Ordinary Gweilo

From today’s SCMP, about 50 years of public housing in Hong Kong:

Subsidised housing has become so popular that last year half the population lived in permanent public housing. There are 90,000 people waiting an average of three years for a public housing flat, down from 150,000 in 1997.

When Margaret Thatcher became Prime Minister of Britain in 1979, one of her more radical policies was to get rid of public housing. She made significant progress, and in England alone 1.6m homes were sold off. Yet, more than twenty years later, half of Hong Kong’s population lives in public housing, and still most people’s image of Hong Kong is that it is a bastion of free enterprise! Mind you, the socialist republic of Singapore has 86% of its population living in public housing!

The original policy was admirable, and achieved its goal of providing homes for people who could not afford to buy. The problem now is that people who can afford to buy property are able to obtain heavily subsidised public housing. In fact, they often live in public housing and own property that they rent out.

Public Housing rentals are not determined by the market, or even by the cost of providing them, but instead are limited to 10 per cent of tenants’ income. The Housing Authority recently lost a court case on this subject, and will have to reduce rentals to bring them back in line with lower salaries. Of course, anyone living in private housing is likely to pay significantly more than that – perhaps 40 to 60 per cent of their income. The result is that for some people it can be better to have a lower-paid job so that they qualify for public housing, and can mean that life is much harder for middle-income families who have to pay significantly higher rentals (or purchase a property and pay a mortgage).

Some prominent academics have argued that the public housing system should be privatised because it distorts the property market and disenfranchises a sector of residents. The problems were highlighted at yesterday’s ceremony, which was marred by demonstrations. Some protesters wanted lower rents while others were frustrated by the long waiting lists.

Lower rents? I don’t think so. The obvious solution is to increase the rents but provide means-tested benefits that could used to pay for either public or private housing. Long waiting lists? That’s because public housing is so attractive, and people move out of property they own in order to take advantage of the cheap rental fee. The solution is fairly obvious, but is the government brave enough to do anything about it?