of daily commodities and keeping their work morale high.
High housing costs are a fundamental cause of poverty and the shortage of daily commodities.
And there is substantial evidence that a lousy living environment can hinder child development and affect the health of adults.
Unfortunately, low-income families in Hong Kong not only suffer from skyrocketing rents and property prices but also have to deal with high inflation. So most of their monthly disposable income is gone, and many find it hard to make ends meet.
A housing affordability survey published by the Wendell Cox Consultancy/Demographia in the United States last year compared the ratio of property prices to income in 360 countries and regions.
It estimated that the ratio of home prices to income in Hong Kong was about 14.9 times, as compared with 13.5 times the previous year, making the city the least affordable place in the world for homebuyers for the fourth consecutive year.
Skyrocketing property prices and rents exacerbate poverty in Hong Kong.
The 2013 poverty situation report found that the poverty rate among occupants of private properties and flats under the Home Ownership Scheme continued to rise between 2010 and 2013.
On the other hand, the latest figures in the report once again prove the effectiveness of providing public housing in alleviating poverty.
If we simply quantify and factor in the benefits of public rental housing, the overall poverty rate in Hong Kong will decline to 9.8 percent from 14.5 percent, and the number of people living in poverty will drop to 660,000 from 970,000.
As a form of non-cash, permanent benefit, public housing is far more efficient than the Comprehensive Social Security Assistance Scheme (CSSA) in easing poverty.
While public housing alone can bring 250,000 people above the poverty line, the CSSA can do that with only 190,000 people.
Public housing can reduce the overall poverty rate by 3.7 percent, while the CSSA can only contribute to a 2.8 percent drop.
The cheap rents of public housing leave grassroots families more resources at their disposal to improve their lives and to help their children climb the social ladder.
In contrast, the poverty rate and the number of people living in poverty among tenants in private flats increased significantly in 2013 from 2012.
Further analysis suggests that most of these are either three-person or four-person families, the majority of whom are not CSSA beneficiaries.
Working parents in these families mostly have limited skills.
The Hong Kong government provided relatively cheap flats under its Home Ownership Scheme starting in the 1970s but ceased to do so in 2003 amid plunging property prices, a high unemployment rate, the rising number of homeowners with negative equity in their homes and mounting pressure from big developers.
Regular land sales were also abandoned in favour of the newly introduced mechanism of land sales by application, and the construction of public rental housing flats also slowed down.
When Donald Tsang Yam-kuen became chief executive in 2005, he continued to keep a firm grip on land supply, and as a result property prices soared.
Despite intense criticism, his administration turned a blind eye to the fact that the city was suffering a housing affordability crisis.
And thanks to the Individual Visit Scheme for mainlanders, property prices in Hong Kong spun completely out of control, further widening the wealth gap in the city.
In fact poverty in our society would be less severe if the government had been more proactive in its housing policy in the past decade.
Recently, business tycoon Lee Shau-kee, founder of Henderson Land Development, proposed to build flats that young people can afford.
We hope other big developers will follow suit and fulfill their social responsibility.
Let’s make Hong Kong not only a city of business opportunity but also a place with plenty of good hearts.
This article appeared in the Hong Kong Economic Journal on Feb 2.
Translation by Alan Lee
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