Rent control necessary
Updated: 2013-02-02 06:44
By Chi Yuen (HK Edition)
Home prices and rents have continued to rise after Chief Executive Leung Chun-ying's maiden Policy Address. This is despite the fact that housing-related policies and measures top all other concerns, prompting some people to urge the government to resume rent control and impose a property vacancy tax.
So far, the government has maintained contrasting stands on the two proposals, stating clearly it does not support the idea of resuming rent control for fear it would discourage property owners from renting out apartments and make it more difficult for people in need to rent flats, but will consider a property vacancy levy if necessary. The authorities must have their reasons for taking such a position, but may have been too quick to rule out resumption of rent control.
With home prices and rents having soared to such highs, it's reasonable to impose rent control and a property vacancy tax. However, Hong Kong has never applied a vacancy levy, therefore, has no experience in defining vacancy, deciding on the tax rate or targeting vacancy of properties owned by big companies. It will need more time to prepare for such a levy if it decides to do so. On the other hand, it would be much easier to reapply rent control.
The British colonial government exercised rent control on shops and residential units in the 1920s and '40s when the arrival of large number of mainlanders prompted many owners to raise home prices and rents after the two World Wars. It was applied in 1921-26 after World War I and again after World War II with the establishment of the Tenancy Tribunal in 1945, which stopped operation in 1982. Rent control was applied in 1973 to halt rent increases exceeding 90 percent of the prevailing market rate for two years or hikes of above 30 percent. Also, owners must renew rental contracts if the tenant is willing to pay the prevailing market rate. Tenancy control was officially abandoned on Dec 31, 1998.
History tells that rent control has helped the government maintain social stability and does not hinder the progress of the economy or hurt the interests of small property owners. It shouldn't be too hard for the government to lift a page from history and reactivate rent control to help ease the financial pressure on low-income households. It can be lifted a soon as the housing market stabilizes.
The author is a current affairs commentator. This is an excerpted translation of his commentary published on Jan 28.
(HK Edition 02/02/2013 page1)