Hong Kong property ownership remains unobtainable for many, triggering a pessimistic outlook on the future of this city as the rich become richer and the poor become poorer. What has the government done to address this and have they done enough?
17 November 2016 - It is no secret that Hong Kong is mired by one of the world’s most drastic divides of income inequality, with a recorded GINI coefficient of 0.537 in 2011 positioning the city firmly behind its global peers. In 2014, Forbes reported that Hong Kong had a Median House Price to Median Household Income ratio of 14.9, soaring above other cities such as New York (with a ratio of 6.2) and Vancouver (with a ratio of 10.3). Needless to say, it is of no surprise that many citizens in Hong Kong feel a categorical separation between the Hong Kong painted upon postcards, and the Hong Kong that they live in; a city where they struggle to pay their steadily creeping rent, with the prospect of home ownership being more of an idyllic daydream than an eventual goal.
However, that is not to say that the government has been unresponsive to this housing crisis throughout the years. The issue at hand, though, is undeniably complex. The government has had to address the problems of: incredibly high demand from both HKPRs (Hong Kong Permanent Residents) and Non-HKPRs alike, as well as the fact that supply of residential housing simply cannot keep up with said demand. Through initiatives such as the Home Ownership Scheme, Public Rental Housing, the Secondary Market Scheme, and various stamp duties, the government’s efforts can be summarized with the following objectives in mind:
(i) to quell property speculation
(ii) to better enable people to rent or purchase their own properties
(iii) to increase the supply of saleable residential properties for the many people currently placed on the waiting list for public housing.
Whilst it is commendable that the government has rolled out these measures over the years, there have been concerns regarding the efficacy and execution of some of these initiatives. In matters that directly impact the quality of life of millions, one simply cannot be content with a good general effort. This article will take a closer look at one of these initiatives in particular, the Home Ownership Scheme, and to a lesser degree, the Public Rental Housing Scheme.
The Home Ownership Scheme and Public Rental Housing
Originally established in the 70s, the birth of the Home Ownership Scheme (HOS) was a signal to the property industry that the government had stepped into the area as a dominant player; here to “set a standard for ownership properties as a challenge to private sector developers”. The gauntlet the HOS threw at the private sector was its core initiative, which was to build quality living spaces and then sell them at a heavily discounted rate to the following two groups:
(i) relatively wealthy occupants of public rental housing
(ii) prospective home owners living on very restricted incomes.
The former sounds a bit counter-intuitive at first, but it is more understandable once you also take the Public Rental Housing Scheme (PRH) into account. The waiting list for the public rental housing scheme is immense. Even though there are currently 750,000 flats set aside for the PRH scheme, supply of these residential spaces pales in comparison to the number of people who are in need of cheap rental accommodation. By incentivizing wealthier public rental housing occupants to purchase discounted apartments and to move out of their flats, these vacated homes can be re-allocated to those on the waiting list; people who need them more.
Though the scheme was suspended in 2002, it was recently reinstated, targeting families who have a monthly household income under $30,000. With its reinstatement, the current government has promised that there will be an additional 470,000 new housing units developed in total for the Public Rental Housing Scheme and the Home Ownership Scheme over the next decade.
Concerns
On paper, the Home Ownership Scheme was promising, but its execution has been less than ideal for a number of reasons, some of which are outlined below:
Land Development Concerns
One of the more visible problems that the Home Ownership Scheme faces are its quarrels with various environmental interest groups regarding its initiative to convert land into flats. In a 2013 policy address, Chief Executive CY Leung spoke about the ever prevalent dilemma of balancing land development and preservation in a way that has sparked responses from pro-environment and pro-cultural heritage preservation groups. The following quote within the address adequately sums up his position: “In considering whether a site should be developed, the use of the site after development, or how to accommodate different views and aspirations in the process of development, we do not have any perfect option… We must have the courage and resolve to make hard choices and decisions with the overall interests of the community in mind. The Government will strive to balance different interests when making choices. But the fact is that the community will never reach a full consensus over such issues. In fact, we cannot afford to, and should not, wait for a full consensus”.
This has been taken by many groups as a thinly-veiled threat against the long consultation processes normally required for land planning and development. Whilst it is true that the issue of home ownership in Hong Kong is one that “cast[s] a dark shadow on our thriving city”, there are concerns of the government strong-arming the re-development of ecologically valuable land into housing areas. Farmland and wetlands have since been degraded by construction efforts, including an area included amongst the 12 priority sites for enhanced conservation in the 2004 New Nature Conservation Policy: Long Valley.
Other environmental concerns in addition to the preservation of animal species include the following: degradation of air quality, noise pollution, traffic, and hits to biodiversity and airflow within the city, all of which negatively impact our existing quality of life.
Though it is understandable that the government may be impatient with the arduous consultation processes involved, especially with the waiting list for public housing only growing, many groups have nonetheless stressed the importance of these regulations to ensure that Hong Kong does not go down an unsustainable path of short term solutions with long term consequences; that Hong Kong does not wrap its wounds with anthrax-laced bandages.
As Leung mentioned, though a full consensus may very well never be reached, a decision by the powers that be to strong-arm their way through the consultation processes in such a politically shaky environment would be questionable to say the least. Going forward, the Housing Authority has to tread carefully regarding its land development decisions. After all, there are few things more precious than land in Hong Kong.
Discrimination between Green and White Forms
The green and white forms are two separate categories of applicants for the Home Ownership Scheme and the Private Sector Participation Scheme.
Green-form applicants “consist of tenants living in public rental housing, authorized occupants of the Housing Authority, Temporary Housing Area or Cottage Areas”, while White-form applicants are comprised of “households from the private sector and public housing residents who wish to live away from their parents’ household”.
This separation of applicants isn’t nominal, and carries real consequences that white form applicants particularly need to bear. Whilst both green and white form applicants are tested for their eligibility, the former are subject to more stringent requirements, with qualified applicants being subjected to monthly income and asset limits of $31,000 and $700,000 respectively. In contrast, green form applicants face no such restrictions and are prioritized, with two thirds of all HOS flats being allocated to them.
This might not sound overly egregious with the number of green and white form applicants being roughly equal, but this cannot be any further from the truth. To illustrate, out of 11,710 single household applications for small flats in 2015, 438 were green form applications, and the remaining 11,272 were white form applicants. With only 847 successful applications, the odds are stacked against white form applicants and whilst one can certainly make an argument for preferential treatment of green form applicants on the basis of need, white form applicants require assistance for home ownership as well.
Societal Resistance and Grievances with Public Rental Housing
If you are wondering why there would there be societal resistance against the Home Ownership Scheme and Public Rental Housing first remember that the Scheme was also devised as a way to incentivize a rational allocation of public rental housing, where more affluent public rental housing applicants were encouraged to buy HOS flats and have their flats re-allocated to those who were on the Waiting List.
This wasn’t the only instrument the government devised in order for PRH flats to be better allocated. A somewhat common phenomenon in PRH flats is “under-occupation”, which is where the population density of a flat is lower than the original, prescribed amount (e.g. 3 people living in a 4 person PRH flat). This can happen for a variety of reasons, but more often than not, as a result of the death of a family member or children moving out of the household.
The government has not been particularly empathetic when dealing with these situations. For example, China Daily reported in 2012 that a 49 year old night-shift taxi driver, was reallocated to a smaller flat following the death of his father. The move was an emotionally traumatic experience for him as he had to cope with the loss of his father alongside the loss of his home. In addition, the majority of his belongings were discarded, as they simply could not fit in the new flat. In total, the move cost him more than $100,000, which was an overwhelming amount compared to the $3,000 moving allowance the government offered him.
This is one case among dozens and, as a result, many under-occupiers feel persecuted when they are essentially evicted from their current homes. Whilst one can certainly say that the process is rational, there is a distinct lack of empathy for the plight of these individuals. People may not be so willing to look at the logical side of these issues when they are lowering their quality of life by moving into smaller accommodation. Though its veracity in the modern era is somewhat contentious, Maslow’s Hierarchy of Needs mentions that shelter is one of our fundamental needs, satisfying our deep-seated and fundamental physiological needs and needs for safety. Considering this, it is of no surprise that the rationalization of public housing allocation has riled the tempers of many citizens.
The Home Ownership Scheme and its companion Public Rental Housing Scheme are by no means perfect schemes, but the former was only reinstated a few years ago, and the government’s promise to drastically increase the supply of public housing requires time before it can be fulfilled. The problems associated with increasing the supply of public housing and the problem of allocating existing public housing are ones that the government must tackle all at once. With hundreds of thousands of applicants on the waiting list, and the income gap being so large, time is of the essence, even if it might be understandable why these problems still exist. In these politically unstable times, the government may be wise to adopt an approach empathetic to these concerns, rather than strong-arming themselves through them.
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