The View

Hong Kong's public housing policy a homewrecker for poor couples

Hong Kong's public flat policy rewards divorce among the poor, and helps perpetuate inequality

PUBLISHED : Tuesday, 01 July, 2014, 11:15am
UPDATED : Wednesday, 02 July, 2014, 3:11am

Hong Kong’s divorce rate in 2011 was 2.9 per 1,000 people, among the 10 highest in the world.

The rate has been increasing rapidly since the 1980s but is significantly lower among homeowner families than tenants who rent housing.

The differences have been rising and since 2000, the divorce rate  was on average about 50  to 60 per cent higher among public and private housing tenants than among homeowners.

Homeownership is a good proxy for household wealth.

The rich are much less likely to divorce because there is more to  lose, especially in Hong Kong where property prices are high.

When families have a joint stake in staying together, the [divorce rate] is lowered

When the divorce rate is rising, especially when the rise is disproportionately higher among poorer people, then the measurement of household income inequality will be distorted. There is a statistical explanation for this.

Suppose there are two households, one earning HK$40,000 (husband and wife each earns HK$20,000) and the other HK$20,000 (each earns HK$10,000). In this two-household society, average household income is HK$30,000. If the lower-income family divorces, then the average household income drops to HK$20,000 because there are now three households – a fall of 33 per cent even though everyone’s individual income is unchanged.

This explains why, over time, median household income is stagnant, and why the household-income gap between the rich and poor is rising faster than the gap in individual income.

Higher divorce rates among the poor and rising divorce rates together suggest that the income gap between the rich and poor could continue across generations, as the poor remain or fall further behind.

Of particular concern is the growing number of women who are divorced, because remarriage rates are much lower among women than men (nearly six times lower in 2011). Divorced women often have low incomes, raise children, and can become increasingly dependent on the state for support.

While divorce may be a sad but necessary solution for unhappy marital partners, there are many reasons why divorce rates have risen everywhere. But in Hong Kong, two factors have provided incentives for couples to divorce, especially among the poor.

Hong Kong’s public housing programme provides a built-in incentive for unhappy couples to divorce. One divorced parent can remain in the public flat, while the other moves out to rent in the private sector – and the latter can apply for readmission to public housing with preferential treatment if they have dependent children or remarry.

Rising divorce rates have exacerbated the demand for both public and private rental units. One spin-off has been the appearance of subdivided housing in the private sector due to limited housing supply. It is notable that the number of divorced people in private rental housing has risen even more rapidly than that in public rental housing.

Meanwhile, the opportunity for low-income divorced individuals to remarry, especially men, has greatly improved with the mainland’s opening up. In Hong Kong today, there are 60,000 marriages and 20,000 divorces each year.  Of the marriages, 23,000  are remarriages. 

Subsidised rental units in Hong Kong perversely reward divorce with improved living conditions –  fewer people occupying small flats. But they also lower upward social mobility as more children grow up in divorced households in the public estates.

Our current public rental housing programme is helping to reproduce poverty across generations against a background of sustained rising private property prices. It would seem obvious that a much better way for Hong Kong to provide subsidised housing is to shift to a scheme of renting with an option to purchase, and removing the silly separation between homeownership and rental units.

When families have a joint stake in staying together, the incentive to divorce is lowered. In Singapore, there is one subsidised housing scheme and more than 95 per cent of people are homeowners. The divorce rate there is 1.5 per 1,000 people.

We must change our subsidised housing policies.

Richard Wong Yue-chim is Philip Wong Kennedy Wong Professor in Political Economy at the University of Hong Kong