March 13, 2025 · 《Ming Pao》
In our previous article (published February 20, 2025 in 《Ming Pao》), we argued that Hong Kong’s record-breaking prolonged economic downturn of recent years is closely linked to shortcomings in housing policy. Hong Kong’s severe housing shortage has done immeasurable harm: high property prices rob young people of hope for upward mobility, make marriage and child-rearing difficult, and thereby worsen the trends of declining birth rates and population ageing; high property prices also hinder Hong Kong’s ability to attract outside talent, exacerbating the territory’s talent shortage; they also drive citizens to depend more heavily on government housing subsidies — and some even cut back on work in order to meet the income criteria for public rental housing (PRH) applications, leaving Hong Kong’s labour force even more depleted. In sum, the long-standing gap between housing supply and demand holds back economic growth, and further damages economic competitiveness and social stability.
1. Hong Kong Housing Policy Needs ‘Breakthrough’ Reform
The Government is determined to address the housing problem. Under the leadership of Ms. Winnie Ho, the Government is rolling out a series of new policies to tackle the current housing issues — for example, adjusting the PRH-to-subsidised-sale-housing ratio from 7:3 to 6:4, increasing the supply of subsidised housing, and expanding young people’s opportunities to purchase flats on the ‘White Form Secondary Market’ (白居二). Over the next five years, the Housing Authority and the Housing Society will together provide more than 50,000 subsidised-sale flats, and the direction of the adjustment is entirely correct.
Yet young people today still generally feel despair over persistently high property prices, and private residential rents have not fallen but continued to rise, already approaching the highs of 2019. To fundamentally reverse the housing problems that have accumulated over time, Hong Kong needs bolder, more systematic reform. As Director Xia Baolong stressed during his earlier inspection visit south, Hong Kong’s reform must ‘break through the impasse’ (破局); housing policy reform can no longer be confined to any single measure or short-term adjustment. Hong Kong should map out a comprehensive, strategic, and systematic 10-year housing development blueprint that closely aligns housing supply with labour policy, so as to lay a foundation for sustainable economic growth.
2. Increase Subsidised Housing Supply and Improve Turnover
- Set a long-term housing policy centred on ‘home ownership for all’. After the Second World War, more than a million people migrated from the mainland into Hong Kong and built squatter huts on the hillsides, creating serious public-safety hazards and triggering multiple tragedies. In response, the Government launched a large-scale public rental housing (PRH) construction programme to provide squatters with a basic level of residential security. But today, with the housing ladder broken, PRH has become a lifelong terminus for many citizens. PRH tenants settle into the status quo — and even pass their PRH flats down from one generation to the next — placing an ever-heavier burden on public resources and further undermining economic competitiveness and social stability.
Hong Kong’s housing policy needs to be repositioned. The Government should follow Singapore’s example and adopt a goal centred on home ownership for all, concentrating resources and targeting assistance at young people and other PRH tenants with the ability to purchase their own homes. Such a policy will benefit long-term economic development and ensure that public resources are used fairly and effectively.
- Roll out ‘TPS 2.0’ to unlock the home-ownership potential of PRH tenants. To achieve the goal of ‘home ownership for all’, the Government should first launch a ‘Tenant Purchase Scheme 2.0’ (TPS 2.0) to rebuild the home-ownership ladder for PRH tenants. Roughly 30% of Hong Kong’s citizens are currently PRH tenants — a proportion unmatched anywhere in the world — and rebuilding the ownership ladder must therefore take these three-tenths of the population into account, in order to realise the ideal of ‘home ownership for all’.
The post-handover Tenant Purchase Scheme was first launched in 1997, enabling PRH tenants to purchase the PRH flat they were already living in with a ‘zero down payment’. As the saying goes, ‘he who has a permanent estate has a steadfast mind’ (有恆產者有恆心): when tenants become owners, they are encouraged to strive for upward mobility and no longer need to cut back on work to avoid being labelled ‘well-off PRH tenants’. Empirical research has shown that the Tenant Purchase Scheme incentivises employment and promotes upward mobility. Fifteen years after the scheme’s launch, the average income of TPS-purchased-flat households was 23% higher than that of ordinary PRH tenants. In addition, the average years of education received by young people in TPS households rose by one year, demonstrating that the scheme not only draws some residents into the labour market but also provides the next generation with a foundation for further upward mobility.
‘TPS 2.0’ would also improve housing turnover. When owners need to relocate to a different district for work or lifestyle reasons, they can move to a new area and rent out or sell their original flat, avoiding exhausting long commutes; owners likewise no longer need to fear losing their unit if they choose to take a job outside Hong Kong or to retire to the mainland. Improving housing turnover raises the efficiency of housing use and is critical to fully utilising Hong Kong’s scarce housing resources.
Moreover, with the Government’s fiscal position having deteriorated sharply in recent years, relaunching the Tenant Purchase Scheme would enable the authorities to monetise the land value locked up in PRH, providing a new source of government revenue.
- Relax rental and transfer restrictions on subsidised-sale housing to unlock economic potential. In parallel with rolling out ‘TPS 2.0’, the authorities should relax the rental and transfer restrictions on subsidised-sale housing to unlock its economic potential. At present, because property prices are so high, more than 90% of subsidised-sale flats have not paid the land premium and are therefore subject to strict restrictions on renting, transfer, and mortgage — restrictions that prevent these flats from circulating efficiently in the free market. The secondary market sees only 2,000 to 3,000 transactions a year, and the results are poor.
Because of the rental and transfer restrictions on subsidised housing, residents will not relocate even when their home is far from their workplace, reducing the matching efficiency between the labour force and the job market. At the same time, these rental and transfer restrictions also create a shortage of supply in the rental market, obstructing HOS-owning families from moving further up the housing ladder and preventing them from fully realising the economic potential of their housing.
We suggest that the Government allow owners of subsidised-sale flats who have not paid the land premium to sell or rent their flats freely to any permanent resident who does not own property, once they have lived in the unit for five years, so that flats can circulate in the secondary and rental markets — thereby raising the efficiency of use and reducing resource waste. At the same time, improved turnover in the secondary market will help owners move up the housing ladder, increase wealth accumulation, and stimulate economic activity.
3. Reduce Mismatch and Combat Waste
- Penalise vacancy and abuse of subsidised-sale housing. While increasing new supply, the Government should improve the efficiency with which existing resources are used. Subsidised-sale housing should be used solely for residential purposes, not as storage or a pure investment vehicle. The authorities should insert relevant penalty clauses into new deeds of assignment, conduct periodic spot-checks, and severely penalise vacancy and abuse to ensure that resources are used appropriately.
- Recover the land premium or market rent from subsidised-sale owners who own other property. Furthermore, the Government should recover the land premium — or a market rent equivalent to the share of land premium — from subsidised-sale owners who simultaneously own multiple properties. The land-premium concession attached to subsidised-sale housing is intended to enable citizens to buy a home at a more affordable price; but once a citizen has the means, they should no longer continue to enjoy ongoing government subsidies. For example, Citizen A owns an HOS flat with an unpaid 30% land premium, occupied as his own home, with a market value of HK$2 million or a monthly rent of HK$12,000, and also owns a private flat; since he already owns two properties, he has succeeded in moving up the ladder and should no longer enjoy continued subsidisation. The Government should therefore collect the value of the foregone land premium or the benefit derived from ownership — i.e., the 30% land premium (HK$600,000) or a ground rent of HK$4,000 per month.
- Tighten the ‘well-off PRH tenants’ policy. In addition, the Government should tighten the ‘well-off PRH tenants’ policy to combat abuse of PRH. There are currently roughly 50,000 well-off tenants whose income exceeds twice the PRH income limit, with incomes at the 70th percentile or above — and who are able to afford market rents and to purchase HOS flats. Yet because the well-off-tenant policy is too lax, they continue to enjoy very low rents. This misallocation of resources not only burdens the Government’s finances and is detrimental to a healthy market, but is also a serious injustice to families living in sub-divided flats and those on the PRH waiting list.
4. Actively Balance Housing Supply and Demand
- Use a ‘Build-to-Order’ (BTO) model to increase subsidised housing supply. The current demand for owner-occupied subsidised housing is enormous — since the resumption of HOS sales, applications have run into the tens of thousands every year. To ensure that housing demand is met, the Government can learn from the Singapore model and establish a ‘Build to Order’ (BTO) system, in which the Government takes the lead and builds according to market demand — first accepting applications, then starting construction only after a sufficient number of applications have been accumulated, so as to avoid oversupply or undersupply, in contrast to Hong Kong’s current ‘build-then-sell’ model. According to 2023 figures, roughly 80% of Singaporeans live in HDB flats, and BTO has become the principal home-purchase method in Singapore. The time from BTO application to flat collection is generally less than four years, and never exceeds five years.
This model allows the Government to plan housing supply precisely based on application data — not only improving policy targeting so that more families benefit in a timely manner, but also ensuring fairness and preventing HOS applications from degenerating into a ‘lottery game’ that benefits only a fortunate few. In addition, the Government should draw up a timetable for HOS construction, demand indicators, and relevant performance indicators for public reference and for assessment of policy implementation, and adjust them on a regular basis.
- Coordinate housing and population policy to keep rents on a stable trajectory. The Government has actively attracted talent in recent years, accelerating population growth — and the private residential rental index consequently rose sharply by more than 10% from the beginning of the year before last to the end of last year, approaching the highs of 2019. To stabilise the rental trend, the Government should coordinate housing and population policy and actively balance housing supply and demand.
To ensure that land supply, population, immigration policy, and economic development are coordinated strategically over the long term, the Government should plan in a unified manner. If each government bureau acts on its own — for example, the Housing Bureau focuses only on housing supply without taking population growth and changes in labour demand into account; the Labour and Welfare Bureau handles employment and immigration policy but cannot ensure sufficient housing supply to accommodate the new arrivals; and the Commerce and Economic Development Bureau promotes industry upgrading yet lacks control over city planning, so that businesses and talent cannot obtain appropriate space for development — then government reform will achieve only half the result with double the effort.
We suggest that the Government establish a cross-bureau working group, led by a senior official, to coordinate the Housing Bureau, the Labour and Welfare Bureau, the Commerce and Economic Development Bureau, and others; to formulate a macro and long-term population and economic development strategy; and, on that basis, to replan land supply and housing policy. Anchored in the future economic development strategy and aligned with city planning, this will ensure that the market has an adequate supply of different types of housing.
5. Conclusion
Housing policy reform should step up efforts to help young people become homeowners, expand the labour force and its productivity, and reduce resource misallocation — thereby helping the Government to increase revenue and cut expenditure. To meet these three objectives, government housing policy should be repositioned: rather than centring on poverty alleviation, it should set clear long-term goals, with the mission of helping all citizens to own a home.
The Government should therefore roll out ‘TPS 2.0’ and adopt the BTO model to increase HOS supply, helping PRH tenants, young people, and sandwich-class families to become homeowners; relax the rental and transfer restrictions on subsidised-sale housing, crack down on vacancy and abuse, and tighten the ‘well-off PRH tenants’ policy, in order to reallocate resources, reduce misallocation, and unlock economic potential; use top-level design to set the direction of long-term economic development and align it with population policy so as to keep overall rents and the market healthy and stable; and, at the same time, establish flexible response mechanisms and performance indicators to ensure policy continuity and implementation efficiency. These recommendations are mutually reinforcing: they can balance the interests of all parties, benefit the vast majority, and promote the long-term healthy development of the economy.
(Translation supported by AI)
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