During a question-and-answer session at the Legislative Council last month, I raised the issue of imposing a vacant homes tax with the administration, only to be refuted not by government officials this time but by two of my pro-establishment colleagues, Abraham Shek Lai-him and Jeffrey Lam Kin-fung.
The two legislators eagerly took issue with me and the Civic Party to which I belong over the idea of levying an empty homes tax, arguing that the proposal is both infeasible and inappropriate.
Under the Legco Rules of Procedure, lawmakers aren’t allowed to address one another directly during the Q&A session, and so I would like to take this opportunity to discuss the issue from a different angle and address the concerns of my two colleagues.
First, they are strongly against imposing an empty homes tax because, as they explained, the property vacancy rate in Hong Kong currently stands at less than 4 percent, totaling some 40,000 units.
Besides, there is a whole bunch of reasons for homeowners to leave their properties vacant.
Therefore, they argued, empty homes don’t necessarily constitute a waste of land resources, and so the empty homes tax is simply not worth pursuing.
True, there can be a lot of reasons for property owners to leave their flats vacant. For example, their flats might be undergoing interior renovations, after which they are likely to either move into them or rent them out. Of course, I know these flats can’t be considered vacant.
In case people still don’t get it, I would like to reiterate that the only kind of “empty homes” that I am targeting is newly completed first-hand flats that remain unsold or unrented by developers 12 months after they have been issued with the occupation permits by the Buildings Department.
This answer, I believe, would be more than enough to address the concerns of legislators Shek and Lam over the technical problems of defining “empty homes”.
Apart from the definition of “empty homes”, another concern my two colleagues raised is that there is overlapping jurisdiction between the Lands Department and the Buildings Department over approving the completion of new homes, which might result in confusion.
For instance, under the current law, a residential property is only deemed “legally habitable” after its developer has been issued with both the “Certificate of Compliance” (CC) by the Lands Department as well as the “Occupation Permits” (OPs) by the Buildings Department.
However, in certain cases, developers of some newly completed first-hand homes may have only been issued with one of these two permits.
And that, according to legislators Shek and Lam, is where the problem sets in: what sort of papers should a new home be issued with in order to be considered vacant or not?
Well, first of all, I don’t think we have to make things so unnecessarily complicated by arguing over what kind of papers developers have to receive in order to tell whether their newly completed properties are vacant or not.
Real estate developers are legally bound to make sure their newly completed first-hand properties are issued with both the CC and OPs before they are put up for open sale.
In other words, under most circumstances, when homebuyers purchase their properties, the new homes they bought would already have been issued with both the CC and OPs unless the developers didn’t follow the rules.
I believe concerns about the potential confusion arising from overlapping jurisdiction among different government departments over home completion approvals are unwarranted.
To put it in a more simple and straightforward way, my suggestion is that the period of vacancy of a newly completed first-hand flat should start kicking in after it has been issued with an OP.
Under the current law, it is the OP, not the CC, that determines whether homeowners are allowed to move into their new properties.
Based on such criterion, there are currently around 9,000 vacant flats across our city.
The number might sound insignificant compared to the overall property vacancy rate in Hong Kong. However, imposing empty homes tax on these 9,000 flats is still necessary because, let’s not forget, the tax I am proposing is intended as a policy tool to press developers into selling their newly completed homes as soon as possible and deter them from hoarding up properties.
Therefore the tax is all about sending a clear message to developers.
Besides, the figure 9,000 might sound a drop in the ocean, but that is already higher than the total number of homes our city was able to build annually at the worst of times (8,254), or accounts for more than half at the peak (17,791) over the past five years.
As we can see, my proposed empty homes tax is totally in accordance with the principle of a simple tax regime which Hong Hong has adopted over the decades. But bear in mind that a simple tax regime isn’t the same as a lazy tax regime.
I believe our government should stop being lazy and launch the empty homes tax immediately.
This article appeared in the Hong Kong Economic Journal on May 28
Translation by Alan Lee
[Chinese version 中文版]
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