Hit by a pandemic and social strife, Hong Kong needs a major housing boost
This article appeared originally in the South China Morning Post on 21 November, 2020.
Author: Amy Liu, Managing Editor at Our Hong Kong Foundation
As Chief Executive Carrie Lam Cheng Yuet-ngor ponders her options for next week’s rescheduled Policy Address, longstanding issues like housing and social instability are now complicated by a tightening government budget follow 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 optimum time to relaunch the Tenants Purchase Scheme is now. This would allow rental public housing tenants to buy their units at a discount, hence become much 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 epidemic and other economic challenges, it is clear interest in property remains strong in Hong Kong. Last month, just as Cathay Pacific Airways was laying off thousands of staffs, Pavilia Farm in Tai Wai in Shatin, a development by New World and the MTR Corporation, was oversubscribed by 57 times when its first batch of units attracted about 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 and become property owners.
But for the grassroots, this is easier said than done. The anti-extradition bill related social movement last year illustrated the city was vulnerable to political instability, which was partly caused by deep-rooted problems such as the sky-high property prices. If young people, which formed the bulk of extreme activists, have the security of having their own homes, then they might not be so agitated and went to extremes. As most grassroots cannot afford to buy flats in the private market simply by savings, the government could give them some help by relaunching the Tenants Purchase Scheme.
The Covid-19 pandemic has hit the public coffers hard. Financial Secretary Paul Chan Mo-por suggested the Budget would be in the red for the next few years, as the government has spent an estimated HK$3,00 billion on relief measures, equivalent to about 10 to 11 per cent of our GDP. The government’s financial resources are expected to be stretched and spending squeezed in the next few financial years.
As the government faces the likelihood of deficit Budgets, it is the right time to sell rental public housing as it will bring in huge income. Professor Richard Y.C. Wong, Chair of Economics at the University of Hong Kong, calculated that the land value of rental public housing would be worthy of HK$4 trillion. With the sale of the public housing, it would release a huge sum of money for the government, while also saving in management and maintenance costs. As such, selling public housing is a measure that can bring in income and cut expenditure at the same time. Tenants would be delighted because they could buy their own homes at huge discounts, while also taking comfort that their children will at least have a home to live in future.
How to stimulate Hong Kong’s economy after the pandemic is one of the city’s most pressing concerns. Fortunately, there are precedents from the past. After the Financial Crisis, the government launched the “Operation Building Bright” in 2009 to help to refurbish private buildings. As the city faces the pandemic today, we recommend a large scale refurbishment of rental public housing estates to prepare for the relaunch of the Tenants Purchase Scheme. Not only will it help to bring job opportunities, it will also create business opportunities in areas such as interior decoration, mortgage, and furniture sales.
Following the citywide protests last year, many Hong Kong people have lost faith in the city as a stable home. With many people considering emigration as an option, it is important the government implements some benevolent policies in order to turn the tide on the widespread discontent. We believe if people are not frustrated by housing problems, they would be less likely to feel disgruntled, and they would also be more likely to feel an attachment towards the city. Some 140,000 households had already benefited from the early Tenants Purchase Scheme policy, but there are still more than 830,000 households living in rental public housing, many of whom are keen to buy their own flats but were unable to do so as the policy was halted. If the scheme is relaunched, it will certainly help to ease social tensions and stablise the mood of the community.
In addition to benefiting existing tenants, the scheme will give the financially stressed government, or its affiliated organisations, more resources which can be used to aid the wider community. Moreover, the scheme will help to boost many economic activities hit by the pandemic and provide new business opportunities. As the city searches for solutions after being plagued by the pandemic and other challenges, the multiple benefits of relaunching the Tenants Purchase Scheme certainly offers a ray of hope that Hong Kong needs.