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Homing in on flats shortage

Chris Chapel

PROVIDING affordable housing for a ballooning population will be a priority of the Special Administrative Region Government, according to Chief Executive Tung Chee-hwa.

He has set up a taskforce, headed by property expert and executive councillor Leung Chun-ying, to look into the housing situation in Hong Kong and make recommendations on future strategy.

The task for Hong Kong and other burgeoning Asian nations is to provide adequate, affordable housing in the next 50 years and beyond, through peaks and troughs in the economic cycle.

Housing is a social need Asian governments cannot afford to ignore. Unemployment benefits may be low or non-existent and old-age payments meagre, but housing is different. By owning their homes, residents are given a direct, tangible stake in their country and its economic and political security. For those without the means to buy outright, the answer is public housing at subsidised rents.

In a recent government consultative paper on long-term housing strategy, Homes for Hong Kong People: The Way Forward, Secretary for Housing Dominic Wong Shing-wah summed up the challenge facing the SAR Government: 'We face a growing population in a limited land area; the rising aspirations of a community which rightly expects better standards than before; long queues for public rental housing; unsatisfied demand for home ownership; a growing number of elderly people, with the special problems this brings; and the risks of property speculation.' For an otherwise laissez faire administration, the colonial Government waded deeply into the housing market. Of a total population of 6.3 million, about 2.4 million are public housing tenants. With some overlap, more than 50 per cent of the population are home owners. The Government's main housing organ, the Housing Authority, provides homes for half the population in a mix of rental and ownership schemes.

Housing solutions are put in place only after long lead times and exhaustive planning. One variable which can be estimated with some degree of accuracy over the medium term is population growth. Birth and death rates can be forecast according to recent historic averages and migration is an area over which the Government can exercise some control.

According to the latest forecasts from the Census and Statistics Department, there will be about 7.4 million people living in Hong Kong by mid-2006; by mid-2016, numbers are expected to have swelled to about 8.2 million.

To cope with growing demand from those unable to buy their own flats, the Government has said it intends building an additional 141,000 public housing units by 2001 and another 390,000 from April 2001 to 2006.

Key proposals in the long-term housing strategy paper include applying a means test to public housing, expanding sales of public flats to tenants, and streamlining approval procedures for private developers.

Whatever strategies are used to reach the housing targets, much more land will need to be made available. In his 1997 Budget speech, Financial Secretary Sir Donald Tsang Yam-kuen said the Government would release 327 hectares of land for public use and 260 hectares for private development over the next five years.

After 2001, land is expected to be made available by developing reserved sites on existing town plans, redeveloping existing sites such as Kai Tak, and by rezoning and lifting plot densities in other areas.

The Secretary for Housing referred to Hong Kong's 'limited land area' but there is a great deal of undeveloped land in Hong Kong. An aerial view of the SAR shows immense areas of green, often running right up to the edge of high-density housing estates.

With revenue from land sales and development premiums a major contributor to government revenues, the amount of land for development has been strictly controlled.

This has left a vast amount of developable land locked up in country parks or otherwise zoned out of the reach of developers. Although the Government does not have a reputation for being green minded, its policies have ensured park land accounts for about 40 per cent of Hong Kong's total land area.

The system of trickle-feeding land to the public and private sectors has served Hong Kong coffers well for the past 156 years, but there is no guarantee the status quo will continue.

As the population increases in coming years, pressure is likely to build to release more from this valuable land bank for housing needs.

One prominent figure in support of greater land availability is Hopewell Holdings managing director Sir Gordon Wu Ying-sheung. Noting the constraint on land sales of 50 hectares per year would be lifted at the change of sovereignty, he advocated supplying 'an adequate amount of land to developers at reasonable market prices' which would result in value-for-money housing.

'We only need to look at Singapore, which in terms of land mass is much smaller than Hong Kong, and yet has been able to provide affordable residences for all its citizens,' Mr Wu said.

According to Shih Wing-ching, managing director of Centaline Property Agency, the crux of the housing problem is the extremely high land price component in finished property prices: some $3,100 per sq foot of the average selling price of about $5,100 per sq foot.

'The Government should not be blamed for high prices in core areas because there are few options for new supply of land in these areas. However, if the Government showed a willingness to deploy more resources to infrastructure in the New Territories, there would be plenty of land for housing. More than 90 per cent of the land in the New Territories is undeveloped,' he said.

'The Government has never admitted the existence of a high land price policy, but the fact is land costs constitute not only a high but an increasing ratio of property prices. In a place where land supply basically is controlled by the Government, how can it evade its responsibility?' Mr Shih said the Government had missed the ball by attempting to solve the 'sandwich class' problem with special purchase programmes rather than by increasing land supply to bring prices down and eliminate the problem altogether.

Hong Kong Centre for Economic Research director Professor Richard Wong Yue-chim takes an even more radical approach. He proposes a wholesale sell-off of public housing to sitting tenants as a way of alleviating the housing shortage. With inflation eating into their savings, families must buy property to preserve their wealth, he said recently.

'Property ownership today divides society into the 'haves' and 'have-nots' and the gulf that separates them appears to be ever widening,' Professor Wong said.

Selling off the public housing stock at below market rates - and allowing tenants to sell them on the free market and keep capital gains - would largely eliminate the gap between those with property and those without, given the vast numbers living in public housing, he said.

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