Jake's View

Mountains facing Hong Kong government all of its own making

Bureaucrats do not seem to recognise that they do not understand the problem behind private management of public housing shopping complexes

PUBLISHED : Monday, 06 June, 2016, 5:24pm
UPDATED : Monday, 06 June, 2016, 7:01pm

The Post understands that in closed-door meetings, [Chief Secretary Carrie Lam Cheng Yuet-ngor] told some lawmakers that the “three mountains” facing the government were the controversial management of public housing malls by the Link Reit, repeated MTR fare increases and the offsetting mechanism of the Mandatory Provident Fund that allows bosses to settle severance or long service payments through their contributions.

SCMP, June 6

This makes it four things she has wrong, the first of which is talking about the other three only in closed-door meetings rather than in public. Of the other three, let’s deal with this misapprehension of the Link Reit today.

If there really is problem here, it is the government’s own fault. Faced with a shortage of funds for building public rental housing when public sale housing was discontinued in 2004, the Housing Authority decided to raise money by listing its shopping malls on the stock market as the Link Reit.

Its mistake was to think it could retain control of this company even after it sold all the shares. Big mistake. Private investors saw that shop rents in these malls were far below market levels. They bought control of the stock and promptly raised the rents.

This immediately prompted protest from The World Owes Me A Living, a longstanding lobby of leeches on the public purse, who have a very broad notion of their social rights and a very limited one of their social obligations.

They demanded that the government legislate the rents back down, which the law (very sorry, lads) does not allow the government to do, or buy the shares back, which at present would cost about HK$110 billion.

Go ahead, Carrie, try it. Show us how badly you and your colleagues goofed. Ask us to pay HK$110 billion for what we sold for HK$22 billion. You can then make it worth only HK$22 billion again by pushing those rents way back down.

But I recognise the argument from The World Owes Me A Living. These were shops where poor public housing tenants could buy their daily necessities at prices they could afford. Now they must travel further to wet markets outside their estates while the estate shops go empty because no one can afford to buy anything there.

This is a puzzler. Will someone please tell me how the Link Reit’s market capitalisation could have jumped from HK$22 billion to HK$110 billion if its revenues had collapsed because shopkeepers without customers could not pay their rents?

The fact is that under the Housing Authority they were not shopping malls. They were called ancillary services facilities blocks and consisted of grimy, dank, ill-lit corridors of small stalls selling look-alike Hello Kitty-style plastic rubbish. Even the public housing tenants went to Nathan Road instead.

Now, under the Link Reit, these blocks have gradually been brightened into real shopping complexes that attract real shoppers. That’s why the Link Reit’s share price is up so much. Artificially depressed rents do not pull in trade. They only create lazy shopkeepers with no incentive to come up with new ideas.

And as to those vanishing wet markets, I too prefer a wet market to supermarkets for fresh food and variety. I regret that the nearest is so far off that in summer often we cannot have my favourite noodles and dumplings dinner because the dumplings turn to glue mush in the heat on the way home.

But who is Carrie to blame the Link Reit for the demise of the wet markets? It is she and her colleagues who are progressively forcing them out of the streets they have occupied for 100 years.

Even assuming that massive subsidies could bring down prices in Link Reit shops, public housing tenants would not really benefit. Employers would just take it out again in lower wages. Why pay workers more when government will do it for you?

There is a truth here that people who actually buy and sell things recognise and that escapes bureaucrats. Free pricing in an open market really is the best way of directing society’s scarce resources to the best possible use.

I know you don’t understand it, Carrie. I just wish you would recognise that you don’t.