19 October 2018
Hong Kong's leader Carrie Lam has outlined an aim to lift the home ownership ratio in the city. Photo: HKEJ
Hong Kong's leader Carrie Lam has outlined an aim to lift the home ownership ratio in the city. Photo: HKEJ

Public rental housing: What role should it play?

Chief Executive Carrie Lam Cheng Yuet-ngor said last week that 800,000 units in public rental housing stock should be enough to meet the demand of grassroots families. The comment sparked concern that the government might put a lid on public rental flats.

Lam said later that 800,000 is not meant to be a cap. The clarification, however, didn’t put an end to the controversy.

Observers say it’s clear that Lam intends to boost the home ownership ratio in the city, rather than focus on rental homes, when it comes to housing policy.

Let’s now revisit the history of public rental housing in Hong Kong.

The city’s first public rental housing estate was built in North Point in 1958. By 1966, public rental flats had provided 30,000 units and catered to three percent of the city’s population.

In 1972, Crawford Murray MacLehose, then Hong Kong governor, announced a ten-year plan for the public provision of housing. The objective was to provide 1.8 million people with “satisfactory accommodation”.

Around 1.5 million people lived in public rental flats as of 1987, representing 27 percent of the total population at that time.

Currently, about 29 percent or 2.09 million of the city’s total population live in pubic rental flats, going by figures at the end of June this year.

Public rental housing had been aimed at helping low-income households. However, the policy initiative failed to let those families share the benefits of soaring land and property values.

Also, the dwellers of pubic rental housing have limited options when it comes to choosing locations close to their offices.

Simply speaking, public rental housing is a necessary safety net for low-income people but it is far from ideal.

By contrast, the public housing policy in Singapore is more suitable for a developed society.

Singapore government helps local families buy their own flats by offering affordable price and loan subsidies. The city-state has a home ownership ratio of nearly 90 percent, far above 49 percent of Hong Kong.

Around 80 percent of the local residents there live in government-built flats. They are able to share the benefits of rising land value, which is critical to mitigating the wealth gap. It’s also easier for them to upgrade when their financial conditions improve.

Hong Kong’s leader, Lam, has made her stance clear that she intends to lift the city’s home ownership ratio. She has put forward a starter-home ownership scheme, and also vowed to put up more subsidized flats for sale through the Green Form Subsidized Home Ownership Pilot Scheme and the secondary market of Home Ownership Scheme.

By encouraging more residents in public rental flats to buy subsidized flats, more public rental flats can be released for those in need.

Through the “recycling” of public rental flats, the government can avoid shouldering a heavy financial burden involved in building a large number of such flats.

Public rental housing policy has worked well in providing a safety net for grassroots families. No policymaker would dare call a stop to such effort.

However, the government should step up efforts in offering more subsidized flats for sale to let more people buy their own home.

When a high enough percentage of people own their homes, it would become easier to cut back or put a cap on public rental housing supply.

This article appeared in the Hong Kong Economic Journal on Oct 31

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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