What Hong Kong must do to solve the city’s perennial housing and land shortage problems

Some residential units in the Northern Metropolis should be designated as ‘talent apartments’ to attract professionals to spur its development
More incentives under the land sharing scheme could alleviate housing shortage using public-private partnership model

Chiu Kam-kuen

Published: 12:00pm, 2 Nov 2021

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Chief Executive Carrie Lam Cheng Yuet-ngor in her final policy address on October 6 highlighted measures to tackle Hong Kong’s housing and land shortages.

She introduced and outlined the Northern Metropolis development strategy, with the aim of creating more land resources for residential, IT and other uses over the next 20 years. However, infrastructure provisions in remote areas may constrain development in the proposed hub. On top of that, the current plot ratio is set as low as 0.2, posing more difficulties for keeping up with the city’s development.

Considering the huge development potential of the Northern Metropolis, the government should conduct a comprehensive planning review, and specify its land use and related transport facilities in the surrounding areas. When the planning blueprint is properly drawn, the government can further improve key services like transport, water supply and sewage facilities. The plot ratio can then be raised and, in turn, housing supply can be increased.

According to the Northern Metropolis development strategy, some 300 square kilometres of the combined area of Yuen Long and North districts are expected to provide about 900,000 residential units, eventually accommodating around 2.5 million people.

Chief Executive Carrie Lam attends the question and answer session on her policy address at the Legislative Council on October 7. Photo: K. Y. Cheng

I propose that a portion of the future supply of residential units should be designated as “talent apartments”. A scheme that provides special discounts on rents and flat purchases to professionals can help attract talent across diverse industries, facilitate growth and promote more forward-looking, healthy and sustainable development of the Northern Metropolis.

To accelerate development of abandoned agricultural land in the New Territories, the government launched the Land Sharing Pilot Scheme in May 2020. Under the programme, the city’s developers have been invited to redirect resources to help solve the housing shortage through public-private partnership. But so far the Land Sharing Office has received just three project applications.

Given that major developers in Hong Kong hold a total of 1,000 hectares of agricultural land, the government should proactively incentivise them to take part in the land sharing scheme. Actions may include use of standard rates in land premium calculation, increasing the plot ratio, accelerating infrastructure construction and most importantly, simplifying the application process so that remote land resources in the New Territories can be effectively released.

On newly zoned land or new development areas, the government should consider launching “starter home” programmes to help prospective buyers gain a foothold on the housing ladder. In the United Kingdom, for example, developers’ land leases include obligations to build a small proportion of affordable housing, specifically to help meet the home ownership aspirations of young professionals and families.

In addition to development of the New Territories, the government also needs to unleash the existing land potential in urban areas. Many buildings and community facilities across Hong Kong are rapidly ageing, with some older urban areas in need of urgent redevelopment.

Currently, private developers must acquire at least 80 per cent share of a building lot to apply for compulsory sale, as stipulated in the Land (Compulsory Sale for Redevelopment) Ordinance. However, as many of these older buildings contain very few units, such ownership threshold often cannot be met if owners of even one or two units refuse to sell.

If the government can lower the ownership requirement for buildings that are more than 50 years old to 75 per cent or even 70 per cent, it can greatly speed up redevelopment. Moreover, we believe that the government can refer to the Urban Renewal Authority’s Yau Mong district study on transfer of plot ratio and site amalgamation to encourage the city’s redevelopment.

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Unfortunately, the redevelopment of older urban areas to boost housing supply requires a lot of time. In response, the government has introduced transitional housing to help alleviate the hardships faced by families waiting for public rental housing.

However, the rights to operate transitional housing rests with various non-profit organisations. I hope the government considers appointing professional organisations to coordinate the allocation of transitional housing, while also identifying transitional housing sites suitable for conversion into permanent single-block public rental houses, and hence maximise the land resources.

Apart from private domestic redevelopment, industrial revitalisation within urban areas is equally important. The two existing industrial revitalisation incentives covering plot ratio relaxation for redevelopment of old industrial buildings, and fee exemptions chargeable for wholesale conversions are to be extended to October 2024.

It is heartening to know that industrial revitalisation policies are being extended. However, I propose to further incentivise the designated 10 per cent floor area requirements for specific uses prescribed by the government, such as implementing a time limit within the tenancy conditions, allowing owners to reclaim possession of the said designated area after five years and renting out to other private parties.

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With the rapid development of the railway network in recent years, the parking ratio provisions required for industrial buildings seem outdated. The government should review its policy on the matter so as to offer greater incentives to promote the revitalisation of industrial buildings.

All in all, we are happy to see the government’s three breakthrough measures – the Northern Metropolis proposal; relaxing development barriers in the New Territories; and lowering the threshold of urban renewal. We expect this three-pronged approach will underpin the government’s efforts to expand the availability of land for the decades ahead.

Chiu Kam-kuen is the international director and chief executive for Greater China at Cushman & Wakefield

This article appeared in the South China Morning Post print edition as: how city can end housing shortage