Review of Hong Kong public housing resources: Better utilisation of resources, better home for all 5 May 2017
Background Prices and rents of private domestic units have continued to rise, far exceeding the affordability of the general public. The waiting time for allocation of public rental housing (PRH) has also kept extending The current housing problems have seriously affected the livelihood of Hong Kong people, and also social harmony and stability, as well as the long-term competitiveness of Hong Kong PRH may be the only avenue for the grassroots to have adequate housing 2
Background Public housing includes PRH and subsidised sale flats (SSF, which are mainly Home Ownership Scheme, HOS) Domestic households by type of housing in 2016 (about 2.51 million households in Hong Kong) Others 1.3% Public Rental Housing 30.4% Private Public Housing Housing 53.0% 45.7% Subsidised Sale Flats 15.3% Note: Others including temporary housing and non-domestic housing 3 Source: Census and Statistics Department
Objectives To review the existing public housing policy, relevant measures and arrangements under the Hong Kong Housing Authority (HA), including • PRH – flat allocation, domestic rent policy, well-off tenants policies, transfer schemes, redevelopment programme • SSF – flat allocation and subsidy arrangements, alienation restrictions, premium payment arrangement To explore how to optimise the existing public housing resources to take better care of people’s housing needs 4
Methodology Literature review – including government documents, academic journals, newspapers and magazines, and overseas experiences Interviews – to collect views from government officials, District Councilors, and concern groups To summarise, discuss and analyse information collected, and propose recommendations 5
Limitations Subsidised housing programmes launched by the Hong Kong Housing Society are not covered Private property which has implications on the development of Hong Kong’s property market is not included Housing issue is not just a matter of the number and allocation of flats, but should also take into account the housing quality. Ancillary community facilities, transportation, regional economy, and employment opportunities, as well as public space design would affect people’s living quality. These topics are to be further explored 6
Current situation (1) Take care of PRH tenants’ need for flat transfer Due to the changes in living conditions or special circumstances, some PRH tenants may have difficulties in continuously living in the existing flats Subject to available resources, HA makes arrangements to cater for tenants’ needs for flat transfer under different transfer schemes From 2011/12 to 2015/16, about 6,300 successful transfer cases per year on average The acute shortage of PRH resources, i.e. limited number of flats for allocation, and application requirements for transfer, makes flat transfer absolutely difficult for tenants in need 7
Recommendation (1) Take care of PRH tenants’ need for flat transfer (con’t ) Establish an online platform enabling flat-for-flat swap among tenants in need Implement the PRH Swap Scheme and merge together with existing transfer schemes Housing Department may make matching arrangements based on tenants’ preferences and reasons for application, with priority accorded to those in urgent needs, thereby minimising opportunities for undergoing unlawful acts among tenants 8
Desired outcome (1) Take care of PRH tenants’ need for flat transfer (con’t ) Provide tenants in need more transfer options and greater chances of successful transfer. Tenants will ‘ Have options and transfer successfully ’, thereby improving the efficiency that the flat contributes to meeting tenant’ housing needs Flats earmarked for transfer can be released to expedite flat allocation to PRH applicants, so that public housing can be secured as early as possible • Assuming that 1% of the tenants are interested and succeeded in flat swapping, the number of beneficiary households would amount to 7,600 a year • Assuming that the PRH Swap Scheme reduced half of the flats earmarked for transfer schemes, 3,000 more flats could be allocated to applicants awaiting PRH 9
Current situation (2) Assist PRH tenants to buy HOS flats Applicants eligible for PRH allocation and PRH tenants are eligible to apply for HOS flats with Green Form (GF) As the price of HOS flats is linked to the price of private domestic flats which has been rising, PRH tenants can hardly afford to buy HOS flats at the current standardised discount rate 'Green Form Subsidised Home Ownership Pilot Scheme' (GSH) helps GF applicants own their homes, but it reduces the number of PRH units and affects the waiting time for PRH 10
Recommendation (2) Assist PRH tenants to buy HOS flats ( con’t ) Offer concession rates according to GF applicants’ financial resources to enable them to buy HOS flats Amalgamate GSH with HOS, and discount rates for sale of HOS flats are set according to the income and assets of GF applicants Reference to the pricing arrangement of ‘Sale of Home Ownership Scheme Flats 2017’ : Proposed Household monthly income limit Asset limit discount rate 30% Households with higher income and asset $31,000 to $36,000 $1,500,000 40% (1) $31,000 $1,300,000 50% (2) Note: The limits are applicable to households with two or more members. (1) For applicants with more than $1.5 million in asset, only a discount of 30% would be offered. (2) For applicants with more than $1.3 million in asset, only a discount of 40% would be offered. 11
Desired outcomes (2) Assist PRH tenants to buy HOS flats ( con’t ) Reinforcing the housing ladder, and promoting the upward mobility of GF applicants 'One-for-one ’, to reallocate PRH units recovered to applicants on the waiting list 12
Current situation (3) Assist eligible PRH applicants to rent flats The Housing Ordinance stipulates that SSF with unpaid land premium cannot be let, sold or assigned in the open market As at end of March 2016, there were about 270,000 HOS flats with unpaid land premium. The flats cannot be let even left idle 'Premium Loan Insurance Scheme' launched by the Hong Kong Mortgage Corporation Limited seems to be inadequate, thus received a lukewarm response 13
Recommendation (3) Assist eligible PRH applicants to rent flats ( con’t ) Allow SSF owners with unpaid land premium to let their flats freely to enable eligible PRH applicants to spend less on rent To amend relevant laws and regulations to allow owners with unpaid land premium to rent out their flats, but they have to share the rental income with HA based on the proportion of unpaid land premium HA may subsidise eligible PRH applicants to rent such flats with the shared rental income 14
Example (3) Assist eligible PRH applicants to rent flats ( con’t ) Assuming that the monthly rent of the HOS flat is $10,000, and the proportion of unpaid land premium is 30% Renting the unit to eligible PRH applicants Owner’s rental income: Tenants’ rental expense: HA’s rental income: $7,000 $7,000 $0 15
Desired Outcome (3) Assist eligible PRH applicants to rent flats ( con’t ) Owners can have more flexibility in renting out idle flats with premium unpaid and receive a rental income Increase the supply of rental units in the market which relieves rental pressure Eligible PRH applicants may enjoy lower rent Helps improve HA’s financial position • Assuming that the vacancy rate of HOS flats with premium unpaid is 4% and half of the owners are interested in renting out their flats, the supply of rental units would be increased by about 5,400 • If each owner pays $3,000 to HA per month, HA would be able to share some $160 million rental income a year 16
(4) Expedite housing subsidy recovery for Current situation more effective deployment While property prices are soaring, owners can hardly ‘chase after’ and pay the huge amount of land premium in one go The existing premium payment arrangement limits the circulation of flats with premium unpaid in the open market It is also difficult for the Government to recover housing subsidy for further deployment 17
(4) Expedite housing subsidy recovery for Recommendation more effective deployment ( con’t ) Allow SSF owners to pay the land premium by instalments to enable the Government to recover housing subsidy Pay the land premium by instalments at the market value To encourage owners to pay back the premium earlier, the Government may provide a time-limited cap on the repayment (e.g. 10 years), which allows owners to pay the premium at the value once the premium assessment is confirmed or at the market value in later instalments 18
(4) Expedite housing subsidy recovery for Example more effective deployment ( con’t ) Assuming that the proportion of unpaid land premium is 30% Time of % of paid Instalment Market value Instalment arrangements payment premium 1 st Jan 2018 $5 million $5 million x 5% = $250,000 75% Validity period 2 nd of the cap on Mar 2022 $6 million $5 million x 5% = $250,000 80% repayment 3 rd Jun 2026 $4.5 million $4.5 million x 10% = $450,000 90% 4 th Sep 2031 $7 million $7 million x 5% = $350,000 95% 5 th Apr 2037 $8 million $8 million x 5% = $400,000 100% 19
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