Tackling the challenges head on, the Government should accurately address the housing needs of the people and the need for land for economic development, with due consideration to fairness.
According to the Hong Kong 2030+ released in October last year, Hong Kong will be short of about 3,000 hectares of land by 2048. The Government indicated in the report that taking into account the Kau Yi Chau Artificial Islands under the Lantau Tomorrow Vision plan, the Northern Metropolis and other possible solution spaces, it is confident to meet Hong Kong’s land development needs in the medium to long term. However, two issues may still need to be addressed in practice: 1. Is the land shortfall of around 3,000 hectares an accurate and conservative estimate? 2. There is a chance that the included possible solution spaces will fail to materialize due to feasibility or other reasons. For the overall development of Hong Kong’s economy and people's livelihood, the Government should show political courage and determination to solve the land supply problem, which is also the single biggest factor in effectively resolving this deep-seated imbalance in Hong Kong.
Establish land banking system and leverage market forces for win-win outcomes
In response to the Northern Metropolis vision and the Lantau Tomorrow Vision plan presented in the Policy Address, the Budget has earmarked HKD100 billion to establish a dedicated fund to speed up the implementation of infrastructure works related to land, housing and transportation within the Northern Metropolis, and indicated that different approaches and financing options will be explored to take forward the Lantau Tomorrow Vision plan. The two land plans are long-lasting and large-scale. Besides speeding up the Government-led large-scale projects, the Government should leverage market forces for a two-legged approach to achieve win-win outcomes, and combine land development with industry support for a good balance of jobs and housing. In addition, Hong Kong has to establish a land banking system with a long-term, macro vision and mindset that allows for flexible regulation of land use in response to changes in social needs. In this regard, it can draw reference from Singapore’s “white site” planning tool, first leveling and designating government land that has no long-term use, including reclaimed new land, land in new development areas and idle land, as “white sites” and, without having to pre-define their use, add them to the land bank to meet unforeseen future development needs.
Adopt multi-pronged strategy to speed up land and housing supply
The Government has identified about 350 hectares of land to produce some 330,000 public housing units for the coming 10-year period, but only about one-third of them are expected to be completed in the first five years, so the supply would be back-loaded during the period. Moreover, the Northern Metropolis will take 20 years to complete. Therefore, the supply will not come soon enough to address the immediate needs of grassroots residents living in subdivided flats and eagerly looking forward to buying their own home. For this, the Government should complete the review of the land development legislation to streamline development processes and statutory procedures as soon as possible. This review was covered in the Budget. It should also push the Housing Authority to first perform part of the preliminary construction work when the Government carries out the “land creation” process in order to truly meet the pressing needs of the people. In addition, the Government should explore ways to accelerate the redevelopment of old districts and the development of agricultural land and brownfield sites and, where feasible, increase the plot ratio (multiplier) as a short-term measure, taking a multi-pronged approach to alleviate the deadlock over the imbalance between housing supply and demand in order to resolve the deep-seated social issue plaguing Hong Kong.
Domestic property policy must give due consideration to fairness
The Budget also introduced several new measures related to domestic properties, such as reforming the rating system, providing a tax deduction for domestic rental expenses, and relaxing the mortgage insurance programme. Actually, last year’s Budget had already mentioned to review the rating system. The specific reform plan was finally put forward this year, with two main points. The first is to restrict eligible owners to apply for rates concession for only one domestic property under their name, and the second is to change from the flat rate of 5% of the rateable value and introduce a three-tier progressive rating system to better reflect the “affordable users pay” principle.
As taxation is one of the tools for redistributing public finances, I believe that the aforesaid reform is in the right direction and can make the system more equitable. There are criticisms from the public about the progressive rating scale being set on a property’s annual rental value of over HKD550,000, which seems to be an overly high threshold as these properties, being luxury properties, represent only 2% of the total number of private domestic properties. However, as the epidemic has hit the economy hard, introducing more drastic adjustments to the rating system may bring additional burdens to the middle class. Undoubtedly, the idea of the “affordable users pay” principle is to make those with higher income and higher housing affordability pay more, with the aim to alleviate the disparity between the rich and the poor. However, how to define “affordable users” and whether the progressive rating scale should be adjusted is still worthy of discussion by the Government and the public in the future.
In addition, the Government now allows “home loan interest deduction” for homeowners, but no tax deduction for renters. For the first time, the Budget introduced a “residential rental tax deduction”, which is intended to be a long-term policy. This is certainly great news for many renters. Nevertheless, I must remind the Government to ensure proper regulation to prevent people from taking advantage of any loopholes.
Enforcement is key to whether or not the policy can be implemented. I hope that the Government can tackle the challenges head on and with due consideration to fairness, accurately address the housing needs of the people and the need for land for economic development with an open mindset in order to truly enable people to live and work in peace and contentment, working together for a bright future.
This is a free translation. For the exact meaning of the article, please refer to the Chinese version.
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