July 31, 2025 · 《Ming Pao》
Facing a fiscal deficit as high as HK$87.2 billion in FY2024/25, the Government must both expand its revenue base and rein in spending. In a previous article, we proposed that the SAR Government should not only build more subsidised-sale flats, but could also follow Britain’s example and establish a “Public Housing Purchase Right” (akin to the UK’s Right to Buy), thereby creating a stable source of fiscal revenue for the Government, easing current deficit pressure, and helping citizens climb the housing ladder. However, the Tenant Purchase Scheme (TPS) launched by the Government in 1998 suffered from serious design flaws. The authorities must learn from past experience — first revitalising the turnover of subsidised-sale flats, and only then introducing an improved version, so as to truly realise the vision of “Helping Citizens to Buy.”
1. Good Intentions, Flawed Design
Looking back to 1997, less than half of Hong Kong’s citizens owned their own homes. The then Chief Executive Tung Chee-hwa set the goal of helping 70% of citizens become homeowners within 10 years. Mr Tung’s philosophy of “helping people to buy” was an excellent one, because for many grassroots families, home ownership not only gives them a stable place to live, but also turns them into stakeholders in the economy, allowing them to share the fruits of economic development and improve their lives.
Between 1998 and 2006, the Government launched the Tenant Purchase Scheme, enabling tenants of more than 180,000 public rental housing units to purchase their flats at extremely low prices; many families thereby became homeowners. The Tenant Purchase Scheme had laudable intentions, but its design was far from ideal, and more than 20 years on, the policy has left behind a host of lingering problems.
2. The Biggest Flaw: Units Don’t Turn Over
First, because the discount offered at sale was excessive, owners who wish to sell their units in the open market must first pay back the land premium that was originally waived. The premium amount is so high that most people are deterred. As a result, of the 180,000 TPS units over 20 years, only about 2,500 have had their premiums paid — an extremely low success rate — and the vast majority of units can only be traded in a limited way in the HOS Secondary Market.
Because buyer eligibility in the HOS Secondary Market is restricted, most TPS owners find it difficult to trade up or move according to their family’s needs; in practice, original tenants have simply been turned into “permanent occupiers.” In 2024, TPS units recorded only about 1,000 transactions in the Secondary Market for the entire year, a turnover rate of just 0.65% — far below the 2.2% turnover rate of the private market in the same year.
TPS owners are not subject to review under the “Well-off Tenants Policy,” and even when their incomes rise, they are not required to move out. The extremely low turnover rate makes it difficult for public housing resources to circulate, ultimately leading to counter-productive outcomes — TPS families still choose to stay in their units for life, and some family members even rejoin the queue for another public rental flat. This prevents units from being reallocated to families in need, and further lengthens public rental housing waiting times.
3. The Second Flaw: Fragmented Management Rights
The Tenant Purchase Scheme not only failed to genuinely help residents move up the housing ladder, it also gave rise to numerous management problems. After the units were sold, day-to-day management of the buildings was generally handled by management companies engaged by Owners’ Corporations. However, when disputes arise between the Hong Kong Housing Authority and the sold TPS properties, coordination is fraught with difficulty. For example, when the water pipe in an upper-floor public rental unit is blocked, the Housing Department may, after investigation, find that the cause is a TPS unit on a lower floor that has already been sold. The Housing Department then has to ask the management company to contact the lower-floor owner for negotiation; what should be a simple piece of work can quickly set off alarm bells in every direction. Some district councillors point out that certain cases have taken several years to resolve.1
The Government has openly acknowledged that some Owners’ Corporations do not welcome the Housing Authority’s involvement in management at all, and may even delay or refuse to provide information. As the housing estates age, many TPS units are now over 30 years in age; when lifts need replacing or external walls repaired, the common facilities involve multiple stakeholders, with constant disputes over how responsibility should be apportioned and how costs should be shared. The result is that large amounts of administrative resources are wasted.2
If the Government relaunches the Tenant Purchase Scheme, the authorities must retain management rights: the Housing Authority should take charge of day-to-day management, with owners sharing the management fees. The Housing Authority should have statutory powers to handle daily disputes such as water seepage and refuse; a long-term maintenance fund should also be set up, with owners making monthly contributions to meet the cost of future major repairs. The Government should also retain the right of buyback so that, when needed, it can redevelop or revitalise the asset, and avoid once again becoming trapped in unclear responsibility and authority.
4. The Third Flaw: Fire-sale Pricing
Lastly, in those days, in order to quickly achieve the goal of “70% of citizens becoming homeowners,” the Government sold TPS units at extremely low prices — at the most extreme, at 10–20% of market value — encouraging the vast majority of tenants to buy. However, the sale price was not even sufficient to offset construction costs, let alone ease the current Government deficit pressure. Instead, it squandered valuable public resources.
If the authorities relaunch the Tenant Purchase Scheme, they should not aim to rapidly help large numbers of public rental housing residents to buy their flats; instead, the focus should be on encouraging and supporting well-off tenants with the ability to move further up the ladder, while at the same time making units easier to turn over. As to pricing, the Government should strike a balance between “affordability for citizens” and “maintaining fiscal soundness.” If existing public rental housing units were sold over 10 years at an average 25% discount, the average price would be around HK$1.5 million, which would generate considerable revenue for the Government.3 At the current Best Lending Rate of 5.25%, with zero down payment and a 30-year repayment period, monthly mortgage payments would come to about HK$6,700. This is roughly three-and-a-half times the rent payable by a public rental housing tenant whose income exceeds the cap by 3 times but not 4 times under the current Well-off Tenants Policy — a reasonable level of burden for grassroots families with a certain income base.
5. Before Reviving TPS, Unlock Turnover in Subsidised Housing First
Although the Tenant Purchase Scheme suffers from serious shortcomings, its goal — helping public rental housing residents to buy, so that citizens can gradually move from tenants to owners — is a core philosophy that has not become outdated. The key to the issue lies in the design and sequencing of the reform. The biggest flaw of the Tenant Purchase Scheme is the lack of liquidity in subsidised-sale flats, which prevents TPS families from genuinely moving up. Before the Government relaunches the Tenant Purchase Scheme, it must first unlock the turnover of subsidised-sale flats.
As we pointed out in a previous article,4 insufficient turnover of subsidised-sale flats is harmful on every front. The harms include: tying owners’ life choices, obstructing young people’s upward mobility, distorting the structure of the private market, worsening the jobs-housing mismatch, and impairing long-term social and economic development. In that article, we recommended that the Government implement the following reforms.
(2) Implement a “Secondary Market Trade-up Scheme”: at present, the Hong Kong Housing Society’s “Flat-for-Flat Scheme for Elderly Owners” targets only specific groups and has limited scope. If the Government relaxes the conditions to allow all HOS owners to adjust their unit size in line with family needs, more old units will be released into circulation, allowing resources to be effectively recycled.
(3) Expand the “Subsidised Sale Flats — Premium Unpaid Rental Scheme”: at present, the Housing Authority and Housing Society allow flats whose premiums have not been paid to be rented out once they reach 10 years of age, but tenants are limited to families who have been on the public rental housing waiting list for 3 years or more, or to designated organisations. As of the end of July this year, only 101 flats across the territory had been rented out — the policy’s benefits are minimal. In reality, regardless of how long they have waited, public rental housing applicants all have genuine housing needs. If the Government can relax tenant eligibility to include all those on the public rental housing waiting list, this would provide them with a reasonable alternative, improve their living environment, ease the subdivided-flat problem, while also revitalising existing unit resources and easing pressure on the private market.5
6. Goal: Citizen Upward Mobility; Method: Policies That Help People Buy
As transitional housing and Light Public Housing (LPH) are completed one after another, the subdivided-flat problem has eased somewhat. At the same time, the Well-off Tenants Policy has been progressively tightened, reducing misallocation in public housing. At this juncture, housing reform should shift its main thrust towards helping sandwich-class citizens move up. To this end, the authorities should learn from the Tenant Purchase Scheme’s failures: first unlock the turnover of subsidised-sale flats, and then roll out a precisely improved set of “Helping-Citizens-to-Buy” policies, creating a steady path of upward mobility for citizens, while at the same time opening up resources for the Government and easing fiscal pressure.
(Translation supported by AI)
Related articles:
- Will Public Housing Reform Undermine the Private Market? by Michael Wong, Alex Ngau and Yun-wing Sung
- Severe Shortage of Subsidised Housing Distorts Social Development — A Major Expansion is Needed by Michael Wong, Alex Ngau and Yun-wing Sung
- Stagnation in the Subsidised Housing Resale Market — Buying and Selling Restrictions Must Be Significantly Eased by Michael Wong, Alex Ngau and Yun-wing Sung
