Public housing plan is a case of too much, too late
Given a chance, developers will build a surplus of homes. Adding more government-subsidised flats to the mix only floods the market further
"We have come to some consensus as to the future direction. Given the current demand, the government should take a more active role in providing public housing."
Anthony Cheung Bing-leung
SCMP, July 26
There are many questionable assumptions underlying this statement but I shall focus on one. It is that normal market forces have not been up to the job of providing people with decent housing, and thus government must do it.
It ignores, first of all, that government always plays the key role in housing, does so in every city on earth and has done so throughout history. Government controls the use of land, regulates building locations and establishes building codes. The appearance of any town is a direct reflection of government policies.
It also ignores the fact that the biggest restraint on private developers is getting building permission from government. Left to their own devices, developers will by nature always overbuild, and do it massively.
Taken as a group, it is not entirely false to compare them to pigs, as many of their critics do. Like Wilbur, they cannot control their appetites. Those who pull back from the trough are soon replaced by hungrier ones. Only financial straits and shortage of developable land stop them.
This is relevant in our case because our developers have been complaining for years that government has starved them by choking the supply of land.
It may be their own fault. This newspaper, for one, has in the past published photographs of competing developers leaning over to each other at land auctions for a quick whisper and a resulting "joint venture" bid.
Partly as a result, the Lands Department instituted an "application system" whereby auctions are only triggered if a developer bids more than a reserve price held secret by the department. It may have kept auction prices up, but it has also significantly brought down the amount of land auctioned.
Thus while I entirely agree with Mr Cheung that government needs to take an active role in housing, I do not see how it follows that this role must be one of direct government provision of housing. You will do just as well to turn on the land tap again, sir.
In fact, you will probably do better that way. One of the sad truths of government intervention in any sector of the economy is that it tends to be approved at the period of worst strain, and then continue unnecessarily to make the subsequent adjustment greater.
It has certainly proved that way in Hong Kong. Reacting to complaints in the mid-1990s about rising housing prices, then-governor Chris Patten, a great democrat but an administrator of doubtful competence, authorised a big push on housing. It was later endorsed by his successor, Tung Chee-hwa.
These things take time to come to fruition and, as the chart shows, this one did in 2001, almost four years after housing prices had already begun to tumble. It made that property crash much worse and extended it all the way to mid-2003.
I think the correction would have happened even without Patten's rushing in where angels fear to tread, but it would not have been so pronounced or long-lasting. Financial straits would have slowed down private developers at an earlier stage. Government is not subject to such financial straits.
However, we are now up in our ratio of public to private housing supply - from 50/50 to 60/40. Here we go again, with public rental housing at an average of HK$1,200 a month, which tells employers they can safely keep wages down, and a capital gain lottery that goes by the name of public sale housing.
You left us plenty of your company, Chris.