Why Singapore’s housing model won’t work for home ownership in Hong Kong
Victor Zheng and Roger Luk say public scepticism about the Hong Kong government’s push for home ownership is well founded, as the public and private sectors serve different needs, and should be treated separately
In her maiden policy address, Chief Executive Carrie Lam Cheng Yuet-ngor outlined a push for home ownership as the answer to the prolonged housing problems in Hong Kong. Through various schemes, such as the “Green Form Subsidised Home Ownership Scheme”, the better-off public housing tenants and middle-income families will get help to buy their own flats. A Starter Homes scheme to help young families will also be launched.
Apparently, the government is trying to replicate Singapore’s public housing model, despite differences between the two.
Will this policy approach work? Many Hongkongers do not believe so, as asset value (housing as an investment) exceeds occupation value (utility). According to a recent poll conducted by the Hong Kong Institute of Asia-Pacific Studies, only 30 per cent of people surveyed are positive about the new policy, while 49 per cent are unconvinced and 21 per cent have reservations.
In Singapore, public and private housing are strictly segregated, as the government recognises that the investment and utility values of housing changes with ownership. Utility is the overriding concern in public housing, while investment is overriding in the private market.
In Hong Kong, however, public and private housing are not mutually exclusive. Public rental housing in the city is a type of social security, yet its flats may also be sold under the “green form” scheme. Moreover, owners can subsequently pay a land premium to acquire full ownership. Such “leakage” to the private market creates policy complexities at a time of market mismatch and imbalance. Thus, the “green form” scheme is inconsistent with the policy intent of public rental housing as social security.
It is not surprising that public views on the scheme are split. Our poll found that only 42 per cent of people surveyed supported a move to regularise the scheme, while 46 per cent are opposed to it.
The policy intent of the so-called “white form” scheme, which allows middle-income families to buy subsidised flats on the secondary market with the land premium unpaid, is similarly muddled.
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Market efficiency holds the key to regulating the private sector. Hong Kong’s skyrocketing housing prices are a result of market distortions and irregularities, particularly in mortgages.
The administration is choosing to respond to this problem by “enriching” public housing. As our poll shows, people are not convinced this will work. When the investment value exceeds utility, subsidising home ownership in this way is never the answer.
Dr Victor Zheng is associate director of the Hong Kong Institute of Asia-Pacific Studies at the Chinese University of Hong Kong. Roger Luk, a retired banker, is an honorary researcher at the institute