Reviving the Tenants Purchase Scheme is a boost the city needs
This article appeared originally in the South China Morning Post on 22 November, 2020.
Author: Amy Liu, Managing Editor at Our Hong Kong Foundation
Read related report at https://bit.ly/3nl5ZxU
As Chief Executive Carrie Lam Cheng Yuet-ngor ponders her options for this week's policy address, her task of finding solutions to long-standing issues such as housing and social instability will have been complicated by a tightening government budget, in the wake of Covid-19 relief measures costing billions of dollars.
As the epidemic is expected to continue to plague our city in the foreseeable future, policies that can address multiple issues while not costing a fortune would provide a respite that Hong Kong sorely needs.
That is why the Tenants Purchase Scheme should be relaunched now. This would allow public rental housing tenants to buy their flats at a discount, and hence become more settled and content as citizens, while also releasing the value of the properties and contributing significantly to the public purse at a time of need.
As to whether there is demand, despite the pandemic and other economic challenges, it is clear interest in property remains strong in Hong Kong.
Last month, Pavilia Farm in Tai Wai, a development by New World Development and the MTR Corporation, was oversubscribed by 57 times when its first two batches of units attracted more than 22,700 prospective buyers, making it the most sought-after development since the handover. It is clear most people in Hong Kong still want to buy property.
But, for the grass roots in society, this is easier said than done; most cannot afford to buy a flat in the private market with their savings alone. The government could help them by relaunching the Tenants Purchase Scheme.
The Covid-19 pandemic has hit the public coffers hard. Financial Secretary Paul Chan Mo-po suggested that the budget would be in the red for the next few years, as the government is estimated to have spent more than HK$300 billion on relief measures, equivalent to about 11 per cent of our gross domestic product. The government's financial resources are expected to be stretched in the next few years.
Selling public rental housing now will bring in huge income for the government. Professor Richard Y.C. Wong, chair of economics at the University of Hong Kong, calculated that the land value of public rental housing would be HK$4 trillion.
The sale of these flats would help fill up our depleted public coffers, while also saving in management and maintenance costs. And the tenants themselves would benefit because they could buy their own homes at huge discounts.
How to stimulate Hong Kong's post-pandemic economy is one of the city's most pressing concerns. There are precedents we could follow. In the wake of the global financial crisis, the government in 2009 rolled out the "Operation Building Bright" initiative to refurbish private buildings.
A large-scale refurbishment of public rental housing estates, to prepare for the relaunch of the Tenants Purchase Scheme, could be similarly beneficial. Not only would it help create jobs, it would increase business opportunities in trades and services for home improvements, such as interior decoration and mortgages.
Following the citywide protests sparked by the extradition bill last year, many Hong Kong people have lost faith in the city as a stable home. It is important that the government implements policies to try to ease the discontent. If people were not frustrated by housing problems, they would be less likely to feel disgruntled, and more likely to feel an attachment to the city.
Some 140,000 households have benefited from the Tenants Purchase Scheme, which was halted in 2006. Today, there are still more than 830,000 households living in public rental housing, according to Our Hong Kong Foundation research. Many of them would no doubt welcome a return of the scheme.
In addition to benefiting tenants, the scheme would give our financially stressed government more resources to help the community, boost the economy and provide new business opportunities.
As the city seeks solutions amid the devastating pandemic and other challenges, the multiple benefits of relaunching the Tenants Purchase Scheme offer a ray of hope.