19 October 2019
Under the starter homes pilot scheme, there will be about 1,000 residential units available in Kwun Tong from 2021 exclusively for local first-time homebuyers. Photo: HKEJ
Under the starter homes pilot scheme, there will be about 1,000 residential units available in Kwun Tong from 2021 exclusively for local first-time homebuyers. Photo: HKEJ

Govt must guarantee transparency and fairness in PPPs

As expected, Chief Executive Carrie Lam Cheng Yuet-ngor unveiled her eagerly anticipated scheme for local first-time homebuyers in her maiden policy address last week. Under the starter homes pilot scheme, there will be some 1,000 new homes in Kwun Tong available exclusively to local first-time homebuyers who are not eligible for Home Ownership Scheme flats.

However, even though the plan itself might be able to slightly ease the housing shortage, the government still faces the daunting task of boosting land supply in the long run.

Unfortunately, as former secretary for Transport and Housing Anthony Cheung Bing-leung admitted last year, the government is actually running out of “disposable sites”, i.e. developable land. Given the acute shortage, there appears to be only two options on the table for the government when it comes to finding new land.

The first option is to turn more “potential sites” into developable land, a process that could take up to eight to 10 years. The second option is to tap into the huge existing pool of developable land reserves of private developers. Apparently, it is pretty much a no-brainer as to which option the government should take.

During a TV interview over the weekend, Lam elaborated on her first-time homebuyer plan: the government is likely to seek public-private partnerships (PPPs) with real estate developers, under which the government would consider raising the “plot ratio”, or the allowable development density, of some of the sites in the New Territories owned by these developers so that they can build more new homes on these lots.

In return, these developers will have to allocate a significant portion of their new homes to the government to be sold under the first-time homebuyer scheme.

During the interview, Lam also said she was fully conscious of the possible backlash from society and political parties against her approach, since promoting PPPs may give rise to public suspicions about collusion between the government and big business, as well as the secret transfer of benefits.

We agree that Lam was not being paranoid in having such worries. It is because as our society has become more and more politicized in recent years, government initiatives to cooperate with big business on housing or infrastructure projects have often been cast in a negative light by politicians and the media regardless of the fact that these initiatives do often benefit society as a whole.

As a result, members of the public are increasingly looking upon PPPs with suspicions. And the fact that several high-ranking government officials have been convicted of taking bribes from big business by the courts in recent years has further reinforced the negative public perceptions about joint initiatives between the public and private sectors, and hence the mounting hypersensitivity to PPPs.

The fact that conservationist Eddie Chu Hoi-dick, who had pledged to declare war on “government-business-clan-triad collusion” during his first Legislative Council election campaign, swept to a stunning victory in the election in the New Territories West geographical constituency last year indicates that the “collusion” issue constitutes a substantial cause for concern among the general public, and the government cannot afford to ignore such growing sentiment.

Nevertheless, we believe even if there is a real public concern about the “collusion” issue, whether it is well-founded or not, neither our CE nor the administration should have cold feet about launching PPP initiatives when it comes to building new homes.

The Private Sector Participation Scheme has been proven to be a viable solution to our housing problem by local academics. In fact, large private residential housing estates with which we are familiar such as Taikoo Shing and Whampoa Garden are all successful examples of PPPs, not to mention that PPPs have remained a commonly adopted model in many advanced democratic countries such as the United States.

That said, while it is our opinion that the government should not give up PPPs as a means to provide new land and resolve our housing shortage, in order to allay public concern about potential government-business collusion, we also believe it is important for the administration to guarantee openness, transparency, fairness and equal treatment for every stakeholder involved in the process.

This article appeared in the Hong Kong Economic Journal on Oct. 16

Translation by Alan Lee

[Chinese version 中文版]

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Hong Kong Economic Journal