Hong Kong’s latest ballot for the sale of second-hand subsidised housing was oversubscribed by just five times – the lowest demand since the programme known as the White Form Secondary Market Scheme, started about a decade ago. This seeming decline in popularity, alongside the increased affordability of private housing, has led some to claim that subsidised housing is no longer needed.

There has indeed been a growing overlap between Hong Kong’s subsidised and private housing markets. In 2021, both markets saw first-hand transactions valued at around HK$3-5 million (US$384,250-640,430). This widened to HK$1-5 million last year, as private home prices fell by close to 30 per cent from the peak in September 2021. This suggests increasing options at the lower end of the private housing market for those eligible for public housing.
On closer scrutiny, however, the options may not be as plentiful. Last year, there were only 521 first-hand transactions in the HK$1-3 million range in the private housing market – but 106,000 applications to buy subsidised housing under the Home Ownership Scheme.
Moreover, the more than 40 per cent of Hong Kong households earning less than HK$25,000 a month can only afford homes that cost no more than HK$3 million. For them, subsidised housing is still the primary route to home ownership. The mission of public housing to fulfil the homeowning aspirations of low-to-middle-income families remains relevant.

Subsidised housing also facilitates the turnover of public rental housing. It gives renting households with improved financial conditions an opportunity to buy a home – releasing their rental flats for those in greater need.

Even with the crackdown on tenancy abuse, the number of public rental flats recovered from the serving of termination notices is far surpassed by the number released by those who had moved on to buy subsidised flats – by anywhere from 47 per cent to 323 per cent in each of the last five financial years.

This shows that while the authorities should continue efforts such as the raising of rents and shortening of tenancies for well-off public renters, it is also important to keep offering subsidised housing to give tenants the incentive to move out of public rental flats.

As it is, public tenant households are increasingly open to the idea of buying subsidised housing, according to the Housing Department’s Public Housing Recurrent Survey. In the latest survey conducted in 2023, 17 per cent said they would consider buying new public housing and 15 per cent were undecided, while 14 per cent said they would consider buying second-hand subsidised housing and 18 per cent said they were undecided. If this demand is fulfilled, as many as 338,100 public rental flats could be recovered.

To give this figure some context, there were only about 116,400 applications for public rental flats as at end-March, indicating the huge potential of subsidised housing to boost the recovery and turnover of public rental stock.
At this point, one may wonder: if there is such demand to buy subsidised housing, why have the applications become less oversubscribed?

First, supply has increased, with either more subsidised flats or bigger quotas set aside for public rental households in recent sales. In the latest White Form Secondary Market Scheme ballot, for instance, the quota of subsidised housing available was increased significantly by 1,500 to reach 6,000.

Second, the sizes of the new subsidised flats offered for sale are out of sync with the preferences of public rental households.

Over the past 15 years, nearly 90 per cent of sales for second-hand subsidised housing with premium unpaid – which applies mainly to public rental households – were of flats larger than 400 sq ft. This clearly shows public rental households overwhelmingly prefer larger homes. But subsidised public housing estates completed in recent years have been dominated by flat sizes under 431 sq ft, which make up some 60-80 per cent of the floor area available.

The reason for the preference is not hard to see. Besides monthly mortgage repayments, home ownership entails expenses such as management fees, government rent and rates, all of which may mean paying more than the rent for public housing. For such households to want to surrender their flats and buy a home, the apartment must at least be larger to offer a genuine upgrade in living quality.

In short, despite the property downturn making more housing options available at the lower end of the private market, subsidised housing’s raison d’être still stands. Moreover, larger units are needed to meet the aspirations for better living quality, impel upgrading and boost the turnover of public rental stock.

Given the government’s progress in improving the quantity of subsidised housing, it is hoped that flat sizes will also increase, leading by example to make Hong Kong a more liveable metropolis.