June 5, 2025 · 《Ming Pao》
To ease the living pressure on lower-income families who have waited more than three years for public housing, the HKSAR Government launched the “Cash Allowance Trial Scheme for Public Housing Waitlist Applicants” in June 2021. As of May this year, the Government has provided around HK$5.56 billion in allowances, benefiting some 110,000 households, of which more than 50,000 have been able to “move into a flat” (i.e., obtain public housing). With the Government having announced that the scheme will end on 30 June this year, there is public debate over whether it should be made permanent. From the perspectives of economic theory and the realities of housing policy, this article examines the limits of cash subsidies and analyses why transitional housing and Simple Public Housing have become a more precise tool for poverty alleviation.
1. Cash Allowances Have Lost Their Focus and Cannot Effectively Target Poverty
Hong Kong’s subdivided-flat problem has long gone unresolved: in 2021, more than 210,000 people were living in subdivided flats. Some of these residents are local residents eligible to apply for public housing, but with private-rental prices soaring, and the current average public-housing wait of 5.3 years, they are forced to take shelter in subdivided flats, giving rise to fire, hygiene and other public-safety crises. The authors have consistently argued for active Government intervention — for example, accelerating the supply of affordable housing, improving mobility up the housing ladder, tightening the “Well-off Tenants Policy” to make better use of public-housing resources, and adding social services such as community kitchens in subdivided-flat districts. For the Government to provide housing subsidies to citizens in need was reasonable in the circumstances at the time.
The key question, however, is this: how can poverty alleviation be most effectively targeted? Under the Cash Allowance Trial Scheme, eligible families receive a monthly cash allowance of HK$1,300 to HK$3,900, scaled to household size. Applicants must be ordinary applicants who have waited more than three years for public housing, must have resided in Hong Kong throughout that time, and more than half of the household members must be Hong Kong permanent residents.
Yet on today’s public-housing waitlist, many applicants are not those most urgently in need of housing subsidies. The current waitlist is ordered solely by the date of application, with no up-front income and assets screening. A 2024 Housing Authority survey found that, among applicants on the points-based waitlist, as many as 43% hold tertiary or above qualifications and therefore have some capacity to raise their incomes. At the same time, 25% of ordinary applicants already live in public housing or subsidised housing; of the remaining applicants not living in public housing, more than 50% are able to rent an entire private unit, with only 33% living in subdivided flats. This shows that most families on the waitlist do not belong to the poorest tier.
Hong Kong has in recent years also seen a widespread but abnormal phenomenon — employees frequently ask their employers to delay promotion, or to be paid in cash, so that they remain eligible for public housing. Worse still, to meet the public-housing income limits, many people deliberately cut back on work. This shows that, within the public-housing queue, the actual income potential of many households exceeds the public-housing income limits.
Targeted poverty-alleviation policy should distinguish between people with different degrees of need, so that policy is more precise. It is reasonable for subdivided-flat households in urgent need to receive housing subsidies; but citizens without urgent need should not receive large housing subsidies. Although the trial scheme targets only ordinary applicants who have queued for public housing for more than three years, paying out cash to this group without distinction is not an ideal policy. The result is that those who truly need help and those who do not receive the same amount of subsidy. This way of helping those in poverty is both costly and inefficient.
2. Screening Needs Through In-Kind Assistance Targets Poverty More Precisely
Nobel laureate in economics George Akerlof put forward a far-reaching insight: compared with handing out cash directly, providing social assistance “in kind” (for example, food stamps or public housing) is more effective at reaching those who are truly in need. The core of in-kind assistance lies in “self-selection” — people without genuine need are generally unwilling to bear the extra cost of obtaining resources with restricted uses. For instance, middle-class households are usually unwilling to put up with the inconvenience of queuing for relief rations, or to move into cramped transitional units; by contrast, those willing to apply for and move into such units tend to be grassroots families in very poor living conditions and in genuine difficulty.
By contrast, under information asymmetry, cash allowances struggle to identify those truly in need. The Government finds it hard to determine accurately which citizens are most in need of help and can only rely on spot-checks to prevent abuse. Because cash is attractive to everyone, some people will try to reduce or conceal their income in order to meet the eligibility threshold and profit. This “adverse selection” phenomenon means that cash assistance easily flows to ineligible recipients, diluting scarce resources.
3. Transitional Housing and Simple Public Housing Built in Volume Diminishes the Role of Cash Allowances
With transitional housing and Simple Public Housing now coming on stream in large numbers, the HKSAR Government is in a position to shift from cash allowances to in-kind assistance, so as to help those in need more precisely and effectively. As of February this year, the Government had provided a total of 18,443 transitional-housing units; a further 2,441 units will be added within this year, and 274 more will be built in 2026, giving a combined total of around 21,000 units. On the Simple Public Housing side, works on all 13 projects have commenced, with some 9,500 units expected to be completed in succession within this year, including the 1,046 units of the southern section of the Yuen Long Yau Pok Road Simple Public Housing — which has been occupied this year and has already reached an 80% occupancy rate. In 2026 and 2027, more than 20,000 Simple Public Housing units will come on stream in succession.
Wait times for Simple Public Housing have already fallen sharply, and the subsidy it offers is larger than that under the cash-allowance scheme. The latest data show that the first tranche of Simple Public Housing, with 4,440 units, attracted around 14,300 applications — about 2.2 times oversubscribed; the second tranche, with some 5,060 units, attracted around 7,520 applications — about 48.6% oversubscribed.
Take the Yuen Long Yau Pok Road Simple Public Housing, already occupied, as an example: a 14-square-metre unit for one to two persons rents for as little as HK$880 a month, and a 26-square-metre unit for three to four persons rents for as little as HK$1,630 a month. Take a three-person unit as an example: a 23-square-metre village-house unit in the nearby village of 壆圍 rents for HK$5,800 a month. In other words, by providing in-kind assistance, the Government has effectively subsidised these citizens by about HK$4,100 in rent — roughly 1.5 times the cash-allowance scheme (which pays HK$2,700 for a three-person household).
In the past year, transitional housing has even seen supply exceed demand. Category A applicants (that is, those who have waited at least three years for public housing) now basically do not have to queue and can move in quickly; around 30% of occupied units are even located in the urban area and the extended urban area (such as Kai Tak and Tsuen Wan). Take a two- to three-person unit in Kai Tak transitional housing as an example: monthly rent is HK$5,340, while private housing in the same district costs at least HK$15,000. Compared with the cash allowance of HK$2,700 for three people, the Government’s subsidy is about 3.5 times that of the cash-allowance scheme.
Because Category A units have recently seen supply exceeding demand, the Housing Bureau has transferred part of the allocation to Category B applicants (that is, those who have waited less than three years for public housing but are in urgent need).
This shows that, through Simple Public Housing and transitional housing, the Government can provide larger subsidies to citizens with urgent needs, and can precisely help those whose need is most urgent. Because the quality, facilities and location of Simple Public Housing and transitional housing are inferior to those of regular public housing, those who are aware of these shortcomings and still apply tend to have no better alternative — that is, they are the citizens most urgently in need of help. Compared with cash allowances, the advantage of in-kind assistance lies in its “self-selection” mechanism: in most cases, only the most urgently in need will choose to apply for Simple Public Housing and transitional housing.
4. Conclusion
The original intent of poverty alleviation is beyond doubt, but policy tools must be adapted to the times. With Simple Public Housing and transitional housing now in much greater supply, the Government’s switch from cash to in-kind assistance can precisely target the intended groups — in line with both economic theory and fiscal discipline.
At the same time, the data clearly show that Hong Kong’s housing ladder is still broken: large numbers of sandwich-class citizens cannot move upward, and can only move sideways between private rental and public housing — which is the main reason for the lengthy public-housing wait times. We urge the authorities to take “home ownership for all” as the core of housing reform, to expand the supply of subsidised housing, to rebuild the housing ladder, and, alongside this, to relax the trading restrictions on subsidised housing so as to improve the liquidity of the secondary market, thereby increasing the upward mobility of Hong Kong’s citizens.
(Translation supported by AI)
