The ViewA HK$3 trillion wealth transfer would fix our broken housing policy
‘This is the only approach that can simultaneously provide a solution for our future budget challenge and allow the present have-nots to become homeowners’
The most important source of growth in housing demand that has not been foreseen in Hong Kong is the rapidly escalating number of divorces and remarriages. This demand has meant many young adults cannot find affordable homes to set themselves up and start families, with the result they have grown increasingly frustrated.
Hong Kong today has the fifth highest divorce rate in the world. Divorces and remarriages accelerated after China’s opening, which eased social interaction and led to an explosion in the pace and scale of cross border marriages.
One can literally read the pressure on housing by looking at the divorce and remarriage rates, which leapt from 84,788 divorces and 65,794 remarriages from 1976-1995, to 323,298 divorces and 256,066 remarriages from 1996-2015. Total marriages increased only from 803,072 to 878,552. At the same time, housing production between the two periods dropped by one-third.
The significance of divorces and remarriages for public housing policy is that these are mostly concentrated in the bottom half of the income distribution
The significance of divorces and remarriages for public housing policy is that these are mostly concentrated in the bottom half of the income distribution and are putting pressure on the growing waiting list for public rental housing.
Public rental housing allocation policy does not distinguish between first-time marriages and remarriages. So there is an implicit incentive to divorce and remarry for those without means. Unless this incentive is removed, then building more public rental housing units would only fuel demand by subsidising divorce and remarriage. Public housing policy has to be reviewed if it ever hopes to succeed in meeting the increasing housing demand among those without means.
Instead of building more units, public housing policy should focus primarily if not exclusively on homeownership as a benefit that would be provided once in a lifetime. This would provide a serious disincentive among beneficiaries to breaking up the family.
Homeownership could be achieved by selling public housing units to existing tenants, especially those units built since 1997 and the stock of units still on the Tenant Purchase Scheme list. In one fell swoop, this would create a serious disincentive against divorce among households in the public rental-housing sector. And it would take a big step towards reducing the economic divide.
