Finally, HK acts to mend broken housing policy

The new housing measures announced by Chief Executive Leung Chun-ying last week, together with some announced earlier, are welcome. They make a start on addressing the three key failings of the previous administration.

What were those failings? First, the scrapping of the annual land sales programme and reliance on an application list system led to a gradual strangling of supply, which forced up prices.

Second, the suspension of the Home Ownership Scheme removed a key rung of the ladder which permitted upward mobility for the middle class.

Third, these two measures and other action or inaction by the government sent a clear signal that the administration's land disposal programme was being run in the interests of - and arguably at the behest of - the major property tycoons.

The significance of a steady - and government-determined - sales programme is that it keeps the market regularly supplied with land and can be adjusted to suit circumstances. If the major players drop out in an informal boycott, the smaller players can take up the slack. If there are still no takers because the capital outlay is too great, sites can be broken up into smaller lots. In extremis, other action can be contemplated to ensure a steady output of completed flats for rent or sale.

Complete reliance on an application list system, by contrast, puts the major developers entirely in the driving seat. Simply by sitting on their hands, they can ensure that price levels for their existing inventory of unsold units, or the value of their undeveloped land banks, will rise until profits are maximised.

The suspension of subsidised housing meant there was a gap. Over the years, the community has recognised a well-worn path of upward mobility from squatter hut to public rental housing, on to subsidised ownership, up to ownership of a modest flat built by the private sector, and so on.