Development — cash or structures — to affordable residences? The rules of capitalism say no.
“Unfortunately in Hong Kong’s situation it’s the government’s job. There’s no incentive for private developers to do this kind of mixed development. Affordable housing affects the value of a development,” explains David KW Tse, managing director at LT Properties and Lt Management Services as well as a governing council member of RICS. “The housing department has been designated as being best able to provide public or affordable housing. We already have a specific department doing it, so the government doesn’t insist that private developers do it.”
Obligations versus Economics
Maybe not, but that doesn’t mean there isn’t a moral argument that they do more to ease the housing crunch. As recently as 2003 some government sites were designated for the HOS, but they were never built though there were complete development briefs. But then the market crashed and the programme was never re-launched. “If the government could be persuaded to go back to this kind of scheme, it would help. Private developers and contractors are more efficient and if you leave it to the Housing Department it will drag on forever. I would recommend they reconsider it,” comments Tse.
The UK model may not be exactly what Hong Kong needs, but its underlying function is valid. London is in the midst of a similar supply crunch and middle class families across the street aren’t scaring away buyers there — or adversely affecting prices. In fact, mixed neighbourhoods could be a good thing. “The [development] sector has a huge responsibility, and it’s not just altruism,” said former residential director at London’s Land Securities Tom Eshelby. “We all want a nice community.” Robert Evans of Argent, one of the developers on the massive King’s Cross regeneration, agrees. Of the overall efforts developers now put into the city, including affordable housing, “We think it makes more money … If you make a better place it should be a more valuable place.”
“London, though, as a global financial city, wants to attract more talent to work there. They have affordable housing, intermediate housing … they want to attract people to the city. The government wants the intermediate housing for those from other parts of the UK, Europe and other parts of the world. In Hong Kong we’ve never thought about that. We think we have the talent,” theorises Cushman & Wakefield’s Vincent Cheung, national director of valuation for Greater China. Add to that the idea that government is doing right by the SAR. Affordable housing plans lower land prices, which affect the public purse. “[Land sales] is the major source of income for the operation of the government. Secondly it affects developers’ prices for sales because of the negative impact of public housing,” says Cheung. He agrees that though it may not be their sole responsibility, “[private developers] can build faster and they know what the market needs … They could consider leveraging their capabilities to supply more affordable housing to the market. But it doesn’t need to be in the same building, they don’t even do that in the UK.” Swire’s spokesperson points out that private developers do in fact supply a range of housing, such as Swire’s own Taikoo Shing, which is fixedly mid-market and remains affordable to this day.
“I think the responsibility should be with the government,” finishes Cheung. “But public welfare is not all on one single person or body. Everyone has that responsibility.”