How to create more affordable housing in Hong Kong: appeal to New Territories landowners’ profit instincts

Hong Kong’s current government came into office declaring that it would give top priority to solving the city’s housing problems. As it approaches the end of its first year in power, we are likely to hear more criticism that our top officials have not done enough. 

It is understandable that people are frustrated at the way that private-sector housing is becoming less affordable and demand for subsidised housing is rising faster than supply. 

People talk about a “housing crisis” in Hong Kong. They mean a very serious immediate problem – especially the rising number of people living in subdivided flats. 

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There is no simple, quick solution to this. Even a major temporary housing programme would take years to implement. Nonetheless, officials are exploring possible new ways to boost supply in the near term. The administration is looking at increasing residential density. It has even mentioned the idea of requiring developers to release completed flats more quickly. 

Another factor is that – looking back – previous administrations did not plan for sufficient land supply. It is essential that this government gets land supply back on track. 

So we have two broadly separate problems. First is a near-term shortage of affordable homes, which feeds into public anger but cannot be fixed at the push of a button. The second is ensuring a supply of land to make sure we do not end up with this situation in the 2020s and 2030s. 

It seems that everyone has a favourite solution – and one person’s favourite is usually bitterly opposed by someone else. The development of golf courses is a prime example. Another is land within country parks. 

Less controversial proposals include reclamation from the sea or somehow using space now occupied by container ports. These may well happen at some stage, but they are the most expensive and time-consuming options. Officials are under pressure to find sources of available land. 

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One possibility is “brownfield sites”. In other parts of the world, this refers to disused industrial or other zones. They might be attractive in terms of size and location, but they need extensive cleaning up before they can be redeveloped. 

In Hong Kong, we use the phrase rather differently. Our brownfield sites are mostly small and scattered around the New Territories. Most are plots of former agricultural land that is now being used for other commercial activities. 

The businesses may not be pleasant to look at – container storage or scrapyards – but, in each case a private land owner is making a profit. In order to use such areas for housing, the government needs to identify which industries are important enough to be relocated in consolidated areas. And it would need to compensate owners. 

In many cases, the sites would need to be assembled into bigger areas suitable for development. These areas would also require upgraded transport and other infrastructure like sewers. 

In short, brownfield sites are not an easy solution – though the government recognises that they are a key source of future land supply. 

Other sources of New Territories land, such as land for village housing and developers’ land banks, are also very complex. They are private property, often divided into small parcels and lack the necessary infrastructure. 

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However, in principle, there is a way to cut through the complexity. Officials talk about “unlocking the potential” of private land in the New Territories. 

This means using market forces to provide incentives for landowners to use their plots for affordable residential housing use. In plain English – let them keep more of the profits. Many would jump at the chance. 

For example, they could pay a low premium to develop farmland, but a percentage of the units would have to be public housing. The exact percentage would be for the community to debate. But, in theory, there could be a “win-win” arrangement. 

The government is extremely sensitive about charges of “collusion”. But it must be possible to devise a formula to harness landowners’ interests in making a profit to the public’s need for affordable homes. This is not so much about economics as accountability and transparency.

Bernard Chan is convenor of Hong Kong’s Executive Council