From tenants to landlords

PUBLISHED : Thursday, 25 May, 2006, 12:00am
UPDATED : Thursday, 25 May, 2006, 12:00am

Public housing is a universal problem. What is so amazing about the way it manifests itself in Hong Kong is that its scale has not shrunk in line with the city's growing affluence.

We still have a public housing programme that accommodates about a third of the population. The Housing Authority is landlord to about 2 million people in 650,000 rental flats.

The programme is a constant source of friction between the government and the public housing lobby. Who should be eligible for public housing, how should rents be set and where should public housing estates be built are issues for which no win-win solutions can ever be found.

The programme is so big that it has also hindered the development of an active private rental market for low-income earners. The problem is aggravated by a lack of incentives for people to invest in rental properties because the law is inclined to protect tenants over landlords.

In some old urban districts such as Shamshuipo and Tai Kok Tsui, there are landlords who make a living renting run-down properties to new immigrants and others who have yet to qualify for, or do not want to move into, public housing. But the units are in poor condition, and the tenants do not see them as serving their housing needs in the long term.

Meanwhile, public housing tenants are tied to their assigned units, as swapping is banned - except under strict conditions - to prevent the emergence of a black market. That has generated a lot of inefficiencies, such as preventing tenants from moving closer to work.

The government has an avowed policy of 'big market, small government'. Yet, no market-driven solution is under consideration to address the problem. Instead, housing officials are currently consumed by the need to make a case for not building public housing on prime sites and setting rent at no more than 10 per cent of tenants' median household income.

The market is not the panacea for every social problem, but it could provide more effective solutions if we make it function better. Privatising public housing has been a solution championed by free-market economists, and its merits are well understood. What it takes is a carefully thought-out plan to sell public housing units - at nominal value - to sitting tenants, who would then have the option of trading their units or renting them out. Either way, the size of the private housing market will expand.

Not only would the government relinquish its administrative and financial burden of managing a sizeable public housing programme, it would also collect more revenue from more property transactions from a much bigger housing market.

What if the government also took measures to encourage investment in rental properties? For example, what if we set up a government-administered rental bond board to keep tenants' deposits and arbitrate in refund disputes? What if procedures for terminating the tenancies of those who breach rental conditions are streamlined?

These steps would surely encourage more people to invest in a wider range of rental properties and make renting a more common mode of housing.

There will always be a need for a small public housing programme, but it should take a different form to encourage a constant flow of beneficiaries who go through it.

C.K. Lau is the Post's executive editor, policy