Well-off Tenants Policy Reform Is a Major Step Forward for People’s Livelihoods

Last Friday, the Housing Authority announced a reform of the “Well-off Tenants Policy” for public housing. Not only does this allow public housing resources to be used more rationally and effectively, but it also tackles the root cause of Hong Kong’s housing-resource misallocation. It shows that the current-term Government and the Secretary for Housing, Winnie Ho, are determined to resolve Hong Kong’s deep-seated and complex housing problems. The authors have long studied Hong Kong’s housing issues. The following explains, from five perspectives, why society should support this reform of the Well-off Tenants Policy, and offers two recommendations for the Government’s reference.

1. Society Should Support This Reform

• The Well-off Tenants Policy must be reviewed periodically. Every policy requires periodic review to keep pace with the times. On housing policy, the Government has a responsibility to review whether public housing resources are being allocated effectively, so as to ensure that those most in need in society receive these precious housing resources. Regrettably, the Well-off Tenants Policy has not been revised for close to 8 years; the current policy has failed to respond effectively to the present social situation, and the misallocation of public housing resources has grown increasingly serious. With the economy in a downturn, if the Government continues to leave the policy unattended, the situation will only worsen.

This reform of the Well-off Tenants Policy not only responds to society’s call for fair allocation of public housing, but also encourages high-income tenants to move up the housing ladder, releasing their demand in the private market or subsidised housing, while easing the Government’s fiscal pressure — a strategy that kills three birds with one stone.

• It effectively improves the misallocation of public housing. As a social safety net, public housing should give priority to those most in need. Yet according to the Government’s survey from late 2020 to early 2021, Hong Kong had nearly 230,000 residents in subdivided flats, of whom about 110,000 were on the public housing waiting list and had not yet been allocated a flat. Unable to afford private housing, they could only be forced to rent subdivided units of less than 130 square feet — even smaller than a single parking space. Being squeezed into such cramped spaces for long periods not only strips them of basic life dignity, but also affects their physical and mental health.

At the same time, many high-income households have long occupied public housing. Among them, the “super-rich tenants” whose income exceeds the income cap by 5 times are already in the top 8% of Hong Kong’s income distribution, and clearly no longer belong to those in need. Under limited resources, these high-income households continuing to occupy public housing will only mean that the low-income families who truly need it cannot access adequate housing, creating extreme unfairness and further aggravating the subdivided-flats problem.

Under the new policy, the rent adjustment for well-off tenants is expanded from a 3-tier to a 4-tier system. The highest-income well-off tenants — i.e. those whose income exceeds the cap by 5 times, or whose household net assets exceed the cap by 100 times — will be required to move out of public housing. This measure helps release public housing resources, accelerates the process of subdivided-flat households moving into public housing, and focuses more sharply on citizens who are truly in need.

• Tenants required to relocate receive proper resettlement arrangements, promoting upward mobility. It is worth affirming that the Government has not left the affected well-off tenants to fend for themselves; instead, it has rolled out a series of humane measures to help them become homeowners. First, the Housing Authority will adjust the quota ratio for Green and White Form applicants for Home Ownership Scheme (HOS) flats from a 40:60 split to a 50:50 split. Second, after well-off tenants voluntarily move out of public housing, they may retain their Green Form status for 4 years, allowing them to purchase subsidised housing in the future. In addition, the Government also plans to introduce a new subsidised housing purchase arrangement, further enhancing their opportunities to become homeowners.

These measures help well-off tenants move up the housing ladder, while releasing more public housing units for citizens who are truly in need, and promoting social fairness.

• The rent adjustment for well-off tenants is reasonable and will not impose an excessive burden. After the reform of the Well-off Tenants Policy, the share of income that public-housing well-off tenants must pay in rent remains on the low side. According to data from the Housing Bureau, under the new policy, the rent of well-off tenants on average accounts for only 11% of household total income — comparable to that of ordinary public housing tenants. This ratio is far below the median rent-to-income ratio of private housing (31.5%), and is also below the United Nations’ recommended 30% rent-to-income ratio for affordable housing.

Clearly, after paying rent and taxes, well-off tenants still have room to save in preparation for home purchase. In addition, they may retain their Green Form status and enjoy the opportunity to purchase subsidised housing. For households earning at this level, with the Government’s support, becoming a homeowner is not a difficult task.

• The rent-setting standard for public housing is more reasonable, eliminating social unfairness. The reform also introduces the “rent-to-income ratio” as a consideration in rent adjustment, making rent-setting fairer. Apart from a small number of well-off tenants with very high income who must move out of public housing, the “rent-to-income ratio” of the remaining well-off tenants will be comparable to that of ordinary public housing tenants, ending the regressive unfairness of the “rent-to-income ratio” (i.e. the higher the income, the lower the share of income paid in rent). This ensures that tenants across income brackets pay a relatively fair rent, making the public housing system more equitable.

2. Conclusion

Amending the Well-off Tenants Policy is a major step forward in improving people’s livelihoods, but the authors hope it is only the beginning of reform. We put forward the following two recommendations for the Government’s reference:

First, since the “rent-to-income ratio” can effectively project the affordability of each income group, the Government should continue to use this ratio as the standard for adjusting public housing rents, and review and adjust the Well-off Tenants Policy every two years.

Second, the Government should further study refining the rent ladder for different income groups, to ensure a more rational allocation of resources — for example, to avoid situations where well-off tenants face multiplied rent increases simply because they have marginally crossed an income threshold, and consequently choose to “lie flat” rather than accept a substantial rent hike. The housing market is constantly changing, and housing policy must therefore also respond with flexibility. The future Well-off Tenants Policy needs continuous improvement, and should not remain rigid and unchanged for years as in the past.