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Hong Kong housing

‘Why care only about property developers and not the public?’: Hong Kong’s leader justifies vacancy tax plan to boost housing supply

Chief Executive Carrie Lam delivers strongest comments to date on controversial plan to tax those who hoard empty flats, days before expected announcement of levy details

PUBLISHED : Tuesday, 26 June, 2018, 6:29pm
UPDATED : Tuesday, 26 June, 2018, 11:32pm

Hong Kong leader Carrie Lam Cheng Yuet-ngor brushed off fears the government will cave in to developers’ objections and delay a plan to tax those who hoard empty flats on Tuesday, insisting her priority is to serve the public good.

In a comeback to questions at a press briefing in Beijing, Lam said: “Why do you care so much about how the developers see it?”

“Why do you not care about the views of the general public? As the chief executive, I care about the interests of the public and the people. There are bound to be different views on every government plan.”

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The chief executive’s rhetorical statements are her strongest comments yet on the plan and come before a special meeting with her top advisers on Thursday. Sources said they would discuss details of the tax before making an official announcement.

They added that the Executive Council would also raise the issue of taking back some prime sites earmarked for private flats in the Kai Tak new development area, and use them for public flats instead.

The government hopes the vacancy tax will spur developers to release more flats on the market, boosting supply and cooling prices that have skyrocketed beyond middle-class affordability.

But the city’s powerful property developers have declared their opposition to the plan, arguing it is discriminatory and amounts to an intervention in the free market that could end up discouraging and slowing the construction of flats.

They previously warned that they could challenge the policy in court through a judicial review.

Lam, who marks her first year in office on Sunday, has pledged to look at immediate and long-term solutions to ease the city’s housing crisis during her term.

Speaking after meeting with vice-premier Han Zheng in the Chinese capital, she emphasised her willingness to tackle issues for the public good, citing the government’s proposal to scrap the so-called offsetting mechanism of the Mandatory Provident Fund, the city’s pension scheme.

The practice allows employers to dip into workers’ pension funds for severance and long-service payments.

“I still hear some strong views from some factions of the business sector,” she noted, referring to opposition to doing away with the offsetting practice.

“But for the sake of the best interests of the public, as the chief executive, I will take on the challenges.”

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Earlier this month, she said a decision on the plan would be announced in June. It was reported the tax would apply only to developers and not affect owners in the secondary property market.

According to the Rating and Valuation Department, about 43,000 flats, or 3.7 per cent of the citywide total, lay vacant in 2017. Among them, 9,370 were unsold and new; of these, 5,000 were completed last year.

She’s complaining about the bread [being too expensive], but the government is the one that’s always benefited from [selling] flour
Lawmaker Abraham Razack on Hong Kong leader Carrie Lam

The Real Estate Developers Association opposed the tax and said the government figure was misleading. The association, which represents major private developers, claimed that flats were being categorised as completed and ready for occupation when they were waiting for an official certificate of compliance that would come only after all furnishings, fittings and landscaping work had been done.

Stewart Leung Chi-kin, chairman of the association’s executive committee, said it never warned about legal challenges to the tax but some developers had let on that they were seeking legal advice on whether their property rights would be affected.

Real estate and construction sector lawmaker Abraham Razack said the tax would only affect as many as 9,000 flats, of which many were rented out by developers, and would not help lower property prices at all even if they were all sold.

“She’s complaining about the bread [being too expensive], but the government is the one that’s always benefited from [selling] flour,” Razack said of Lam, using the sector’s favourite analogy of land being flour and resulting developments being bread.

Razack said the government should find more land to build low cost public rental housing for some 280,000 applicants on the waiting list, instead of focusing on vacant flats.

But both men said they would support the plan to build public flats in Kai Tak.

“Personally I think this policy is appropriate,” Leung said. “This is for the public interest.”