What would entice developers to turn vast farmland holdings in New Territories into nearly 280,000 low-income flats?
A public-private partnership under which developers agree to build public flats in return for a sweet deal allowing them to build lots of private flats would enable the government to quickly reach its 10-year goal for new affordable housing, consultancy Knight Frank suggests.
The Hong Kong government could get nearly all of the 280,000 new subsidised flats it wants within a decade by incentivising private developers to unlock vast agricultural lands in the New Territories bought on the cheap long ago, the property consultancy Knight Frank said.
Knight Frank suggests that developers could be persuaded to join in a public-private partnership if the ratio of public to private flats they were required to build was between 20 per cent and 40 per cent, and certainly no higher than 50 per cent.
“As Hong Kong is currently facing the issue of land shortage to develop subsidised flats, the government should create private incentives to draw private participation from those developers who own land reserve,” said Alnwick Chan, Knight Frank’s executive director and head of valuation & professional services.
The Knight Frank proposal is among the final ones being submitted to a Hong Kong task force looking at 18 options to create more affordable housing in the world’s least affordable market over the next three decades. The target for the first 10 years is for 470,000 new public and private housing units to be built, 60 per cent of which would be public flats.
The task force is accepting ideas through September and then will report to the government.
While tapping into the private agricultural lands is among the 18 options, the Knight Frank proposal is unusual in its detail.
Other options on the table are using brownfield sites, the storied Hong Kong Golf Club in Fanling and reclaimed land outside Victoria Harbour. But Knight Frank argues in favour of the option of a public-private partnership, saying it could reach the city’s goals comparatively fast.
The city’s four major developers have about 1,000 hectares of farmland – the size of 1,000 rugby fields – according to website of the Task Force on Land Supply.
As land prices continue to soar in Hong Kong, the developers – including Henderson Land Development, which has more than 44.9 million square feet of farmland – hope to convert the farmland to residential use and realise the land value.
“Assuming 500 hectares of private land, or half of the total, opt for public-private partnership at a plot ratio of 5, the total gross floor area is 269 million square feet,” said Martin Wong, associate director of research and consultancy at Knight Frank. “If half of that goes to public housing, it becomes 135 million square feet. Assuming 484 square feet per flat, the total number of public housing units is about 277,000.”
If local planning boards approved a change in land use, and developers were allowed to use the cost of building public housing to pay for part of the “premium” they would be charged to construct private flats on their property, they would profit from the deal, Knight Frank said. The government would also kick in roads and other infrastructure to make the public-private partnership a success, it said.
“And as the public housing [built by developers] would be sold or returned to the government at HK$1, the construction cost of the public housing is deducted directly from the premium for the private housing part,” said Wong. “There will be no [other] premium discount.”
Wong said the partnership could produce the flats within about eight years after approval, including the land use conversion and planning.
“[It] could help satisfy the government’s target,” Wong said, but it would need a high level of commitment from major developers.
Meanwhile, William Cheng Kai-man, chairman of Shun Ho Property Investments, which controls nine hotels in Hong Kong, suggested the government establish a new “Assisted Development Authority” to redevelop old residential buildings in urban areas for individual homeowners to speed up urban renewal.
In the proposal, Cheng said individual homeowners should get back flats of sizes similar to their original ones and share the profits after redevelopment.