Developers must answer John Lee’s call for private subsidised housing

The pilot scheme for private developers to build subsidised housing, which comes after New World Development’s proposal, is a chance for more businesses to come forward to fulfil their corporate social responsibility

Terence Chong Tai-leung

Published: 9:15am, 27 Oct 2022

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Corrected [2:34pm, 27 Oct, 2022]

[2:34pm, 27 Oct, 2022]
An earlier version of this article was attributed to the author Terence Chong rather than Terence Chong Tai-leung.

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As the Hong Kong government begins a new chapter in its quest to provide affordable housing, many young families may have cause to be hopeful that their home ownership dreams will soon come true – with a helping hand from the private sector.

This is because Chief Executive John Lee Ka-chiu is launching a pilot scheme on private developer participation in subsidised housing, as announced in his policy address, a decision expected to open the door for up to 4,000 families to buy quality homes at below-market prices, and without the typical long wait caused by red tape.

In his policy blueprint, Lee has rightly highlighted the pressing need to expand the housing market by supplementing with private housing such government efforts as the Home Ownership Scheme, operated by the Housing Authority, to meet the public’s home ownership aspirations.

The pilot scheme – which involves the government putting up three sites for tender to build subsidised housing and opportunities for property developers to rezone their private land for subsidised housing projects – is a much-appreciated gesture in enhancing public-private partnership to shore up the shortfall in subsidised flats.

Of particular significance is the official openness towards giving property developers more freedom in making mortgage and sale arrangements. This comes after New World Development proposed Hong Kong’s first not-for-profit privately subsidised housing project under its social enterprise unit, New World Build for Good.

Under this innovative proposal, those eligible for public subsidised housing can buy New World flats through a special financial arrangement, benefiting from ultra-low down payments and flexible instalments spread over decades.

The proposal to provide around 312 flats with an average size of 332 sq ft in a Southern Yuen Long site is expected to be considered by the Town Planning Board on October 28, with construction due to begin next year, for completion in 2027.

In light of the private sector’s growing enthusiasm in helping to solve public housing difficulties, the latest pilot scheme announced by the chief executive signals an acknowledgement that property developers and the financial sector, with their economies of scale and business expertise in construction and lending, can provide good alternatives to projects run solely by the government.

While Hong Kong’s civil servants are praised for being meticulous and respectful to due process, deploying this bureaucracy to initiate and implement large-scale subsidised housing projects regularly requires an immense and costly commitment of resources.

In contrast, private developers have greater freedom to customise their housing projects to respond to market trends and consumer tastes, and this can work to the benefit of homebuyers.

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While officials have yet to reveal the implementation and operational details of the pilot scheme, media reports suggest that incentives, such as land premium concessions for rezoned private sites, could be offered to attract developers’ participation. But other possible restrictions may dampen the scheme’s attractiveness, such as a specified minimum for flat size and a cap on prices, amid speculation that the government may not offer the usual buy-back guarantee for unsold flats.

Although only one property developer has made a head start in preparations to join the pilot scheme, it is a golden opportunity for more businesses to come forward to fulfil their corporate social responsibility in the joint societal effort to rebuild Hong Kong as it emerges from the Covid-19 pandemic.

It is thus of key importance that the Housing Bureau, when completing its formulation of the scheme’s framework by the first quarter of next year, as envisaged in the policy address, also puts in place a mechanism to speed up site approvals and the land premium concession process, which would make the scheme more attractive for developers and further lower sale prices.

For now, the proposal by New World Build for Good, which has secured the support of a major bank in Hong Kong to provide flexible mortgage arrangements, may be seen as a showcase of how the resourcefulness of the private sector can complement the administration’s drive to provide affordable homes.

Professor Terence Chong Tai-leung is executive director of the Lau Chor Tak Institute of Global Economics and Finance, Chinese University. He is also a member of the Advisory Committee of New World Build for Good

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