The housing blues

Updated: 2012-11-14 06:02

By Joseph Li (HK Edition)

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The housing blues

Hong Kong faces a critical housing shortage, exacerbated by rising property prices out of reach of most citizens, and rents following suit. The government is devising a long term housing strategy (LTHS), aimed at ensuring optimal use of existing land and housing resources, in the hope of solving this problem in the near, medium and long term. After collecting the relevant data, it will project demand for both public and private housing to meet the needs of various groups. Joseph Li has spoken to people familiar with housing issues, including the LTHS Steering Committee members Eddie Hui, PC Lau and Wong Kwun to share their insights.

The housing blues

Wong Kwun

Chairman, The Federation of HK, Kln, and NT Public Housing Estates & Shopowner Organization.

Housing has been one of the most serious quality of life problems in Hong Kong for decades and sometimes it's a political problem. The root cause is very simple: inadequate housing supply of both public and private housing units, while the insufficient supply of private housing has prompted property prices to surge. At present, there are a record high of nearly 200,000 households applying for public rental housing. The situation reflects the economic downturn and escalating property prices beyond the affordability of many citizens. Besides, decreased construction of public rental units and the relaxation of income/asset limits have also prompted the increase of applicants for public housing. When Donald Tsang was still chief secretary in 2002, he suspended construction of flats under the Home Ownership Scheme (HOS) until he announced in 2011, as Chief Executive, the resumption of the scheme. So supply of subsidized housing was stopped for many years. Again, the sites originally designed for HOS flats were not returned to the Housing Authority for building rental units. After some old public housing estates were demolished, the sites were sold to the property developers to build luxury flats. I think the government of that era was indulging in wishful thinking that the developers would build more low-priced, small and medium-sized flats. In my view, suspension of the HOS flats was a means to "prop up the property market", so was the decision to allow developers to apply for sites from the land reserve list, in lieu of regular land auctions. In fact, some developers have plenty of sites in their land banks. They do not build enough flats because they know very well that if housing supply is plentiful, they cannot sell the flats at higher prices. All in all, Donald Tsang did very little to increase land supply and accordingly, housing supply during his tenure as CE. I hope the steering committee will estimate the housing demand and devise strategies for the next 10 to 15 years, at the same time announce the number of both public and private housing units to be built, to cope with demand. Also, the terms of reference of the steering committee must include land supply so that it will know if it has enough sites to achieve the construction target.

The housing blues

Shih Wing-Ching

Founder of Centaline Group

The most serious aspects of the housing problem in Hong Kong are inadequate supply and exorbitant prices, out of reach of most people. One of the major causes is that not all the home buyers are genuine occupants. There are also investors and speculators. It is difficult for Hong Kong, as an international metropolis to prevent foreign people from buying properties here. The other major cause is a mismatch of resources. The housing stock exceeds the number of households. Theoretically, every household should have a home, but Hong Kong people wants bigger flats in convenient locations. Owing to the land shortage, property prices have risen beyond people's reach. In fact, government land planning has encountered great resistance from green groups and conservationists in the name of protection of the environment and the ridge line. But do they know some people live in sub-divided units without windows? In my view, housing has an overriding need over other issues. To tackle the housing shortage, the plot ratio in urban areas should be relaxed for construction of more flats, while the ratio can be lower in remote areas. After old buildings are demolished, the plot ratio of the redevelopments should be extended. This will also allow the government to gain more land premiums. At the same time, the government should look for new sites. A long term housing strategy is necessary. It must be specific, visionary and forward-looking. It should not be too detailed, because the situation may change after a few years. The government can start work immediately. There are about 200,000 households applying for public rental housing units. Assume there are 200 units in a housing block, 1,000 blocks are needed. This is a huge task. I also think a two-tier structure of public and private housing is enough and there is no need to have the Home Ownership Scheme. Housing is Chief Executive CY Leung's strong area, but he is under pressure, because the housing measures he recently announced have been criticized as having little effect. The government has just extended the special stamp duty and introduced a buyer's stamp duty to cool the property market. I think they have only artificial effects because they only dampen people's desire to buy, without actually increasing housing supply, which is the proper thing to do.

The housing blues

PC Lau

Surveyor, and one of Chief Executive CY Leung's housing policy advisors

The root cause of the housing problem in Hong Kong is inadequate supply owing to land supply shortage. That is because, for a certain period in the past, the government did not provide enough land. It had neither land planning, nor did it show any initiative to recover sites. In 1997, about 30,000 public and private housing units were built. But in recent years, the yearly output was about 8,000. The supply shortage, aggravated by the influx of hot money, prompted property prices to soar rapidly out of reach of most people. The inadequate supply was also due to the slow, tedious approval processes and lack of coordination involving government departments. For public housing, the government needs 75 months to build a 40-story block. This is far too slow compared to just 20 months for construction of a private residential block with 6,000 units, in which I have been involved, knowing that government projects are exempt from inspections by various departments. It must simplify the procedures and make greater use of private sector participation. We should also increase the plot ratio in urban areas, to increase housing supply. I was surprised to know that land supply was not within our terms of reference. If we discuss housing without access to land supply, it will create panic, because the public doesn't know if there will be enough sites to build flats. After lengthy discussion at the first steering committee meeting, Secretary for Transport and Housing Anthony Cheung agreed to amend the terms of reference. In calculating the housing demand, we need to consider such factors as population change, composition of families and birth rate. We also need to consider the change in the economic structure in relation to the types of flats we should build. High earners in the financial and IT sectors have greater demand for housing and so better, larger flats will be needed. If we focus on the general public, then more low-priced, smaller flats should be built. In my view, our housing strategy will be supply-driven, but not demand-driven. If the government has adequate lands, it has an upper hand as to timing on the launch of sites, the types and quantity of flats to be built. It will be too passive if the housing strategy is demand-driven. We can't set a yearly construction target of, say, 20,000 flats before we look for sites, because four or five years are needed for construction. But then it will fall behind demand and the government will be manipulated by the property developers.

The housing blues

Eddie Hui

Professor, Department of Building and Real Estate, Hong Kong Polytechnic University

It is the right time to review the long term housing strategy since it has not been reviewed for many years. In devising long term strategy, the steering committee should consider many aspects, including the changing social situation, housing demands of different parts of the community (including the young people, the elderly and those living in poor conditions (such as sub-divided units, partitioned units, cage houses). It is necessary to set priorities. Whilst the government can dominate public housing output, it can calculate the number of available private housing flats through land auctions and such special conditions for specified sites (with the areas and prices of flats fixed). We should devise a construction target and set priorities as to which group(s) will first be provided public housing. At present there are nearly 200,000 households waiting for public rental units. To fulfill the government's service pledge of housing allocation within three years (two years for elderly), how many flats do we need? With a yearly output of 15,000 flats, we need 13.3 years to come to the end of the queue if things remain unchanged. So we may ask the government to build more public rental units and build faster. We should first set out the strategy. Then we should estimate the demand for housing, set the construction targets and then identify sites for construction. One new trend worth noting is the big increase in the number of one-member families, as well as young, single applicants and undergraduates with no income. Together, they account for about one-third of public housing applicants. Our traditional concept of a family, is that it comprises two or more members. If young people apply for public housing as single applicants, the number of applicants will rise significantly. Public housing is an invaluable resource, and opinions at large, are against young people applying for public housing. Whether young people should be given priority is a question for the government. If they are refused public housing, they may become a source of anger or social instability. If they are offered public housing, resources for other groups will decrease. The terms of reference of the Steering Committee does not include land supply. Although this does not seriously handicap our work, I would have liked to see housing, planning and lands portfolios grouped under one policy bureau. But Chief Executive CY Leung's reorganization proposal was dragged down by filibustering in the Legislative Council.

(HK Edition 11/14/2012 page4)