To what extent can the housing crisis be solved in Hong Kong?
By Benedict Lam
The housing crisis is a well known problem that has a long history and continues today. There are several reasons for this, including the amount of private housing, housing demand, public housing availability etc. as per the report from HKU’s assistant professor in management and strategy, Dr. Michael B. Wong. However, the most important factor that contributes to the housing crisis is the uneven rise of housing prices.
On the demand side, Hong Kong's population is projected to increase from 7.41 million in 2021 to 8.02 million by 2036 according to the HK Housing Bureau official website. This will contribute to the ongoing housing demand as more citizens will live in Hong Kong, increasing the need for housing. On the supply side, Hong Kong faces a significant land shortage, with estimates suggesting a need for at least 1,200 hectares more to meet future housing demands from the Global Property Guide. This notable low amount of housing supply and the increasing housing demand cause the rise of housing prices which make this problem harder to solve.
Moreover, the impact of the housing crisis will also increase if the problem becomes harder to solve. One of the most significant impacts on the government is delay in other areas’ development. Since solving the housing crisis requires the government to plan policies to implement them and build more houses to increase the supply, these actions need time and effort, in which the government will need to allocate time and resources for these actions. This can significantly impact other developments such as the economy because government resources are limited and they must allocate more time and resources for the housing crisis as it is more urgent to solve than others.
Furthermore, the housing crisis can also cause economic instability and social unrest because this problem directly relates to citizens. Since one factor causing the housing crisis is the rise of housing prices, it can easily cause inflation which is a form of economic instability. If this problem continues to grow that becomes obvious to the citizens and affects their daily life, they might take parades to show the existence of this problem to the government. This can negatively affect the stability in terms of society in Hong Kong as well.
There are multiple solutions that the government can take to fix this problem, such as increasing the public housing supply, increasing land supply, implementing rent control, providing financial assistance etc. However, the solutions mentioned above require the government to organize and control most of the real estate in Hong Kong because these policies are either regulating or controlling the market. This can possibly decrease the potential of the Hong Kong market as the real estate sector contributes more than 20% of Hong Kong's GDP as per Hong Kong Institute of Surveyors. In addition, if the government implemented control politics, it might create economic instability as the Hong Kong market is currently a free trade market, rather than a government control market. This means that if the government decides to implement policies that control most of the real estate market, it can significantly impact the Hong Kong economy and global power. Therefore, I think these solutions are unlikely to be implemented.
Nevertheless, there is a suitable solution for Hong Kong called the "Private Subsidised Sale Flat – Pilot Scheme”, which was first announced in the 2022 Policy Address by Chief Executive John Lee and received approval for its policy framework in June 2023 from the legislative council. The scheme is a partnership between public and private in order to create affordable housing through utilizing market forces from the private sector. The housing will be priced at 65% of the market value and the eligible criteria is the same as the Home Ownership Scheme, which is a scheme that is similar to public housing.
This new scheme can enable more citizens in Hong Kong who have a low income level to be able to live in an affordable and comfortable house. At the same time, maintaining the market efficiency as this scheme allows developers to manage sales and marketing independently. Though, the government will not repurchase unsold units, making it a risk for the developers. As a result, less developers tendered for sites which diminished the effectiveness of this scheme as planned. This shows that the new scheme won’t be able to work in the long term, which means more schemes and initiatives will be needed in order to solve the housing crisis in Hong Kong.