Hong Kong housing

Sweeping changes to Hong Kong’s subsidised housing policy set to be proposed by Chief Executive Carrie Lam, Post learns

Sources say proposals will make subsidised housing cheaper and impose a vacancy tax on newly built unsold homes

PUBLISHED : Wednesday, 27 June, 2018, 8:41pm
UPDATED : Thursday, 28 June, 2018, 12:05am

Hong Kong’s leader is expected to announce a package of new policy proposals to combat the city’s unaffordable housing by Friday, including a plan to make government-subsidised housing cheaper, the Post has learned.

The package will also include a proposed vacancy tax on newly built but unsold homes, as well as taking back prime government sites reserved for private developers to bid on and build public-sector housing on them.

Chief Executive Carrie Lam Cheng Yuet-ngor’s biggest move on the housing front yet comes after home prices continued to rise in the world’s least affordable property market, fuelling public discontent. Friday will also mark the end of the current government’s first year in office.

Sources said the package would first be discussed in an Executive Council meeting between Lam and her top advisers on Thursday.

“[The package] symbolises Lam’s report card, and she wants to rush this out before July 1,” a source close to the situation said. Lam took office on July 1 last year.

The proposed review of the subsidised housing pricing mechanism is likely to disconnect the prices from market rates to prevent prices from inflating each year, according to the source.

Under the proposed mechanism, subsidised housing prices would relate to a family’s budget. The calculation will be based on the median monthly income of applicants, a percentage of this income reflecting how much applicants should pay every month, and the number of years applicants should take to pay off the mortgage.

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The existing mechanism sets a discount off the market price and, after the discount, the price of half the flats in a project to be sold should be affordable – meaning the monthly mortgage payment should not exceed 40 per cent of applicants’ income – to eligible applicants falling within the income limit. This discount has remained at 30 per cent since 1991.

On an RTHK programme on Wednesday, Anthony Chiu Kwok-wai, a member of the subsidised housing committee under the Housing Authority, which scrutinises all public-sector housing policies, said the income limit for subsidised housing, now HK$57,000 for families of two or more, was linked with market prices and would increase every year.

If the subsidised housing prices are to be unlinked from market prices, Chiu said, the income limit should be lower than the existing level, or there would be more families with higher incomes eligible for a limited amount of subsidised flats.

Stanley Wong Yuen-fai, chairman of the committee, had similar concerns.

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“At a time when the land supply is scarce, I hope we will reach out to the neediest families,” he said.

The committee will have a meeting late on Friday. Wong said he expected the meeting to be about the pricing mechanism review.

But Lawrence Poon Wing-cheung, a scholar of housing policy at City University, said lowering the income limit would only push a group of families too wealthy for subsidised housing but too poor for private flats to stretch themselves into the private market, which would also push private property prices even higher.

Instead of lowering the income limit, Poon said, the government should build more subsidised flats to absorb demand from the private market.

The supply of subsidised housing in Hong Kong has been so limited that getting one is widely considered akin to winning the lottery.

According to the source, the government has identified four to five prime private housing sites in Kai Tak for building public-sector housing.

On vacancy tax, a government source said officials would not impose a very high level of tax in the beginning.

“It can be increased over time, depending on the actual market response, just like other property cooling measures,” the source said.

The source said the public should not only focus on the estimated 9,000 completed, but also on the unsold flats.

“We are talking about a supply of tens of thousands of new flats in the next few years,” the source said. “We have to make sure these flats will be released on the market [in a timely manner].”

The Executive Council is also expected to discuss on Thursday details about a starter-home scheme for those who are too rich for subsidised housing but too poor for private housing.