20 September 2019
Most Hong Kong people bet on their flat to boost their own wealth even if the flat is not sold. They like the feeling of being paper millionaires. Photo: HKEJ
Most Hong Kong people bet on their flat to boost their own wealth even if the flat is not sold. They like the feeling of being paper millionaires. Photo: HKEJ

What’s wrong with our housing policy under Carrie Lam?

Chief Executive Carrie Lam has enjoyed a much higher rating than her predecessor, Leung Chun-ying, as she showed her capability to push forward policies such as special funding for the education sector. But it doesn’t mean she can set the policy she wants without public consensus. A recent example is her idea to cap the number of public rental housing units at 800,000.

Last Friday, Lam said in a newspaper interview that when the stock of public rental flats hits 800,000, it would be enough to satisfy demand for public rental housing. Most units built afterwards will be subsidised flats that low-income families can buy.

Lam was simply following her election manifesto earlier this year. It stated that her housing policy is focused on home ownership. “However, property prices have skyrocketed in recent years and home ownership has become a remote hope for many middle class families,” she said on her official website. “Despite the proposal … to raise the rate of home ownership from 46.7 percent to 70 percent in 10 years, the latest figure is only 50.4 percent.”

It is quite strange that Lam did not announce such a significant policy shift on an official basis, such as in her recent policy address. The 800,000 public housing units cap is quite a significant change in the housing policy. Previous administrations never set a limit on the number of public rental housing units. The wait for these flats takes an average of 4.7 years, with the number of applications reaching 277,800.

Public rental housing has played an important role in Hong Kong’s housing policy, which offers homes for over two million people, or about 30 percent of the population. In our public rental housing portfolio, there are 179 public rental housing estates and more than 760,000 flats. That said, Lam suggests to build 40,000 more flats and shift all resources to subsidised flats.

It is dangerous for the government to set its housing policy with the aim of home ownership rather than solving the housing problem of all Hong Kong people.

Lam said many Hong Kong people want to have their own flats. At the same time, she said home ownership could boost the sense of belonging among Hong Kong people.

It may be true when the housing issue is purely a livelihood issue, not an investment one. If people treat their home as a place to live but not an asset with investment value, then Lam can push forward her home ownership policy through government subsidies.

The government can even set a price cap for flats to attract tenants of public rental housing to buy their own flats at an affordable price. That can help to ease the queue for public housing flats.

But each flat has its own investment value. Most Hong Kong people bet on their flat to boost their own wealth even if the flat is not sold. They like the feeling of being paper millionaires.

As more mainlanders migrate to Hong Kong under the policy of family reunions and as land supply remain insufficient, many people expect home prices to continue to surge.

This indicates that the government has no real direction in its housing policy. Lam should first understand the root cause of the housing problem — lack of land for housing development and too much money flowing into the capital market.

Lam should proactively find more land to build public rental housing to meet demand from people waiting in the queue and to meet future demand for flats.

However, the surge in home prices could be a difficult challenge for Lam given Hong Kong’s status as an international financial center.

The fact is that Chinese funds are entering the Hong Kong property market to keep outside Chinese currency control. This has led to skyrocketing home prices in the past decade.

In order to achieve Lam’s plan of home ownership, the government should position the property market as a protected market for local people and stop all foreign capital from flooding it.

Such an outcome would gradually turn the housing policy back on track as people begin to treat their home as a necessity rather than an investment product.

On Tuesday, Lam apologised to the public for her statement on the 800,000 public rental housing units. If she had a complete understanding of Hong Kong’s housing issue, such apology would have been avoided.

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EJ Insight writer