Home Truths

You have to admit it’s a tough life for senior officials in the Hong Kong SAR government. Fail to pose the right question on a socio-political issue, or answer it incorrectly, and people will attack for lack of competence. Get both correct, but neglect to detail the rationale of how the conclusion was reached, and people will criticise for lack of transparency. Get question and answer right, with sufficient reason given, and officials will find that they have stepped on the oh-so-sensitive toes of a vested interest. Sometimes it must seem that they just can’t win.

Take for example this latest houha over the appropriate number of public rental housing (PRH) units. In an interview with a local newspaper, chief executive Carrie Lam Cheng Yuet Ngor said that there were at present 760,000 publically owned housing units for rental. Projects in the pipeline would soon bring the total to 800,000. Left there, Lam’s remarks could have been interpreted to mean that would be enough to meet the genuine demand from the less well off, although she didn’t quite say so explicitly. Instead she talked about the desirability of giving more assistance to people to buy their own homes. Be that as it may, under pressure from critics who claimed – falsely – that she had imposed one, Lam explicitly denied setting any ceiling on the number of PRH units.

Setting aside the noise and bluster, what is really going on here? Well for one thing, we are in danger of losing sight of the main issue. The rate of home ownership in Hong Kong compares poorly with all of our main comparators. Singapore is at around 91 per cent. The mainland is at 90 per cent (including, according to the BBC, at 70 per cent for millennials). Hong Kong is stuck at 51 per cent.

The advantages of a higher rate of home ownership are many. When people have a tangible stake in the stability and prosperity of their community, they are more likely to behave as responsible citizens and take an interest in public affairs. You don’t seek to destroy what you own, or permit others easily to do so. You have peace of mind for your own long term living arrangements and an asset to pass on to the next generation. Alternatively, you can use the property as security for a loan to start a business, or meet urgent spending needs. In so many ways, home ownership sets the individual free and instils more confidence.

A lower rate of home ownership, by contrast, means more demand for rental accommodation. When prices are high, that will mean in turn pressure for a greater role by the government in ensuring adequate supply of affordable housing, either by rent control of privately owned apartments (not popular politically, and anyway not effective in the long run) or direct provision by a publically funded housing authority. In Hong Kong fully 35 per cent of the housing stock is PRH units. The danger here is that such a situation can engender a culture of dependency.

Some politicians, in particular those competing for grass roots support, welcome such circumstances although they are careful not to say so out loud. The 800,000 units will house well over a million voters. Candidates who promise that tenants can never be evicted and rents will never rise in real terms, are likely to be re-elected. One of Lam’s critics pointed out that rent of public flats is deemed to include rates and management charges. Moreover, tenants are not required to contribute to costs of the major repair and redecoration exercises every 10 or 20 years. What he failed to mention is that all these are real costs that have to be met by someone. Perhaps as a first step, monthly receipts given to tenants should itemise separately rates, management charges and a levy to cover future refurbishment costs so that the net amount for actual rent is more clearly visible. This is not to demean the recipients of public largesse, but to show all concerned clearly what the actual situation is.

Every long term resident of Hong Kong is aware that over the years many abuses have crept into the allocation of public housing resources, and tens of thousands of PRH flats are occupied by people who no longer merit assistance. If these abuses were eliminated, I suspect the actual number of PRH units needed to meet real demand would be much lower than the number we already have.

But leave that on one side: the argument for assisting more local citizens to own their own home is overwhelming. Lam should set a specific target of raising the overall home ownership percentage by at least five points during her first term, and an additional five if she seeks a second term.

Be it never so humble, there’s no place like home – especially if you own it.