Recommended moves could help alleviate city’s housing shortage

This article appeared originally in the CHINADAILY on 10 June 2020.
Authors: Ryan Ip, head of land and housing research, and Iris Poon, researcher at Our Hong Kong Foundation

As COVID-19 took hold in Hong Kong, sales and construction of new residential units have been dwindling. Notwithstanding the effect from COVID-19, the supply of private housing will already be low in the next five years. Our Hong Kong Foundation (OHKF) recently published a report titled "Cutting Red Tape to Catch Up With Shortfalls in Land and Housing Supply", warning of an ever-tightening supply of housing. Amid the shortage of "bread" (housing), the supply of "flour" (spade-ready land) was nearly exhausted. The report suggests that a cumbersome administrative procedure is one of the stumbling blocks to housing supply.

In 2019, only 14,093 private residential units were completed. Not only is it 33 percent lower than that of 2018, the figure is also significantly lower than the government’s original forecast by a lofty 30 percent. OHKF expects that for the next five years, the completion of private residential units will only be 16,000 units on average.

The private housing supply will stay low since all stages of the development cycle have slowed considerably. Spade-ready land supply, superstructure commencement, and pre-sale consents all dropped by 35 to 53 percent from their respective peak levels over the past one to two years. The epidemic is going to hit the housing supply even further as work was suspended at construction sites for some time. Importation of construction materials was also delayed because of hindrances in logistics.

The existing administrative procedure has been onerous and blocking housing supplies to come through. A piece of vacant land may not be available for construction immediately, because land not zoned as a residential site must first go through a series of development procedures. However, this flour mill (the land developing procedure) is becoming increasingly dysfunctional, resulting in fewer spade-ready sites.

Administrative procedures of rezoning land involve several stages, including planning approval, lease drafting, and land premium settlements. In the past, the industry has voiced that it could take more than a decade to go through all these steps. It is not hard to see that there must be some inefficiency that could be improved on in these 10-plus years of development. In the report, we have summarized 10 recommendations that aim to cut the red tape and expedite supply. These recommendations are widely advocated by the industry.

Our first suggestion is that the government should set up a central team with multidisciplinary government officials to serve as one-stop help desk and assist on various planning applications. Currently, the approval procedures involve different departments, including the Lands Department (LandsD), Planning Department and Buildings Department. The proposed central team should coordinate communication among all departments and provide a piece of consolidated advice, so that the application can meet the requirements of all departments as soon as possible.

The government should also clearly define the review/approval scope of development/building plans across departments. There have been inconsistencies in the technical definitions of development control parameters across departments. In 2017, the Development Bureau (DEVB) set up a Steering Group on Streamlining Development Control and subsequently implemented the first batch of consolidated development control parameters in 2019. We hope that the DEVB will continue its work going forward.

We also propose the government set land and housing supply targets and clearly define the responsibilities for their delivery. Despite the housing supply targets set out in the Long Term Housing Strategy, the actual supply has been falling short over the years. Nonetheless, the government has yet to come up with any accountability framework or plans to improve the situation.

We also made four proposals on land administration, including setting a statutory time frame for review/approval of all types of plans, simplifying land leases, optimizing the determination mechanism of land premiums, and avoiding duplication in public consultation.

While the Buildings Ordinance and the Town Planning Ordinance prescribe the statutory limits on vetting building plans and planning applications, the LandsD has no similar rules to follow in approving development plans. Hence, a statutory time limit should be put in place to speed up the approval process.

Also, land lease should be simplified to avoid triggering complicated procedures of lease modification, which only involves minor amendment. Specific requirements stemmed from other regulations such as drainage impact assessment should not be included in the land lease, since such requirements are governed by relevant ordinances.

In addition, disagreement between developers and the government on the assessed values of sites often prolongs the land premium negotiation process. The determination mechanism of land premiums could be optimized. The LandsD should revisit some of the key assumptions in its assessment to ensure that premiums are in line with the actual appreciation of land value.

Lastly, it is undeniable that public consultation helps gauge public views, but it is often seen that the same proposal is dragged in repeated rounds of consultation. Indeed, along the plan-making process of the Town Planning Board, representations from the public are well-sought and considered prior to plan approvals. Therefore, redundant consultation in the subsequent lease modification process should be avoided.

At the same time, the government should also leverage information technology to improve work efficiency and increase funding for work related to land development. Our government has a complex organizational structure and various administrative procedures are established to manage various facets of an issue. The excessive bureaucracy at the moment is slowing down the pace of land and housing supply. As the government has repeatedly stressed that it strives to tackle housing crisis despite difficulties, we call on the government to cut the red tape as soon as possible to facilitate housing development.