Wealthy not at home with tax on empty Hong Kong flats
Financial chief Paul Chan Mo-po deserves some praise for a politically difficult idea that would mean standing up not only to powerful developers but also many homeowners
It will probably all come to naught but Financial Secretary Paul Chan Mo-po deserves credit for at least talking about taboo ideas to create more homes and address unaffordable housing.
First he wanted to let renters claim tax deductions but said technical computer issues prevented him from doing it in the latest government budget.
Now, he wants to tax owners of empty flats. Housing advocates not tied to the real estate cartels have long raised the idea but successive administrations have refused to even consider it.
As of September 2017, there were 9,000 unsold flats in private developments, of which 31 per cent were in projects completed last year.
This compared with 2,000 unsold flats from projects completed in 2016. Another 43,657 flats, or 3.8 per cent of the city’s total, were vacant in 2016, according to official statistics.
The problem is that such a tax would open a whole can of worms. If you tax empty flats, doesn’t it logically mean you should tax vacant lots owned by developers for years, if not decades?
It’s estimated that the largest developers could free up to 1,000 hectares of land in the New Territories for housing if they are all rezoned for residential development. Without taxes or other penalties or incentives, developers have been sitting on them indefinitely.
Professionals tied to the real estate sector would say it’s impractical and impossible to determine which flats were empty. Nonsense! If the government could come up with those statistics, they could make such determination.
The idea isn’t even new. Many overseas cities have such taxes. Most recently, Melbourne in Australia and Vancouver in Canada have imposed a similar vacant property tax, setting the rate at 1 per cent of the value of a property while vacancy is defined as being unoccupied for six months out of a year. Owners are required to make self-declarations, or face a penalty.
The problem is not that it is technically infeasible, but politically difficult. It would mean standing up not only to powerful developers but also many homeowners.
The post-1997 government has had a habit of favouring such owners with tax breaks and property rate waivers, that is, so-called “sweeteners” as budget giveaways from recurrent fiscal surpluses.
Imposing such a tax would mean taking back some of those takeaways, which are clearly aimed at placating the middle and upper classes for political support.