Hong Kong is solving its housing crisis, and the next chief executive should just carry on the good work
Lau Ping Cheung believes the Leung Chun-ying government has pointed the city in the right direction in meeting its land and housing shortages, and the next chief executive would be wise to follow – and improve on – the plan
As the race to become the next Hong Kong chief executive heats up, it’s not news that housing remains one of the key issues. Hong Kong has one of the world’s most expensive property markets, not just for the average person who simply wants a roof over their head, but also for businesspeople in this financial hub. According to the UBS Global Real Estate Bubble Index 2016, it now takes 18 years for someone on a skilled worker’s income to buy a 600 sq ft flat in Hong Kong.
Flats are not just expensive but tend to be cramped. The average living space per capita in Hong Kong, for example, is about 160 sq ft, way behind that of Singapore, Shenzhen and Shanghai, where the figure is close to or above 300 sq ft.
Office space is also in short supply. The latest Knight Frank Skyscraper Index says Hong Kong can expect an estimated shortfall of 2 million sq ft of office space by 2020.
The problem is the low supply of land. The truth is, the non-intervention policy of Donald Tsang Yam-kuen’s administration bears certain blame.
Land and housing issues will be a challenge for the next chief executive. I believe the best policy is to tackle the root of the problem: low land supply.
Before all else, the city’s next leader should thank Chief Executive Leung Chun-ying for laying down a multipronged, farsighted land and housing policy. In 2012, Leung set up a steering committee to review the city’s long-term housing strategy. The government set a 10-year housing supply target, which is being updated every year. It currently stands at 460,000 units, 60 per cent of which should be public housing and 40 per cent private.
So far, the government has sold enough land to build 51,100 private flats, which is more than double that of the previous five years. The supply of private flats in the coming three to four years is estimated to be 94,000 units – a record high since such statistics was first released 12 years ago and some 45 per cent more than when Leung first took office.
Additionally, the supply of public housing in the coming five years is estimated to be 94,500 flats, which is some 37 per cent more than in the past five financial years.
As for commercial and business land, public land sales in the current financial year can provide some 555,000 square metres of floor space, which exceeds the aggregate supply in the previous four years. Moreover, the government has also discontinued land sales by the application mechanism, which means it has taken the lead in putting up government sites for sale, instead of passively waiting for developers’ application.
Unlike the previous administrations, the government has also reduced the size of land parcels for public sale, thus enabling small and medium-sized developers to participate, curbing the monopoly by major developers.
Meanwhile, various punitive stamp duty measures and property purchase restrictions have also been put in place as interim measures to suppress demand in the face of acute shortages, as well as to curb speculation and deter buyers not from Hong Kong, give priority to first-time home buyers, cool prices and stabilise the market, thus allowing time for the government to catch up with the shortfall.
Leung’s administration has initiated other steps to increase land and housing supply, such as increasing development density, changing land use, redeveloping dilapidated buildings and providing more subsidised housing for sale. For the medium to long term, the administration has committed itself to a number of large-scale projects, such as the northeastern New Territories development, the Tung Chung new town extension, and the proposed Eastern Lantau Metropolis.
The government estimates that, by 2046, at least another 4,800 hectares of land will be required and yet, despite the all-encompassing policies dedicated to increasing land and housing supply, we are still short of 1,200 hectares, not to mention that land for 44,000 public housing flats, so as to meet the target of 280,000 units for the coming 10 years, is still unaccounted for.
Watch: ‘Coffin homes’ sprout in Hong Kong
In sourcing more land, some have suggested a review of the current small-house policy for rural areas. But such matters must be handled with discretion, not least because Article 40 of the Basic Law stipulates that “the lawful traditional rights and interests of the indigenous inhabitants of the New Territories shall be protected”.
So, what’s the best housing and land policy for the next chief executive? First and foremost, he or she should continue the good work of the current government. That means sourcing and increasing land supply through multipronged avenues such as reclamation, rehabilitating brownfield sites, constructing caverns, and developing fringe areas of country parks with low ecological value. The government should also expedite land rezoning to release more privately owned, non-residential land, such as deserted agricultural land and fish farms.
A few years ago, I advocated setting up a “land authority”, whose single task would be to source and resume land for use. With proper statutory power, the agency could cut most of the red tape.
Meanwhile, the Urban Renewal Authority could also be transformed into a land resumption agent for the government without getting involved in the property development process, which is now mainly carried out through joint ventures with private developers.
It is imperative for the government to continue with the recommendation set by the Long Term Housing Strategy team, to build at least 460,000 units in the next 10 years – again, increasing and expediting supply is the most effective solution to meet the housing shortage.
The new chief executive should also allocate a higher percentage of the 280,000 public housing target for the next 10 years for sale, and offer bigger discounts to qualified buyers of subsidised public housing. They should also make better use of the private sector by reinventing the private-sector participation scheme, which some in academia say is 40 per cent less expensive, takes 20 per cent less time to build and, most importantly, is 50 per cent more efficient in land utilisation than the government’s Home Ownership Scheme projects.
Last but not least, the Housing Authority must crack down on the abuse of their privilege by some tenants of public rental flats.
Some may say it is unwise to increase land supply in the face of an uncertain economic outlook, but it is always best to have a rainy-day reserve of land. Should there be an excess (a rather unlikely scenario in Hong Kong’s context), the government can always put it away in the land bank.
The previous government’s positive non-intervention policy is the major culprit for the current housing shortage and property price hikes, which have been damaging to people’s livelihood and the city’s competitiveness. It must be addressed – we must go from a demand-led to a supply-led housing model, and from a developer-led to a government-led approach.
So far, it is comforting to note that none of the contenders for chief executive has disavowed the current government’s land and housing policy and its good work. I am sure that, for whoever becomes Hong Kong’s next leader, land and housing issues will remain a major challenge for some time.
Lau Ping Cheung is a member of the Economic Development Commission and convenor of its working group on professional services