restricted access 21: How Can We Get out of the Housing Quandary?
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21 How Can We Get out of the Housing Quandary? In these final two essays, I will analyze housing and domestic property in Hong Kong. This area best illustrates one of the deep contradictions between the policies of Cowperthwaite–Haddon-Cave and MacLehose, and their legacies. Public pressure on government to reintroduce the Home Ownership Scheme (HOS) reappeared when negative interest rates and rising home prices in the private market reignited concern among middle-income households that their aspirations for homeownership were being frustrated. As a result, the government asked the Hong Kong Housing Society (HS) to develop 5,000 flats under the “My Home Purchase Plan” in 2010, making them available to people with a household monthly income of under $39,000, or a personal monthly income of under $23,000. After five years, tenants in these flats are given the option of purchasing them or another unit. They have a two-year window in which to decide and can apply 50% of the rent, paid over the five years, toward their purchase. The core feature of the program is to provide a financial subsidy rather than take a total brick-and-mortar approach. Why Demand for Home Ownership Is Hot The outcome of the government’s housing policy since the 1970s is best illustrated in Table 21.1, which shows the percentage of households by tenure and the type of housing they have occupied in the period 1971–2010. Notice that the proportion of public housing renters has remained static. I believe there is an enormous aspiration within this community for homeownership . The past 30 years have convinced the people of Hong Kong that property prices are highly volatile, but they will rise, and those caught without a flat to call their own will have much to regret later in life. There are many reasons for this. 200 Resolving a Critical Deep Contradiction First, the rapid economic development of the region will increase external demand for Hong Kong properties both as investment opportunities and status symbols. Second, the heightened awareness of environmental protection and conservation has made development more difficult and uncertain, and has already caused delays. As supply slows, property prices will rise. Third, although not all residents in Hong Kong are assured of a prosperous economic future, the city itself has a huge opportunity to continue to advance economically and its bright future will be reflected in inflated property values. Fourth, the Cowperthwaite–Haddon-Cave legacy of low tax rates, limited government, and balanced budgets will ensure that policies that jeopardize property values will have system-wide consequences, not least of which is the local banking industry. Finally, with 53.4% of domestic households being owner-occupiers, the advent of plunging property prices will not be politically popular. Government Policies on Homeownership In 1972, the Hong Kong Housing Authority (HA) was created under Governor MacLehose’s ten-year housing program to provide decent living accommodation for 1.8 million people, over a ten-year period. It aimed to build 53 new public housing estates and convert 19 existing schemes to meet residents’ aspirations for homeownership. Eventually, only half of that target was achieved, Table 21.1 Percentage of households by tenure and type of housing, 1971–2011 1971 1976 1981 1986 1991 1996 2001 2006 2011 Owner Occupiers 18.1% 23.2% 27.9% 35.1% 42.6% 44.5% 50.8% 52.8% 52.1% Private 18.1% 23.2% 27.3% 31.1% 35.3% 33.7% 35.2% 36.5% 36.2% Public – – 0.6% 4.0% 7.3% 10.7% 15.6% 16.3% 15.9% Renters 73.5% 67.0% 62.9% 57.3% 53.2% 53.2% 47.9% 46.5% 47.1% Private 42.4% 32.6% 29.5% 21.8% 16.8% 17.8% 17.4% 15.4% 16.8% Public 31.1% 34.4% 33.4% 35.5% 36.5% 35.5% 30.6% 31.0% 30.3% Temporary Housing 8.5% 9.8% 9.3% 7.6% 4.2% 2.3% 1.2% 0.8% 0.8% Source: 1971–2011 Census and By-Census, various issues. How Can We Get out of the Housing Quandary? 201 with the construction of 23,000 HOS flats and 180,000 public rental flats, providing housing for 1 million people. In 1987, a new Long Term Housing Strategy was introduced to help families to acquire suitable and affordable homes. The emphasis was on constructing flats for purchase rather than for...