Just enforcing the rules could end Hong Kong's housing 'shortage'

PUBLISHED : Thursday, 31 October, 2013, 2:52am
UPDATED : Thursday, 31 October, 2013, 11:49am

Without knowing it, Jake's View and Monitor have been thinking along convergent lines.

We started out in different places, and followed separate paths. But we ended up by coming to much the same conclusion.

We have all been told so often now that Hong Kong is suffering an acute housing shortage, there is a risk we might come to accept it as fact.

After all, we've all read the stories about the tens of thousands of unfortunates forced to live in cage homes and subdivided cubicles. And we have been told endlessly that the typical Hong Kong flat now costs more than 13 times the median household's annual income, shutting young families irrevocably out of the market. So it seems obvious that there must be a desperate shortage of housing.

Anecdotes of public housing tenants exploiting the system abound

But, the more you examine the official data on Hong Kong's housing market, the harder it becomes to find this dreadful shortage.

Bear with me for a bit here; we're going to have to look at some numbers.

According to the government, Hong Kong has about 2.6 million homes. Most of those - 56 per cent - are privately owned. Some 29 per cent are public rental flats, and the remaining 15 per cent have been sold through government-subsidised schemes.

Fine, that's our stock of housing. Now let's look at where Hong Kong households live.

Again according to the government, the city has about 2.4 million households (I'm rounding the figures, because the different government sources don't quite agree).

The first thing to notice here is that Hong Kong has about 200,000 more homes than households, which implies we actually have a housing surplus.

Digging deeper, we unearth more curiosities.

Of those 2.4 million households, 52 per cent own the homes they live in, whether they bought in the private market or from the government.

Some 32 per cent rent from the government, and the rest - 16 per cent of the total or 380,000 families - rent from private landlords.

Now let's make a few assumptions. If we forget for the moment about vacant flats held by absentee owners, and assume that all the private landlords in Hong Kong live in homes that they own themselves, bought in the private sector, that means on average each private sector owner-occupier must own 1.7 flats.

Even if we allow households who own government-subsidised flats to own second properties in the private sector, on average each owner-occupier in the territory - that's 52 per cent of all households, remember - would still own 1.5 flats.

To put that another way, of all the families who own their own homes, half own another flat too.

This sounds unfeasibly high.

As a result, it seems highly likely that a significant proportion of public housing tenants also own flats in the private sector. Some continue to live in their government flat - as Jake points out, they are relatively spacious - while renting out the flat they bought. Others move into their private homes and sublet their public rental flat. All are breaking the rules.

Unfortunately, it's impossible to say how many of these illicit tenants there might be. But anecdotes of public housing tenants exploiting the weaknesses of the system abound.

"It is no secret how many BMWs and Mercedes you can see parked outside public housing estates," remarks one property financier.

"If the government actually enforced the rules governing ongoing qualification for public housing, there would be a significant reduction from one source of housing demand."

If just 3.5 per cent of public housing tenants were breaking the rules in this way, a crackdown could free up enough public rental flats to house all the families currently living in cubicle homes, roof-top shanties and other substandard accommodation.

If as many as 10 per cent were illicitly renting public flats while owning private sector properties, enforcing the rules could free enough public sector rental flats to clear the government's waiting list entirely.

If the government were also to jack up the rates on private sector properties in order to increase the cost of carry for owners of vacant flats, while offering a rebate to owner-occupiers, Hong Kong's much-publicised housing shortage could be ended in short order.

None of it is likely to happen. There will be no clampdown on rule-breaking public housing tenants. The relatively wealthy will continue to abuse the system, while the relatively poor will continue to pay sky-high rents for substandard private housing.

And thousands upon thousands of flats will continue to sit empty. All of which leaves Hong Kong in the bizarre position of suffering a housing shortage, while actually having more than enough homes to house its entire population.