It's shelter, but little else

PUBLISHED : Tuesday, 01 November, 2011, 12:00am
UPDATED : Tuesday, 01 November, 2011, 12:00am


The resurrected Home Ownership Scheme promises to deliver 5,000 flats a year - the same as before. But this time the philosophy behind the housing policy is different.

Instead of reinstating a long-term commitment, government officials say the new scheme for building subsidised homes for sale - unveiled in the policy address and to run for four years from 2016 - is a buffer against the rocketing private market. It can be withdrawn at any time if there are enough affordable homes in the private sector.

'The new HOS is intended as leverage of the private market. It assumes a supplementary role,' said Professor Anthony Cheung Bing-leung, Executive Council member and chairman of the Housing Authority's subsidised housing committee.

The new scheme, to provide flats in several places in the New Territories including Sha Tin, Tsuen Wan and Yuen Long, does not aim to have buyers settling in their subsidised homes for good. With a far more generous resale policy, it is meant to encourage buyers to profit from the flats and move on with the gains to buy a private home - achieving the objective of 'upward social mobility'.

'In the past, the HOS intended to help people find their own homes and settle down,' Cheung said. 'But times have changed. With the next generation, the owners, having saved some money, may have wanted to move out and buy a larger home in the private market. But the old scheme, with resale restrictions, was not able to let them do that.'

The old HOS, announced by governor Murray MacLehose in 1976, produced 374,000 flats over 25 years. Of them, 250,000 were not resold on the open market.

MacLehose called his plan 'a large-scale non-profit-making scheme of home ownership within the public sector'.

'Home ownership, with the security it offers, is clearly the goal of very many of our people,' he said then. The scheme, open to tenants from public rental homes and to people of a certain, limited income, would fulfil a double purpose: providing new homes for those who could afford to buy them and making rented accommodation available for those who could not.

The old scheme did create home, sweet home for hundreds of thousands of people living on modest incomes.

Cheng Lai-chun, one of the pioneers in the scheme, moved into Shun Chi Court in 1980 when the first HOS estate on Kowloon Peak was completed. She said life had been smooth since she started her family there.

'In those days, it was not common for people to own their flats,' she said. 'When we heard that a 700 sq ft flat cost only HK$120,000, we thought it was such a bargain ... we had just got married. We decided to try our luck and joined the lottery for purchase.'

Her husband, a teacher with the Construction Industry Council, bought a flat jointly with his brother, initially paying one-third of his HK$3,000 salary for a mortgage. It took him 15 years to complete the purchase.

Their two-bedroom flat contained a loft, a design rarely featured in public-sector housing and scrapped in later HOS estates. 'The estate actually was not so much different from private housing. In some ways it's even better,' Cheng said.

'It's nice and cool up in the hills. It's a serene environment. There is lots of greenery, open space and fresh air. It's not like those densely aligned buildings in private estates. It was an honest development, no big bay windows, no other tricks to fool you about how big the flat is,' she said.

Usually lacking non-essentials such as bay windows, clubhouses and grand entrance halls, HOS flats boasted a high efficiency rate - the percentage of usable gross floor area - of more than 80 per cent. Private flats are often rated below 80 or even 70 per cent.

The home gave Cheng stability. She bore a son and raised him to adulthood. Yet comfortable as the flat is, Cheng, 53, is now thinking about moving on.

'After all, the place is already old and the property management is not so good,' she said. 'I'd like a more secure, exclusive neighbourhood. I don't like to see poor people coming in at night to dig into rubbish bins in the park, and strangers roaming around.' The estate, like many other HOS estates, is just across the road from a public rental housing estate.

'Also, my husband is approaching retirement. We can't just rely on our son and we need more security,' she said. 'It's better that we have a property with a potential of rising in value. Obviously our HOS flat doesn't have that much potential compared to a private flat.'

But Cheng would have to top up with HK$1.1 million even after she sells her flat, valued at HK$3.2 million, to afford her target flat of a similar size in Oscar by the Sea in Tseung Kwan O.

The problem of moving on may be even more difficult for owners of later HOS estates. They must pay a premium in resale, a requirement imposed in 1981 as land prices started to soar. To keep homes affordable, the government decided to exclude land prices in setting the sale price. This allowed the Housing Authority to sell the flats at a steep discount, such as 30 per cent off.

Virginia Ma from Greenwood Terrace, an HOS estate in Chai Wan, said the premium was too high for her to move into the private market, although she has long wanted to.

Her 500 sq ft flat, bought with her construction-worker husband at a 17 per cent discount for HK$280,000 in 1985, is now valued at HK$3.1 million. If she sells it successfully at the prevailing market price, she will have to pay a premium of HK$520,000.

Her net HK$2.57 million would only get her half the price of the 600 sq ft flat in Heng Fa Chuen she is eyeing. 'I can only buy an even smaller flat in an old building nearby. How can I become mobile?' Ma, a hospital clerk, asked.

The disadvantages of the old scheme have been detailed by Richard Wong Yue-chim, chair economics professor at the University of Hong Kong. Earlier this year he published five articles outlining his proposals for a new housing policy, some of them adopted by Chief Executive Donald Tsang Yam-kuen in his policy address.

Wong argued that the old scheme with stringent transfer restrictions was outdated after 30 years and impeded upward social mobility of the poor.

'Nearly half the population of Hong Kong is destined to stay in the same initially assigned premises for almost the rest of their lives. The households are compelled to make inferior or suboptimal decisions [e.g. on employment] conditioned on the location of their residence,' he wrote in a newspaper column.

'Hong Kong's programme has succeeded only in providing affordable shelter. It has failed to provide an effective vehicle for low-income households to protect their savings and to share in the rising prosperity of a growing urban community.'

He said 'society has become arbitrarily divided into haves and have-nots', with 53 per cent of households living in a capitalist private housing market and 43 per cent in a planned sector.

'This is Hong Kong's self-inflicted tragedy and the source of many deep-seated structural contradictions. It is a society divided from within by generations of well-meaning policymakers who nonetheless have failed to comprehend the long-term consequences of their policy actions.'

The economist drew up a sweeping set of proposals for a new housing policy.

First, it would allow owners of future subsidised homes to profit with their flats and pay a smaller premium than before. The premium (the difference between market price and discounted purchase price) would be fixed at the time of purchase.

If the market goes up when the flat is resold, most of the rise in market price can be recouped after deducting the fixed premium. This would apply to all future subsidised homes, including HOS flats and rental flats, which tenants could buy. Old HOS owners would pay a discounted premium to make it easier to sell their flats.

Doing all this would enlarge the supply of public-sector flats for rent or sale, Wong said. Once there was enough supply, the government could give grants to low-income households on a waiting list for rental homes if they wished to buy subsidised flats.

However, Tsang adopted only some of the economist's proposals. He accepted the generous resale arrangement for future HOS flats but not for existing ones - a compromise that has been criticised as unfair to old scheme buyers and non-HOS owners. He also ruled out the idea of letting tenants of public rental homes buy the properties.

As a result, a bigger pool of affordable housing is unlikely. About 100,000 people living on modest incomes will have to wait until 2014 to join what critics have called the 'public lottery'.

Some housing experts doubt the policy will achieve the so-called mobility goal.

Raymond So Wai-man, a Housing Authority member and finance professor, is one of those.

He said: 'Tsang adopted only half the proposals because of political considerations. He doesn't want to have a drastic programme which could slash property prices and bring a similar fate like what happened to Tung Chee-hwa's heavily-blamed 85,000-flats-a-year policy.'

That policy, by Tsang's predecessor, was meant to increase housing supply, but was ended in 2002 when the market plunged soon afterward.

So said the new policy would be controversial if the new resale method, already seen as too generous and unfair to non-HOS owners, was extended to other public-sector homes. Only a small group of people would be able to climb up the property ladder, given the small quantity of flats to be built.

The scheme's aim to help owners get ahead could be further compromised by a likely plan that emerged last week to force future buyers to pay interest on the subsidies they receive from the government. Officials suggested this after the resale mechanism was slammed as being too generous to future buyers.

So said Wong's proposals might be too idealistic. 'It could be a myth that the HOS can help upward mobility. When the market value of your subsidised home rises, the flats in the private sector also rise. You may not be able to trade your home for a larger or newer flat in the market.

'The half-hearted HOS is just opium to appease politicians and the angry public. It's not really solving the housing problem,' So said.

Ho Hei-wah, director of the Society for Community Organisation, said it was unclear how many existing HOS owners would want to change their flats. The government should conduct a survey to find out the owners' intentions before devising new measures.

Chau Kwong-wing, chair professor of HKU's real estate and construction department, said the fundamental solution lies in land supply.

'Reviving the HOS or not has been a political issue. Once there is enough land supply, homes will naturally become affordable,' he said.

Chau said the sale of the Nam Cheong Station site below market expectations last week is an indicator that once the government makes it clear that it is determined to increase land supply and small-sized flats, property prices will fall.

The seaside site in West Kowloon was sold to Sun Hung Kai Properties at a per-sq-ft price of HK$4,500 - cheaper than a flat in the New Territories.

So said: 'Mobility should not be achieved by encouraging people to speculate in property, but by personal advancement. Of course, we also need enough land to build cheaper housing so people can save money and build their wealth. After all, who can guarantee the market will keep moving up and you can profit with the subsidised home one day?'


The percentage of people in Hong Kong who live in public housing - 30 per cent in rental flats and 17.7 per cent in subsidised sale flats