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Resumption of land is costly and takes time. Here are five better ways to fix Hong Kong’s housing shortage

South China Morning Post

發布於 2019年09月19日03:09 • Ian Brownlee
  • These ideas that were rejected or ignored deserve a rethink: phase out subdivided flats, change the way public housing eligibility is determined, review mortgage controls, revamp the land premium system, and consider providing a rental subsidy
Illustration: Craig Stephens
Illustration: Craig Stephens

This month, the pro-government party, the Democratic Alliance for the Betterment and Progress of Hong Kong, proposed resuming land owned by private developers to build more public housing. The Post, in an editorial, welcomed the move and concluded that: "If ever there was a time to think outside the box it is now."

Beijing newspapers then urged Chief Executive Carrie Lam Cheng Yuet-ngor to resume land from Hong Kong developers, who have been accused of making excessive profits. High housing prices were the reason behind the current unrest in Hong Kong, they said.

Meanwhile, the government has confirmed that a vacancy tax bill will be introduced at the Legislative Council, moving ahead with a plan to discourage developers from hoarding newly completed flats.

Is land resumption the right solution to the problem? Developers own land so they can develop it, mainly for housing. The lack of development of the large areas they own is because the systems of town planning and land administration do not permit it, not because the developers do not want to develop.

Numerous applications have been submitted to the Town Planning Board to change zoning to permit development, for example. They are inevitably rejected.

Other applications to increase the density of development on land already zoned for housing are also most often rejected, as government departments do not support proposals they do not initiate themselves. Thus, despite the apparent housing crisis, the government does not encourage quick development of private land for flats.

Take the new town to be built in Hung Shui Kiu, in the Northwestern New Territories, that was approved in 2017. Developers want to build on zoned land they own, but the government has a stated policy that it will not accept proposals from private land owners.

Instead, officials have stated that the government would, "as a general rule, resume and clear all the private land planned for developments, and dispose of the land planned for private developments in the market".

The compulsory purchase of private land to prevent an owner developing it, and then selling it on to another developer, is questionable. The Basic Law guarantees the right of property ownership. To compulsorily remove these rights requires careful consideration. It requires compliance with the rule of law, which is so often held up as needing to be respected.

The resumption process is inevitably slower and more expensive than negotiating a development lease with the owner. Resumption incurs public finance costs, to buy the land rights and compensate those who are living or operating a business on the site. Resumption is not a quick solution, and would take eight to 10 years to produce flats.

In the current critical social situation, we need to get further outside the box and look at things that aren't working or good ideas that haven't been adopted, to reconsider them now.

Basic Law will complicate any attempt to take back rural land for housing

First, give an absolute priority to getting rid of the totally unacceptable conditions in subdivided flats by demolishing the internal subdivisions and rehousing those living there.

Second, change the system for establishing eligibility criteria for public rental housing. Each year, legislators question why the system should automatically raise the income threshold, thereby automatically increasing the numbers on the waiting list.

Many households who meet the criteria already have adequate housing, and production of enough public housing flats needed to meet the waiting list cannot be achieved.

Third, the so-called "demand side" controls have completely failed to significantly reduce property prices. The Monetary Authority's restrictions on mortgage loans " in some cases, 50 per cent maximum value loan, limitations on borrowing on old buildings, excessive stamp duty " unnecessarily make it difficult for young people to buy a flat. These are policies that can be changed instantly and would have an immediate effect on affordability.

Fourth, the billions of dollars that a developer pays as land premium to government when buying a site has a direct impact on the high price of flats. Professionals have proposed alternatives to the land premium that spread the cost over the life of the lease by paying government a greater annual rent. If this makes flats more affordable, why not try it?

Finally, there is a need to look at the housing issue afresh. There is an affordability problem which can never be resolved by land supply. Current government policy requires that only 30 per cent of the flats produced are set aside for private housing. The private market will decrease proportionally and the frustration from a lack of ownership opportunities will increase.

Singapore has a social conscience. Hong Kong is ruled by greed

Many do not want to live in public housing, and many " the so-called sandwich class " are not eligible. Developers need to produce flats for these households, and they need to have land.

There are problems with the government being the biggest developer and the biggest landlord through building enormous public housing estates.

The natural social mix in society is not evident, as residents are restricted to specific socioeconomic groups and live together in their tens of thousands. The cost of managing and maintaining this housing stock is enormous.

In Australia and the US, there is a move away from producing and managing large quantities of physical housing. Instead, authorities in both places provide financial subsidies to people renting in private housing.

A rental subsidy would immediately address the affordability issue for hundreds of households here. With strict controls on eligibility and the quality and size of the flat, as well as the rental agreement between the landlord and tenant, the process can be managed.

The idea had been considered before by the government, but was rejected due to a concern that it would spur rent increases, thus benefiting the landlords. That may happen, but the need to improve the quality of the flats before they become eligible for a subsidised tenant should result in an improvement in physical housing quality.

It doesn't really matter if both the tenant and landlord benefit, because the housing affordability issue is being addressed immediately.

Taking away the right of property ownership and limiting the free-market processes that are part of society will not solve the deep-rooted philosophical and political issues that need to be directly addressed. Changing administrative processes that have proven not to work will have more chance of immediate success than resuming land.

Ian Brownlee is managing director of Masterplan Limited, a planning and development consultancy which works with both developers and NGOs

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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