Use of public housing should depend on market demand

Hong Kong property

Following Carrie Lam’s Policy Address which announced Lam’s new housing policies, Lam said in a recent interview that ‘800,000 public housing units’ should be able to meet the market demand - a statement that sent the public abuzz.

Hong Kong has a total of 770,000 public housing flats as of end of March this year, and that number is set to reach 800,000 in the next three years. All public housing units developed afterwards will be sold under the Green Form Subsidised Home Ownership Scheme. The government keeps stressing that the Green Form Scheme will not reduce the supply of public housing, but for applicants who have been on the waiting list for years, it will obviously be more ideal if there are newly vacated old units as well as new ones, which can help speed up the waiting time.

I understand the reasons behind Lam’s policy of prioritising home ownership. The Green Form Scheme is arguably the most direct and effective way to improve Hong Kong’s home ownership rate. In addition, the scheme can help alleviate the financial burden felt by the Hong Kong Housing Authority.

If a large portion of public housing units are converted into Green Form homes, it runs the risk of targeting the same demographic as the Home Ownership Scheme (HOS). In terms of pricing, the prices of Green Form flats should be set differently from HOS homes. I suggest that prices of Green Form flats to be set much lower than market rate, or be sold at cost price. This will surely make them cheaper than HOS units, but stricter resale regulations should apply to Green Form homes, as well as applying a higher premium. Thus, they can be afforded by more people other than wealthy occupiers of public housing units. If wealthy homeowners receive even more benefits, not only will it be unfair, but it will also attract fierce objection from multiple parties.

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On the other hand, tens of thousands of new public housing units are being built every year, and if all of them become Green Form homes, I doubt the market will be able to digest them. The first Green Form project, located in San Po Kong, has already gotten 16,000 bids, and the new project, set to open in Fo Tan next year, will probably reach a similar number. In the current market environment, making sales is naturally an easy task.

However, once the property market boom stops, it will be a different story. For example, in times of real estate market downturn, such as 2003 and 2008, HOS sales experienced stagnancy. Therefore, the government should always have a backup plan ready — once the market trend changes, the public housing units should be swiftly converted to rentals. I think the best way is to conduct an annual review, after which all unsold Green Form flats will be let out, otherwise it would be a huge waste of resources if a large number of public housing units stays unoccupied.

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