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Hong Kong housing

Housing in Hong Kong's city centre must be affordable for both rich and poor

Barry Wilson says HK must avoid policies that segregate low-income housing, often at the edge of town

PUBLISHED : Sunday, 04 October, 2015, 11:00am
UPDATED : Monday, 05 October, 2015, 9:12am

Not everyone can own property and not everyone wants to. Germany, for instance, has some of the lowest property ownership levels in the developed world, with about half the population living in rental accommodation, a level comparable with Hong Kong. The difference for Germany is that it is mostly by choice as, arguably, the tenant enjoys greater rights and is afforded stronger protection from landlords.

Germans do not sit around a meal table discussing how much their home has risen in value over the past months. According to the Organisation for Economic Cooperation and Development, though house prices increased by an average of 83 per cent between 1970 and 2008 in OECD countries, in Germany they fell 17 per cent. Mortgages are also hard to come by, as a large deposit is required.

READ MORE: Hong Kong home rents expected to fall along with prices

By contrast, for Chinese, it seems that owning a home is one of the most important life aspirations. For young men, there even exists the cultural pressure of needing to secure a property prior to taking a wife. A lack of affordable first homes potentially sees couples marrying later in life, becoming older parents, or perhaps not even marrying at all. More recently, with spiralling prices, purchasing property as a financial investment appears essential to younger generations.

Shortages of affordable housing in inner cities might lead to a lack of vital workers like police officers, firefighters, teachers and nurses, all unable to find accommodation near their work

It is clear that all of China's big cities are now very expensive for its citizens, especially in terms of property ownership. According to E-House China, by the end of 2014, on average, it cost a family 21.7 years' income (without additional spending) to buy a 100 square metre house in Shenzhen, right next door to Hong Kong. A quick look at the Numbeo database suggests that the price-to-income ratio in Beijing is a whopping 34.7 years, against a national average of 24.2 years in China.

Hong Kong, long considered ridiculously expensive, is not far behind at 34.3 years. To put that into context, the US continues to prop up the ladder with a national average of just 3.48 years. Rental yields in the US are some of the world's best whereas the rental market in China is still some way behind rising house prices, making buy-to-rent unattractive for homeowners and so leaving newly purchased property deliberately empty, sometimes for years.

It can be argued that income, rather than either price or availability, is the primary factor that determines housing affordability. Therefore, understanding affordable housing challenges requires understanding trends and disparities in income and wealth.

Furthermore, it seems clear that, regardless of whether for rental or purchase, housing needs to be affordable in all locations, be it in the city centre or at the edge of town. In many places nowadays, especially Hong Kong, this is not the case. This has a number of implications for society.

As older neighbourhoods are redeveloped, or gentrified, rental prices increase rapidly as landlords find new tenants willing to pay higher market rates. Lower-income families, many of whom have been living in such neighbourhoods all their lives, are left without affordable rental units.

Finding local accommodation matched to their income level means smaller spaces and poorer quality, culminating in those living at the bottom of the income bracket finding themselves in completely unacceptable private rental housing conditions such as subdivided apartments or caged spaces.

As an alternative, moving to cheaper districts has other implications, with the upheaval of a family causing trauma in terms of finding new schools or work or the greater travel distances involved to maintain an established life. Living close to work saves time, reduces costs and reduces the impact on services. Most importantly, people are generally reticent to leave behind friends and life habits.

READ MORE: Without a long-term land bank, Hong Kong faces a development crisis

The availability of affordable housing close to mass transit and linked to job distribution has become severely imbalanced in this period of rapid regional urbanisation and growing city density. Cities require a full range of workers, from bankers to street cleaners. Each needs affordable local housing, preferably close to their work. As street cleaners need to sweep the roads of the bankers, this implies that both should live close together.

Shortages of affordable housing in inner cities might lead to a lack of vital workers like police officers, firefighters, teachers and nurses, all unable to find accommodation near their work. Low-income renters are typically service workers whose jobs are also essential to the community.

The current situation, created by planners and endorsed by governments of the last millennium, generated segregated, income-specific communities, located out of town where jobs are scarce and long distances of commuting are required.

This state of affairs has run its course in the developed world, though apparently not yet in mainland China and Hong Kong.

Over the past decade, mixed-income housing, a relatively new concept in affordable housing development, has become more popular across the US, with progressive cities providing inner-city housing for both lower-income and more affluent residents. Local governments appear to prefer mixed-income housing to segregation of low-income residents because, again, policy lessons have taught them that poverty concentration is not ideal.

The city of Austin's Smart (Safe, Mixed-income, Accessible, Reasonably priced, Transit-oriented) housing programme offers developers a schedule of incentives based on the level of affordable housing provided. The city provides additional density and height variance, or floor/area ratio, to encourage the provision of affordable housing and other community benefits, such as open space. Developers are expected to set aside 25 per cent of units as affordable or pay an in-lieu fee into the city's housing fund.

Hong Kong continues to push quick-fix, tired but trusted, mass public housing projects out of town, providing few local jobs while creating pressure on the existing transport system. At the same time, it promotes new central business district areas such as Kwun Tong without allowing any residential areas to develop within them.

READ MORE: Hong Kong development chief confident of meeting private housing land supply target

Meanwhile, in mainland China, centuries-old communities in urban villages are being swept away under the pen of a young city planner, to be replaced by squeaky new international-style development with sky-high rents and empty units.

Even in a new city like Shenzhen, the vast majority of the population are recent migrants who flock first to the affordable rents of those very urban villages slated for demolition.

According to analyst Wendell Cox, domestic migration closely tracks housing affordability in the US, where the major metropolitan markets with severe housing bubbles lost nearly 3.2 million domestic migrants from 2000 to 2009.

In a time of mass rural-urban migration, the overall desirability of moving to a city must be influenced by its housing costs, particularly if you are a low-paid worker. Without affordable housing in diverse, mixed downtown neighbourhoods, where will all the workers live and who will do their jobs?

Barry Wilson is an urbanist, lecturer and professional consultant. www.initiatives.com.hk