Why Hong Kong is no Singapore when it comes to housing and will struggle to catch up
Regina Ip says in contrast to Singapore’s bold commitment to a home-owning society, Hong Kong’s leadership has dithered over the years on housing policy. As a result, it simply does not have enough land to build the ladder of property ownership that Carrie Lam seeks
The first overseas trip made by Carrie Lam Cheng Yuet-ngor after she took over as chief executive was a visit to Singapore. Although often viewed as rival economies, Hong Kong and Singapore face many common problems – language and identity, nation building, economic restructuring, wealth disparity and, last but not least, decent and affordable housing for its people.
After the second world war, both Hong Kong and Singapore faced severe housing shortages owing to rapid population increase or wartime damage. In Hong Kong, after a fire broke out in the Shek Kip Mei squatter area in December 1953, more than 50,000 people were left homeless. The colonial government quickly established a resettlement department to rehouse the homeless in seven-storey resettlement estates designed to meet their basic needs. Inhabitants had to cook and wash themselves in common areas.
As Hong Kong’s industrialisation gathered pace, the government started to build low-cost public rental housing for low-income families and satellite towns in the New Territories to make room for flatted factory buildings in the urban areas.
It was not until the arrival of Sir Murray MacLehose as governor in 1971 that the government promulgated a new vision of housing for the people. The Housing Authority was established under the Housing Ordinance in 1973, signalling the government’s long-term commitment to providing decent, affordable housing for the people, not just resettlement for squatters or fire victims. In the late 1970s, the government took a major step forward by helping low-income families to own homes by launching the first Home Ownership Scheme.
Singapore likewise started its housing programme in the 1920s as an emergency response to resettling squatters. But as its founding father Lee Kuan Yew made clear in his memoirs, elected leaders faced a more pressing need than colonial officials to make good on their promise of a good life to their people. Thus, even before Singapore became independent, the People’s Action Party established the Housing and Development Board in 1960, and launched a home ownership scheme in 1964.
As part of his vision of building Singapore as a “fair, not welfare society”, Lee decided that the government needed to step in to make possible a “home-owning society”, so that every citizen could have a stake in its country and its future. As a result of the Singaporean government’s ongoing participation in the housing market, the public sector now accounts for about 73 per cent of the residential market.
Hong Kong’s housing policy, at first glance, is similar – moving from building resettlement estates to low-cost rental housing to subsidised home ownership. Yet the similarity stops there.
In sharp contrast to Singapore, Hong Kong’s housing policy lacks consistency, courage and foresight. Although first-term chief executive Tung Chee-hwa pledged to build 85,000 housing units per year, reach a target of 70 per cent home ownership in 10 years, and a reduction of waiting time for public rental housing to three years, those promises were quietly dropped in the wake of the Asian financial crisis.
As home values continued to plunge, the government announced in 2002 that it would stop the production of home ownership scheme flats, and its public rental housing programme would in future be demand-driven. In a panicky response typical of a government unaccustomed to crisis management, in 2004, the government sold its harbourfront Home Ownership Scheme project Hunghom Peninsula, to developers, at a mere HK$864 million. The scheme would have yielded over 2,400 units worth billions today.
The government finally announced it would resume the construction of home ownership scheme flats in 2011. By that time, home prices had risen greatly, and the major developers had become so powerful that “property hegemony” became a hot-button issue.
Perhaps civil servants should be forgiven for lacking the business acumen and the courage to buy low. But as the result of the government’s withdrawal from the residential market, the government finds itself in the unhappy predicament of having no “land bank” to fall back on in the face of mounting land and housing demands.
The Planning Department estimated that the government lacks 1,200 hectares of land in the next 30 years. The frequently bandied about number masks the cruel reality that the government is estimated to have no more than a couple of hundred hectares at its disposal, relative to much larger tracts of undeveloped lands in the New Territories – about 1,000 hectares of agricultural land hoarded by developers, 2,600 hectares of tso (clan) and tong (family) land granted by the government and registered under the New Territories Ordinance, and an estimated 1,300 hectares of “brownfield” sites occupied by various types of economic users.
Watch: Why land in Hong Kong is so expensive
Although Lam plans to rebuild a five-tier housing ladder starting with public housing at the bottom, moving up to the so-called Green Form Scheme (a scheme for public housing tenants and other eligible applicants to buy public rental housing units), home ownership scheme, starter homes and ultimately private housing, it would be hard for her to pull off such a scheme given the government’s lack of land supply.
The government’s withdrawal from the residential market in the past decade, with public housing production down to a few thousand units at the nadir, has wrought grave consequences for the production of affordable housing. With a living space of about 15 square metres fetching rentals of HK$8,000 per month (US$1,000), and a harbourfront residential unit of about 20 square metres on Hong Kong Island fetching a sale price of HK$10 million, anger at the lack of affordable housing has spread from the grass roots to the well-to-do middle class.
Why should Hongkongers sweat all their lives and put all their wealth (if any), into one asset class (housing), which will ultimately benefit a few property-owning families? This is the question the chief executive should think hard about before she promotes more home ownership.
Regina Ip Lau Suk-yee is a lawmaker and chairwoman of the New People’s Party