Tackle Hong Kong’s shortage of affordable housing with more subsidised sale flats

The shortage of affordable housing has long been a problem that the Hong Kong government has vowed to fix. However, the recent policy address left several issues unresolved. One is the insufficient supply of subsidised sale flats. The latest Long Term Housing Strategy report outlines a rolling 10-year housing supply plan. Next year, the government will maintain the split of 70 per cent for public rental housing and the Green Form Subsidised Home Ownership Scheme and 30 per cent for other subsidised sale flats. Given the surge in public rental housing applications in the past decade, it might seem logical to allocate a large chunk of resources to public rental housing supply. However, the insufficient number of subsidised sale flats for the “sandwich class” – a popular term for the lower middle class – leaves these households with no viable housing options, holding them back from improving their living conditions. With few incentives for people to climb up the housing ladder, public resources and talent are trapped within a sluggish system. Hong Kong’s demand for subsidised sale flats surpasses the need for public rental housing; the proportion of these flats should be increased. If the government wants to eradicate subdivided units, increasing public rental housing supply alone will not get the job done. According to a 2021 government report, 34.2 per cent of the over 107,000 households in subdivided units earn a monthly income of HK$20,000 (US$2,560) or more, exceeding the current income threshold of HK$12,940 and HK$19,550 for one-person and two-person households, respectively. In other words, they are ineligible for public rental housing. By contrast, with a higher monthly income limit, subsidised sale flats are a better option for elevating their living conditions. As of June, more than 40 per cent of public rental housing applicants were single people under the age of 60. In fact, last year, their average age was 36 years old, and 40 per cent had attained postsecondary education or higher. Some 42 per cent of these applicants expressed interest in buying subsidised sale flats. Given the inadequacy of the available supply, though, these young applicants have to maintain relatively low incomes despite their qualifications to satisfy the public housing income limit and remain eligible for the queue. A greater supply of subsidised sale flats means better opportunities for public housing tenants to climb the housing ladder and return their units for reallocation. A major factor contributing to the long waiting times for public rental housing is the low turnover rate of existing units, a result of the severe shortage of subsidised sale flats. In 2021/22, 0.4 per cent of public rental housing units were voluntarily surrendered by tenants who successfully bought subsidised sale flats. This does not mean their interest in home ownership is low, though. In 2021, 22 per cent of tenants said they would consider buying new subsidised sale flats. The government can empower these tenants by offering attractive home ownership opportunities via subsidised sale flats. This could bolster upward mobility among tenants and free up public rental housing units for existing applicants. This in turn could trim the queue and let the problem resolve itself without building a large number of additional public rental housing units. Isn’t that a better use of public resources? More subsidised sale flats would mean members of Hong Kong’s sandwich class have a better chance of buying homes. The number of households ineligible to apply for public rental housing yet unable to afford private housing rose from about 370,000 in 2001 to almost 980,000 in 2021, accounting for about 37 per cent of all households in Hong Kong. These people struggle with limited housing options and face cutthroat competition for subsidised sale flats. In the past six rounds of Home Ownership Scheme sales, units allocated to “white form” applicants – predominantly sandwich class residents – have been oversubscribed by an average of 50 times. The rate in 2018 and 2019 exceeded 100 times. Driven by necessity, those in the sandwich class have no choice but to apply and reapply for subsidised sale flats until they eventually secure one. Increasing the supply of subsidised sale flats could prevent the housing system from falling into a vicious cycle. The government has often spoken about the importance of building a robust housing ladder. However, with insufficient subsidised sale flat options, those in public rental housing have limited alternatives that would allow them to move up the housing ladder. Meanwhile, applicants are forced to languish in the queue. If these trends persist, Hong Kong’s housing system will be trapped in a downward spiral. Public rental housing applicants would be stuck in the queue and unit turnover would remain slow. The government could be left with no choice but to build even more such units to meet applicants’ needs. Further expansion of the public rental housing system comes at a price. Beyond the initial construction costs, the government also must pay for ongoing management, maintenance and redevelopment costs. Last year, spending on maintenance surpassed HK$4 billion. It is time for change. The government recently identified land capable of housing 100,000 more units than the existing plan. This paves the way for it to adjust the current 70/30 public housing split to a more balanced 50/50 distribution. By increasing subsidised sale flats, we can empower Hongkongers to achieve home ownership and foster social mobility. Dr Wendy Hong is a Legislative Council member for the Election Committee constituency