Hong Kong housing

To turn farmland into public housing, Hong Kong must first agree on what’s fair. And that’s the problem

Bernard Chan says the public-private partnership model has worked in the past and can work again – if government officials, the developers who own the land, and the general public set aside their mistrust and commit to finding a deal that benefits all

PUBLISHED : Thursday, 27 September, 2018, 6:03pm
UPDATED : Thursday, 27 September, 2018, 7:17pm

Hong Kong is still going through an intense debate about land supply. It should be clear by now is that this is not a single problem with a single answer. We have near-term, medium-term and long-term needs for space – and they almost certainly have different solutions.

I have said before that our current housing prices are distorted – the gap between valuations and affordability for end users will have to narrow at some stage. The land supply debate is about making sure we do not get into this situation again, and we have adequate and liveable housing in the future.

I support large-scale reclamation, like the proposed artificial island east of northern Lantau, as a long-term source of space. Unlike other options, it would create a large empty area for planners to design a modern and comfortable living and working environment from scratch. However, it would be 10 to 20 years before the land is available for use.

In the nearer term, we have no choice but to find smaller parcels of land suitable for housing, essentially in the New Territories. The debate is especially fierce on what sort of land to use – the edges of country parks, golf courses, brownfield sites currently used for commercial activities, or fallow agricultural land.

Every option is controversial and involves technical, zoning and other issues. But I believe that if we are pragmatic and objective about this, one option stands out – and that is the privately owned farmland.

Developers open to public-private housing, but quota ‘down to calculation’

Such land is not part of our country parks or leisure facilities. The community would not be sacrificing valuable space that contributes to quality of life. Besides, many owners of the farmland would welcome an opportunity to develop the land. At the moment, these holdings are either idle or rented out for low-value uses such as storage. If the economic incentives are right, the owners would go along.

As I say, every option is controversial. In this case, the controversy is that the land owners are in many cases major property developers. To be frank, these corporations are unpopular among the public. They have profited massively from building highly priced and often small homes, and there is a widespread perception that the government colludes with them in this.

This is a complex subject – experts have written whole books about the relationship between government and developers in Hong Kong. But let’s say for the sake of argument that this relationship has been unfair to the broader population. Would it be possible for the government to change this?

There are precedents for good outcomes from changing private land use. Such deals with developers enabled old industrial sites to become estates like Mei Foo and Taikoo Shing.

I believe the agricultural land holdings represent an opportunity. The mechanism would be a public-private partnership. Officials would need to devise a formula that allows developers to profit from developing the land in a way that also provides the community with affordable homes.

You might think that, from a financial point of view, the numbers cannot add up. But they can, provided the government does not maximise its own revenues from the arrangement.

Beware the developers who promise flats for a land deal

The challenge is to convince the suspicious public. This would probably require two conditions.

First, the new housing supply would have to be seriously weighted towards public rental or subsidised homes. For example, public opinion would probably approve of a 70:30 ratio of public flats to private market-price units.

Second, there would have to be a transparent system for deciding land premiums and who pays for the supporting infrastructure for new developments. To assure the public it is fair, an independent body with members who are not developers or officials could oversee the whole process.

Basic Law will complicate any attempt to take back rural land for housing

Critics of the public-private partnership approach would rather see the government resume the farmland and cut the owners out. However, you can be sure the developers would fight like crazy in the courts and drag everything out for years.

The developers do, however, have an incentive to cooperate fast if they are offered a way to get some profit out of basically idle land.

Actually, I expect not only the public but some officials and developers would also be sceptical about this approach. By Hong Kong standards, it is radical. I would say it is also common sense.

Bernard Chan is convenor of Hong Kong’s Executive Council