• Thu
  • Nov 27, 2014
  • Updated: 1:07pm
CommentInsight & Opinion

Hong Kong must build housing for people, not just investors

Stephen Vines says home ownership should be the basis of the good life

PUBLISHED : Saturday, 02 March, 2013, 12:00am
UPDATED : Saturday, 02 March, 2013, 3:30am

It is becoming increasingly clear that while the government has something approaching a property policy, it has very little by way of a housing policy.

Controversy reigns over the latest bout of property market intervention, which is designed to curb price rises. However, there is a paucity of measures to improve Hong Kong's vastly inadequate housing. Most people live in homes that remain barely fit for purpose; the bulk of which are small and poorly built.

The Hong Kong property market is simply not providing homes for people who need them, but has become a repository for savings and investment. Although the latest government intervention might produce some price easing, home ownership remains beyond the wildest dreams of the average citizen. Yet, a large home-owning community underpins civic responsibility and has social benefits.

Many other societies have taken bold steps to expand home ownership. Hong Kong has been notable not just for its timid steps but by the way they tend to be reversed. Thus, we had the Home Ownership Scheme, launched in the 1970s, then discontinued and now back in force creating a modest number of homes. Then there was the Tenants Purchase Scheme for those in public housing. This, too, was discontinued and, in 2004, the government started phasing out the Home Assistance Loan Scheme, offering interest-free loans to low-income families.

Back in 2005, Joseph Yam Chi-kwong, the then head of the Monetary Authority, shrewdly observed one reason for government inaction: "Whether or not government intervention is desirable in a particular case is always debatable. It is tempting, particularly when bureaucrats do not wish to take on responsibilities, to argue against intervention."

Meanwhile, an unholy alliance of highly influential property developers and free market ideologues have successfully combined to discourage government attempts to widen the net of home ownership. The developers, of course, are primarily interested in making property as expensive as possible, while free market ideologues routinely criticise any government intervention.

There are few more ardent advocates of free market ideology than former British prime minister Margaret Thatcher, yet she went on a mission to intervene in the housing market to a massive extent by selling off public housing to tenants at competitive prices. Her policy was wildly popular.

In Hong Kong, the public sector houses almost half the population. Most of the stock is pretty miserable. Yet there is little doubt that many residents would leap at the chance to get a foot on the property ladder and, like other people who own their own homes, they would be sure to make improvements.

Why won't the government embark on a Thatcher-style programme of selling off its housing stock and possibly using the money raised to create other forms of public housing?

Partly, this is a problem of mindset, especially in a government run by someone who has spent his career in the property market and believes that prices are what matters.

Secondly, the influence of the developers and others, who have a vested interest in prices remaining high, cannot be discounted.

As ever, the powerful people who run Hong Kong are shortsighted, but they might like to remember why public housing was initiated in the 1950s. On the one hand, it was a response to the tragedies that arose from shanty town housing while, on the other, although this was never publicly stated, cheap housing was a prerequisite for keeping wages down.

Now, new social priorities have arisen and they need to be addressed.

Stephen Vines is a Hong Kong-based journalist and entrepreneur

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This article is now closed to comments

johnyuan
Stephen Vines’ urge for a housing policy by far among the heavy traffic in reporting, editorializing and commenting in these two weeks in SCMP is the most clear-headed. Hong Kong needs a housing policy.

The government who shall be responsible for a housing policy must recognize that housing and affordable housing is every citizen’s fundamental right. It is in such lack nowadays that Hong Kong has betrayed its early housing mission in housing the needed.

Affordable housings have been undermined to become investment properties. Mindful to do anything different by the new administration, Leung likes his predecessor Tung may even has his job security on the line.
Circumspectly, Leung is better prepared than Tung and also he by default is at the right time. Central government will not be easily persuaded that property development is the economic king while trashing affordable housing. China itself is undergoing a transformation calling a halt to the property development model that exported very much from Hong Kong. Leung knows that.
Hong Kong has no free market ideologues – but plenty practical and greedy bunch instead: capitalists without a social mission.
caractacus
The present crazy property values were deliberately engineered by leaders of the last administration and the amoral property tycoons.
How can one justify residential (so called 'market') prices at $12,000 per square foot upwards when the actual cost of building an apartment including the cost of the land is at most no more than $2,000 per square foot?
'johnyuan' is absolutely correct; affordable housing is every citizen’s fundamental right, but in today's Hong Kong the administration and the tycoons have denied the public any such rights by rigging the market. In addition C. Y. Leung's administration (which contains too many of the old Exco gang) is wringing its hands with indecision or making poor decisions.
The whole issue needs to be re-thought by talented people and and a proper housing policy formulated with the interests of the citizens, not the rich, to the forefront. Nor should public housing solely consist of tiny, poor quality units in undesirable areas.
dynamco
how can the Government measures stop Mainlanders / Mexican drug cartel/black money buying property here ? The Government money laundering task force is severely lacking whilst owners are being offered cash to sell their properties. It's now ten years since SARS caused the Government to do away with residential property controls and protection- why was this not reinstated ? Who pulled the strings ?
rucoruna
It is also well known that Thatcher's policy led to gentrification eventually, in the same way that dividing commons into private lands results in land concentration and more spacial inequality. Yes, the government should care more about those who cannot access decent housing rather than about investors. Yes, developers and free marketeers align in dangerous ways when it comes to HK's property's market. But privatizing public housing is as free market as it gets. Put in more simple words: those privatized public flats that have some high market value (because of their location or otherwise) would gradually be sold out to investors/richer owners, and the people now living in them would likely move to further and less attractive areas. This could imply a short-term injection of cash for poor families. But in the long term, after that money is gone, it would only lead to higher inequality when it comes to housing.
HK-Explorer
The point is allot of people in government housing are extremely happy with the current setup. After rent wavers they any roughly HK $10,000 per year for their apartment.
If the government sold them that apartment they would have to pay hk $1.5 million for the apartment and then pay $12,000 per year management fees.
It would become a mess when 30% of the of the people buy in a building and 70% rent.
The only way to make buying make sense would be to sell at roughly $500,000 OR raise rents to HK $3,000 per month. Then people would see the incentive.
oasis
Hong Kong is largely governed by property owners, and the general government attitude is that cheap hosting is economically undesirable. The like their rents.
HK-Explorer
Yes, HK is governed by property owners and by people living in government housing. 40% of HK people own their homes and 45% live in government housing. That leaves 15% renting.
So yes, the majority rule and also they are the ones who work for the taxes.

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