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Hong Kong housing

In home ownership push, Hong Kong leader Carrie Lam follows Singapore model of Lee Kuan Yew

But unlike in the city state, local officials have largely adhered to colonial housing policy of providing cheap rental flats for poorest while leaving ownership largely to private market

PUBLISHED : Sunday, 08 July, 2018, 2:31pm
UPDATED : Sunday, 08 July, 2018, 11:32pm

More than half a century after the housing authorities of Hong Kong and Singapore, born to the same colonial inheritance, went their separate ways, the leader of the now Chinese city appears to be borrowing a page from the playbook of the city state’s first prime minister.

“We will focus on home ownership to enable our people to live happily in Hong Kong and call it their home,” Chief Executive Carrie Lam Cheng Yuet-ngor said in her first policy address in October last year.

Her pledge resembled that of Singapore’s founding father, Lee Kuan Yew, when he summed up the rationale behind a policy introduced in 1964 that would see most people in the country owning government-funded homes.

“My primary preoccupation was to give every citizen a stake in the country and its future,” Lee said in his 2000 memoirs. “I wanted a homeowning society.”

Unlike in Singapore, the Hong Kong government has largely adhered to a colonial housing policy of providing cheap rental flats for the poorest while leaving ownership largely to the private market.

But Lam followed her pledge last year with a series of suggestions for boosting affordable ownership in the world’s most expensive property market, culminating in her package of proposals announced at the end of last month. If the measures materialise, they could bring Hong Kong closer to Singapore’s housing system.

The plan comes as skyrocketing property prices have exacerbated social frustration, with traditional march-and-protest tactics gradually losing their appeal, especially among young people. Some of the discouraged have even started to consider the city’s independence from China as a solution.

“In general, home ownership creates conservatism and favours the status quo, as homeowners are concerned [their investments] might be disrupted by social and political change,” Chua Beng Huat, a sociologist at the National University of Singapore, said. “A nation of homeowners, such as Singapore, has definitely contributed to the general political conservatism or political stability.”

For now, marked differences exist between what the rival cities offer.

In 2016, government-funded homes in Hong Kong made up 43 per cent of the whole housing stock, compared with 73 per cent in Singapore. Among funded housing offerings, those for sale accounted for 33 per cent in Hong Kong, compared with a whopping 94 per cent in Singapore.

Last year, about half of local households lived in homes they owned, compared with 91 per cent in Singapore.

But Lam’s latest proposals could bridge the gap.

Plan to up discount in Home Ownership Scheme hurts Housing Society: chairman

On June 29, she announced she would make subsidised ownership cheaper in Hong Kong. In every such project in future, 75 per cent of the flats would need to be affordable to those making the median income among all non-property-owning households. Being affordable means fixing mortgages at 40 per cent of income. This would bring flat prices down to about half the market rate, instead of the previous 30 per cent discount.

The chief executive also revealed details of a funded starter-home scheme – with flats 10 to 20 per cent more expensive than the ownership homes – for those who earn too much to qualify for the ownership scheme but too little to compete in the private market.

In last year’s policy speech, Lam suggested the government could replace most new public rental housing projects in Hong Kong with “green form” ownership flats, which are 10 per cent cheaper than ordinary ownership homes and sold to rental housing tenants only.

“To the extent that the shift is towards greater affordability in home ownership, it is towards the Singapore housing model,” Chua observed.

But the sociologist pointed out that affordability in Singapore means 90 per cent of all income earners pay no more than 30 per cent of their monthly income towards a mortgage.

“The 40 per cent income-mortgage ratio is much higher than Singapore and this will deter families from buying public flats,” he added.

Another key to Lam’s plan succeeding is land supply. She has admitted that getting an affordable flat under current conditions would be akin to winning a “big lottery”.

The chief executive has also suggested that, with enough land, officials would consider increasing the targeted proportion of funded housing from 60 per cent of the housing mix to 70 per cent.

Land supply options report to be driven by public views, panel chief says

Although the government is in the middle of a public consultation on how to plug a predicted shortage of about 1,200 hectares of land for housing and economic development in the next three decades, Lam has already voiced strong support for reclamation, a controversial option often criticised as time-consuming, damaging to the environment and increasingly expensive amid a global shortage of sand.

Andrew Wan Siu-kin, a Democratic Party lawmaker and Housing Authority member, said Lam should not ignore existing land resources such as about 700 hectares of unplanned damaged private agricultural land, about 1,000 hectares of farmland held by developers and a 172-hectare golf course in Fanling.

If the government uses the Lands Resumption Ordinance, which authorises it to buy private land “for any purpose ... which the Chief Executive in Council may decide to be a public purpose”, such land could be available for development in a shorter time at lower costs, Wan added.

An estimate by land concern group Liber Research Community showed it costs about HK$150 million to develop a hectare of private farmland, compared with about HK$470 million for a hectare of reclamation. The findings were based on existing government projects and compensation standards.

The group also found that a new town project on private farmland could be completed in about a decade, compared with a timetable of at least 18 years on reclaimed land.

In her latest book, Professor Phang Sock Yong, an economist at the Singapore Management University, said while the country had done extensive reclamation, an important policy was the “draconian” Land Acquisition Act of 1966, which enabled compulsory acquisition for “any public purpose” at below market prices. This greatly contributed to the government owning 90 per cent of the country’s land today. Since 2007, compensation for acquired land has been pegged to full market value.

“This constitutes the backbone of the large public housing programme,” Phang wrote in Policy Innovation for Affordable Housing in Singapore.

To overcome public resistance, Phang said, officials promised suitable relocation for every business and person affected, which in turn brought land acquisition, public housing construction and resettlement closely together.

Reclamation could add 'another Sha Tin’ to Hong Kong’s land area

Lam, however, has argued that compulsory acquisition could lead to time-consuming judicial reviews. Wan countered this assertion, citing city figures showing there were only eight such cases between 1997 and last year, despite the government launching compulsory acquisition 154 times.

Officials won all eight cases, the longest case lasting a year.

“If [Lam] wants to learn from the Singapore model, so far she’s only done a half-hearted job at best,” Wan said.

But some question whether Hong Kong should learn from Singapore at all.

David Webb, a prominent free market advocate, slammed Lam’s proposals as an “invasion of the housing market” that would take the city “further away from free-market principles”.

He believed officials should scrap public sector housing altogether and instead provide rental subsidies, increase land supply, lower land premiums and increase annual property rents to move towards a freer and fairer land and housing system.

It is a government’s role to ensure that people have a home, not that they own one
David Webb, commentator

“It is a government’s role to ensure that people have a home, not that they own one,” Webb said.

Giving the government too much control over people’s mortgages and housing, some worry, could intrude upon individual financial independence.

But Wan described homeowners in general, whether in the public or private sector, as a stabilising force.

“As long as you are bound to your property, you tend to be less radical,” the lawmaker said.

Indeed, Chua noted Singapore’s ruling People’s Action Party between the mid-1980s and late 1990s tried to punish electoral constituencies that did not vote for it, by withholding estate and housing upgrading programmes from public housing residents in the constituencies.

Yet such retaliation only fuelled anti-government determination, Chua said, and officials dropped their efforts.