Hong Kong's low-income households have never had it so good. For the first time in years, they need only wait for an average of 1.9 years before being assigned a public rental unit. For applicants who do not mind being housed in estates far into the New Territories, the waiting period could be shorter than a year. The speed of allocation is a far cry from the 1990s, when the average waiting time was as long as seven years. Yet, as application numbers have failed to drop in tandem with slower rates of population growth, housing officials are wondering if, over the long term, they will be able to stick to the policy of capping the waiting period at no more than three years. Underlying their concerns are social and policy changes that have significantly altered demand and supply for public housing. On the demand side, the number of new public housing applicants increased from 21,000 in 1995-96 to 46,100 in 2002-03. Although it dropped to 35,100 in 2003-04 and 32,300 in 2004-05, the figures were still high, relative to the population's annual growth rates of about 1 per cent in recent years. The high application numbers were attributed to a surge in young singleton applicants. In 1998-99, 21 per cent of 26,400 new households waiting to be assigned public housing were single. By 2004-05, 44 per cent of the 32,300 new applicants were single. Of these, 42 per cent were under 34. What is most alarming is that of the 91,400 applicants on the waiting list last month, 41 per cent were single. Of these, 34.5 per were believed to be young, unmarried children of families already in public housing. Two government decisions made in 2002 are starting to resuscitate the private housing market and impinge on the provision of public housing. In that year, the government scrapped the Home Ownership Scheme (HOS), under which the Housing Authority built homes and sold them to eligible households at below market prices, and shelved the sale of public rental units to sitting tenants under the Tenants' Purchase Scheme (TPS). The termination of these two schemes has severely compromised the authority's ability to maintain a steady supply of rental units - by recovering old units vacated by HOS buyers and by using HOS and TPS sales proceeds to build new ones. Between 1997-98 and 2001-02, the number of rental units recovered from tenants leaving public housing ranged between 16,000 and 20,000. The majority of the units were recovered from HOS buyers, but this supply of old units has since dried up. Last year, the government also scrapped the housing loan scheme aimed at helping tenants buy private flats, so that the only incentive for tenants to move out has also been removed. In future, officials estimate that only about 5,000 to 6,000 old units will be available for re-allocation to applicants. As a result, the bulk of future demand will have to be met by new construction, even though the authority can no longer raise money through the HOS or TPS. The authority has decided to shore up its finances by selling its shopping malls and car parks through the listing of a real estate investment trust. However, the listing, originally scheduled for January, was derailed by a judicial challenge. When the listing goes ahead, the proceeds can keep the authority afloat for only about eight to nine years. 'The Housing Authority's previous mode of operation - getting free land from the government, building HOS flats and then using the sales proceeds to fund the construction and management of public rental housing - has been confined to history,' a senior official said. 'We'll have to find new ways of discharging our responsibility. The question is how?' Hailed as a bedrock of social stability since it was launched in the aftermath of a disastrous squatter fire in 1953, Hong Kong's public housing programme once accommodated about half the population. Over the past two decades, the figure has come down as many tenants vacated their rental units after buying HOS flats or becoming owners of their units under the TPS. Today, about 2,136,000 people, or about 31 per cent of the population and 30 per cent of Hong Kong households, live in 668,400 public rental units. Whether about 30 per cent of the population should live in subsidised rental housing is debatable. The issues that face the authority boil down to two questions: Should steps be taken to boost supply or curtail demand? If so, how? As far as supply is concerned, the Housing Authority is committed to building about 18,000 units a year over the next five years in order to comply with the policy of capping the waiting period at three years. But there are counter arguments against even such a modest building programme. 'We already have 668,400 units. Should we be building more? Having invested so much in public housing for so long, should we not think about reaping the fruits of past investments?' asked the official. One view is that future demand should be met via existing stock. This means regulating supply and demand so that eligible applicants are accommodated in existing units. If this strategy became policy, it would mean adopting measures to encourage more tenants who have become well-off and able to afford private housing to vacate their units. At present, while applicants are subject to a means test before they are assigned a unit, they are not subject to further screenings until 10 years later. Even then, the thresholds on their earnings and assets are very loose, and they could opt to stay put in their units by paying higher rents. At present, only about 15,400 households, or just over 2 per cent of the total, are paying higher rents. But taking sterner measures to force tenants out would be socially disruptive and might backfire politically. On the demand side, housing officials wonder if they should tighten eligibility to reduce the number of applicants, particularly young, single adults. Traditionally, the public housing programme's priority was to help low-income families, and it was only over the past 20 years that singletons, starting with the elderly, were progressively allowed improved access. Officials are mindful that attempts to restrict the right of young singletons may be deemed discriminatory. But if admissions criteria were not tightened, they are concerned that young adults would form new singleton households, with serious implications on demand for public housing. Cheung Bing-leung, professor of public administration at City University, has warned against discriminating against singletons, as more people now are opting not to marry. He has proposed that the problem be addressed by giving young singleton applicants shorter tenancies. Legislator and Democratic Party chairman Lee Wing-tat, who is a former member of the Housing Authority, agreed that targeting young singleton applicants would be discriminatory. Instead of giving young people a rental unit, Mr Lee said it might be better to give them a cash allowance for renting private flats. 'For young people whose income may grow very quickly over time, a bricks-and-mortar approach of addressing their housing needs may not be best,' he said. 'I would rather give young people rental subsidies for a short, specified period than assigning them a flat that they could keep for the rest of their life.' As for evicting well-off tenants, Mr Lee said he did not believe more would move out, even if they were subject to means tests earlier than 10 years after moving in, or if the income and asset limits were tightened. 'Many families have managed to keep within the limits by asking their well-off children to move out. The old folks still keep their units,' said Mr Lee. Mr Lee said he agreed there was a need to rethink the direction of not just public housing, but also the shape of the private housing market. 'Hong Kong is unique in not having an active private rental housing market that provides decent housing for low-income earners,' said Mr Lee. Perhaps the public housing programme had been so successful that it had crowded out the private housing market at the low end, he said.