A Firm Foundation
I have felt for a long time that our first Chief Executive Tung Chee Hwa got a pretty raw deal in terms of public criticism of his housing policies.
After all, the declared objective of getting the rate of home ownership up to 70% was and is a very worthy one. The USA is already close to this, while Singapore is almost 90%. As a similarly wealthy society it should be well within our ability to do very much better.
There are a whole host of reasons – social, political, economic – why a much higher rate than our present level of about 53% is desirable.
Nor was CH the first person to think in terms of “85,000 new residential units per year”. One of the supporting documents for the 1997 Budget, when Hong Kong was still under British administration, had quoted a target (or projection) of 425,000 new units over five years.
It is a long time since I passed my O level maths exam but I believe that equates to pretty much the same thing.
Tung’s misfortune arose from the fact that turning the dull British era five-year projection into the much more sexy sounding annual figure coincided with a regional economic downturn (later followed by a SARS outbreak) which caused our housing price bubble to burst. Lots of ordinary people were left in negative equity territory and naturally when they cast around for someone to blame, there was the high profile target statement with “scapegoat” written all over it.
The Government overreacted both during the balance of the Tung era and throughout virtually the whole of the reign of his successor Donald Tsang Yam Kuen.
The land sales programme was abandoned, the pace of new land disposal was put entirely in the hands of the major property developers, the Home Ownership scheme was suspended sine die. In effect the wolf pack was put in charge of the chickens.
The inevitable result was that we are once again experiencing a price bubble in the housing market, but the new administration to its credit has moved decisively to address it.
Moreover despite the short term problems we face our current Chief Executive Leung Chun Ying has a historic opportunity to move our community closer to the desirable level of home ownership.
This can be achieved by a substantial increase in the scale of the HOS programme.
A number of old public rental housing estates, including some in the urban area, are nearing the end of their useful life and are due for redevelopment. Using higher plot ratios, there will be more units but they do not all need to be set aside for replacement rental purposes.
At present some 31% of households are in public rental housing. In the long term that figure is too high and we should be aiming to get it down to around a quarter.
But there is naturally pressure to move to address the appalling situation of those inadequately housed at present in subdivided flats, industrial units and so on.
Building 5,000 new PRH units meets the demand for that number of families. But making those same units available for HOS instead gives 5,000 families a chance of subsidised home ownership and frees up the same number of units for re-allocation to those on the waiting list. Double the number of happy families from the same number of units.
Moreover as the programme rolls forward it should have the desirable side effect of moderating the pressure which has driven prices in the private sector to absurd levels. Our property moguls can continue to keep many thousands of vacant units off the market, releasing them only in dribs and drabs to keep prices high, but ordinary local families will have an alternative option.
Hong Kong is scheduled to take major steps forward in political development in 2017 and 2020. Some are concerned that increased democracy will lead to populist demands for excessive welfare.
In my view those fears are overblown as our citizens have always shown themselves to be overwhelmingly responsible and pragmatic. We can reinforce those desirable traits by giving many more families a direct stake in our society with home ownership.
There may be some howls of protest from the wolves. But the overriding priority should be to give our new democracy a firm foundation.