Transparency needed in housing scheme

The devil is in the numbers. During a radio interview after her policy speech, Carrie Lam Cheng Yuet-ngor rebutted a caller who warned her proposed Starter Homes scheme was just a way for the government to collude with property developers in the name of helping middle-income people to get on the home ownership ladder.

The chief executive quickly dismissed the claim as another one of those conspiracy theories inevitably spread among the public with any big government plan. Well, it all depends on how much developers stand to gain from such private-public development projects.

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Lam subsequently softened up by clarifying that crucial details have yet to be worked out and will be subject to public consultation. These include pricing, flat sizes and restrictions on owners’ ability to resell them. I would add one more condition: transparency, that is, make developers open their books with such development projects.

When companies get involved, they are no longer purely private profit-seeking machines any more. In effect, so far as those projects are concerned, they have become something like public utilities such as old-fashioned banks and power companies like HK Electric and CLP Power.

Developers should have no trouble understanding this concept, since two of the biggest developers in Hong Kong control our power duopoly; and the profits of both power utilities are dictated by the government’s scheme of control, which is pegged to the value of their fixed assets.

A pilot project under the Starter Homes scheme will be on Anderson Road in Kwun Tong. The site will be auctioned and portions of the development will be set aside to provide 1,000 flats for households earning between HK$52,000 and HK$68,000 a month, and single people who earn HK$26,000 to HK$34,000. Lam said if developers failed to set affordable prices, they would be in breach of land lease conditions. But that’s rather vague; you can hardly blame critics for being suspicious.

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There are two ways to make it specific: preset flat sizes and prices under something like a scheme of control. Lam and her lieutenants would probably argue if conditions are too strict, it would fail to attract developers.

But that’s the whole point. If the rate of returns guarantees sizeable profits, developers will do it under any scheme. And if they won’t do it at rates considered reasonable, it just means they are playing the same old game. Lam surely would not want to be accused of collusion.