Concrete Analysis | Hong Kong needs varied approach to ease housing shortage, including public-private partnerships, Lands Resumption Ordinance

Hong Kong has the most expensive housing among developed countries and regions in the world. Based on statistics of the Census and Statistics Department, from March 2004 to now, there has been an increase of 67.2 per cent in the nominal wage. The price indices of private flats, on the other hand, have skyrocketed by 3.86 times over the same period, according to the Rating and Valuation Department. This implies real wages have hardly kept up with surging real-estate prices.

Affordability aside, congested living conditions are also a concern in the territory. According to the 2016 Population By-census, the average living space per person was 161 sq ft, which is much lower than that in Singapore, Shanghai and Shenzhen. Worse still, for those who live in subdivided flats, the average living space per person was only 56.5 sq ft.

Given how unaffordable private homes are and the nano flat issue, citizens have to resort to public rental housing as an alternative solution. But, as of June 2019, the average waiting time for public rental housing for general applicants was 5.4 years.

In view of the long waiting time, the government has proposed the construction of transitional housing to alleviate the problem. However, transitional housing may only cure the symptoms, not the disease. The root cause of insufficient housing supply has yet to be addressed. From 2014 to 2018, the cumulative totals of the targeted housing supply and the actual completion numbers were 231,000 and 159,400, respectively, or a discrepancy of 71,600 residential units. It reflects that the housing completed each year, be it private or public, is far below the target stated in the Long Term Housing Strategy (LTHS).

In the latest LTHS, the ratio of public to private housing supply has been revised from 60:40 to 70:30. Under the revised public and private housing supply ratio, the annual supply target of private residential units will drastically plummet from 18,000 to 13,500, while that of the public homes will rise from 28,000 to 31,500. From these figures, although it can be expected that the waiting time for public housing may be reduced in the future, assuming there are no delays in construction work and reduction in potential sites for development, there will still be a shortage of private housing and thus the price of domestic properties will be pushed up.

Moreover, whether public housing applicants will be allocated a flat earlier even with an increased proportion of public housing is largely in doubt, given that the number of new public residential apartments built every year fails to offset the increase in population. Meanwhile, as a result of the adjustment in the LTHS, the reduction in the supply of private units implies higher prices in the real estate market, and more citizens may enter the pool of public housing applicants as they cannot afford the overly expensive private flats. These factors may lengthen the list of public housing applicants, contributing to a longer waiting time as a consequence.