OHKF Releases the Latest Land and Housing Policy Research Report

Resolute Action Needed to Tackle Land and Housing Supply Crisis

(21 April 2021, Hong Kong) Our Hong Kong Foundation (OHKF) has released a new research report today on Land and Housing policy entitled Decisive Moment—Can Hong Kong Save Itself from the Land and Housing Supply Crisis? The Report warns that Hong Kong is caught in a deadlock of “triple lows”: low spade-ready land supply, low housing completions, and low quality of living. Resolute government action is needed to achieve the ten-year Long Term Housing Strategy (LTHS) housing supply target. The OHKF sets out an exclusive ten-year forecast on public and private housing supply, and urges the Government to expedite all land supply initiatives and streamline the approval processes for land and housing development.

The OHKF also calls on the society at large to rally behind the Government’s land and housing development plans. The Government and society must join hands and work together to save Hong Kong from the downward spiral in land and housing supply crisis.

Low Supply of Spade-Ready Land Due to Lack of Land Development

Hong Kong has been increasingly plagued by a lack of good-quality land for housing due to the lack of large-scale land development over the past 20 years, and the land stock from existing new towns is being gradually exhausted. The Report cites the land available for private residential development as an example, with the supply plunging from the peak level of 25,500 units recorded three years ago to 13,020 units this year.

In addition to a reduction in quantity, a lowering in quality is also observed. In the Government’s land sale programme, the proportion of tiny development sites providing fewer than 100 flats has climbed to 40% in 2021/22, from a low of 10% in 2015/16, setting a record high in nine years. Besides, a considerable amount of sites in the coming year’s land sale programme are non-spade-ready, some of which are still subject to Outline Zoning Plan amendments while others are pending land clearance procedure. It is apparent that the Government has exhausted its efforts in sourcing land for housing supply.

Low Housing Completions in Both Public and Private Housing in Next Five Years

Although private housing completions saw a one-off rebound last year, the private housing development cycle since mid-2018 has remained on downward trend. The OHKF forecasts that the number of private residential completions in the next five years will average only about 15,000 units a year, down 28% from the 20,900 units completed last year.

Public housing supply in the next four years is also expected to lag behind the LTHS target by 28%, with an annual average of 21,800 units.

Low Quality of Living with Private Housing to Be Completed in Smaller Size and More Unaffordable

The supply shortage will also undermine the quality of living, as housing units become smaller and yet more expensive. The Report predicts that the average gross floor area of completed private housing units will continue to shrink to a record low of less than 600 square feet in 2024 (which is equivalent to a saleable area smaller than 480 square feet based on an 80% efficiency ratio). This is almost one-third smaller than in 2012. On top of having “subdivided units” and “container homes”, the number of “nano-flats” and “space capsule pods”, with the latter as small as 20 square feet, have increased significantly in Hong Kong in recent years.

But a sign of improvement can be seen in the building plans submitted by developers to the Buildings Department and sales brochures. The trend of “nano-flats” smaller than 215 square feet in saleable area is expected to peak out gradually after next year.

The Ten-Year LTHS Housing Supply Target Will Only Be Achieved with a Herculean Effort

The OHKF has repeatedly pointed out that the Government’s ten-year housing supply target as stipulated in the LTHS is too conservative to make up for the cumulative shortfall, let alone improve the quality of living for the public. However, even this low target will require a Herculean effort. To assess whether the Government could achieve its LTHS ten-year housing supply target, we have compiled an exclusive ten-year forecast on public and private housing supply and a quantitative analysis on reaching the LTHS target.

The Government has announced in the 2020 Policy Address that it had identified all the land required for 316,000 public housing units in the next ten years. However, based on OHKF forecast, if all land supply initiatives continue to progress at the current speed, only about 277,400 public housing units could be completed in the same period. To achieve the figure stated in the Policy Address, New Development Areas and other major land supply initiatives will need to be completed with a compressed timeline, approximately two years ahead of their current schedules. In addition, the annual supply of flats from rezoning needs to be increased by 5% over the current level.

For private housing, we expect an average of only 12,000 units per year to be completed in 2026–2030. This is 20% lower than the annual average of 15,000 units between 2021 and 2025, and fails to reach the annual target of 12,900 units in the LTHS. If the Government wishes to fulfil the LTHS target, New Development Areas and railway projects need to be completed one year ahead of the original schedule, and supply from private development needs to deliver 5% more of units each year.

Now is the Defining Moment to Turn the Tide of the City’s Woeful Housing Crisis

The OHKF advises the Government to take a bold step forward and expedite all major land supply initiatives, including development of New Development Areas, rezoning, topside development on railways, urban redevelopment and others, while streamlining the current administrative procedures for land and housing development. Specifically, we advocate that the Government conducts in-depth study on compressing the development procedures of New Development Areas, and speeds up transport infrastructure projects that support New Development Areas, in particular road infrastructure including Route 11, Tuen Mun Bypass, and Lantau Road P1, as well as railway infrastructure including the Northern Link, Tuen Mun South Extension, and Tung Chung Line Extension.

Moreover, the OHKF urges the Government to ensure the newly set up Development Projects Facilitation Office announced in 2020 Policy Address can perform its functions effectively to streamline the administrative and approval processes in private housing development.

On public housing supply, in the report published last year, the OHKF pointed out that many public housing projects were delayed due to different bureaucratic procedures. The OHKF calls on the Government to leverage on the Steering Group on Streamlining Development Control, with its expanded function from the Policy Address, to improve cross-department coordination and streamline cumbersome government procedures to compress the timeline of public housing development.

There are different suggestions on increasing land supply in the society, including developing the periphery of country parks, Hong Kong Disneyland Phase 2 site, and even Guishan Island. As remarked by Chinese Senior Vice Premier Han Zheng, although it is difficult to solve Hong Kong’s housing problem, we have to grab it by the horns. The OHKF believes the key to increasing housing supply in the short- to medium-term is by ensuring quick completion of the planned New Development Areas. Take as examples the New Development Areas of Kwu Tung North and Fanling North, and Hung Shui Kiu, although these development projects started in the early 1990s, they will not be fully completed until 2031 and 2038 respectively, spanning almost 40 years.

Looking ahead, the Government must demonstrate the ability to develop large-scale new towns in a comprehensive manner, as well as the strategic vision to build a land reserve to support the long-term development of Hong Kong. Lantau Tomorrow Vision is an important part of that long-term strategic plan to shift society’s expectations on the upcoming land and housing supply. It also serves as an important “catalyst” in the negotiations between the Government and relevant stakeholders, with the hope to prompt landowners to expedite development of their lands and release their potential value.

Mr Stephen Wong, OHKF Senior Vice President & Executive Director of Public Policy Institute, said: “The housing supply in Hong Kong is like a baker who has to make a large amount of bread in a short period of time. But the shortage of ‘flour’ (spade-ready land) and malfunctioning ‘flour-making machine’ (land developing mechanism) only allow the baker to make little bread (housing) slowly, which results in small and expensive flats. To reverse this trend, we must develop New Development Areas and push forward the procedures for releasing large land pieces for housing development as soon as possible.”

Mr Ryan Ip, Head of Land & Housing Research, remarked: “For the past 20 years, Hong Kong has no large-scale land development. The city’s landbank is being depleted and the land shortage is becoming acute. It is noteworthy that the Lantau Tomorrow Vision as a long-term land supply scheme can shift stakeholders’ expectation on future land and housing supply. It will act as an important ‘catalyst’ in speeding up potential land clearance and resettlement issues in the negotiation between the Government and current land stakeholders, which often drag the development of New Development Areas and the progress of other land supply initiatives.”

Full report of Decisive Moment—Can Hong Kong Save Itself from the Land and Housing Supply Crisis?
Chinese version: https://bit.ly/3xdPwly
English version: https://bit.ly/3emS1ZY