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Affordable Housing Policy in Hong Kong


This study examines the affordable housing policy in Hong Kong, China. The housing market and the execution of housing policy are being scrutinized to see how institutional and economic differences affect them. There are certain similarities between the two markets, such as their reliance on the property industry to sustain economic development and dense metropolitan regions with significant proportions of high-rise structures. Hong Kong’s mean home price–middle family income ratio was 11.8 in 2010 and climbed to 14.9 in 2013 despite numerous policies and initiatives to ” cool down” the property market. There is a shortage of available land for development in this area because it is mostly mountainous (Tim Wong, 2018).

About 1.8 billion hectares of agricultural land must be set aside by the PRC. Local governments often ignore this rule, and the administration has little incentive in enforcing it. Both markets’ housing strategies are aligned with their respective social welfare systems in terms of their goals and achievements. Since the aged and the needy are favored in Hong Kong, China, housing rules favor the lower-income bracket. As a result of the PRC’s concentration on the young and the wealthy, most housing measures aimed at the upper-income bracket have failed. Hong Kong’s regulations give housing subsidies; however, this is a less successful strategy to help people get their own homes. China’s high homeownership rate is that the Homes Provident fund’s interest rate reduction scheme has a considerably more significant impact on enabling homeownership.

Affordable housing policies

More than 50,000 refugees from China were evacuated from Shek Kip Mei, a shantytown in Hong Kong, in 1953 after a catastrophic fire. Squatter huts and temporary dwellings housed 46% of the population in 1972. The government wanted to build 180,000 housing units in 1975/76 to help people live comfortably (Liu & Gou, 2019). When prices for privately owned homes peaked in 1997, they were 9.5 times higher than in 1984. Property values started to level out in 2004 (Liu & Gou, 2019).

The administration accepted that the decline in property values and sustained deflation were the root reasons for sluggish local consumption and investment. Consequently, it re-examined its situation in the housing market (Liu & Gou, 2019). Instead of constructing new homes, policymakers turned their attention to urban rehabilitation and preserving existing structures. A homeownership rate of 51% was recorded in 2014, with 68% of the population living in private, permanent dwellings (Richard Wong, 2015).

Under the railways and property development paradigm, the Hong Kong Home Authority coordinates housing constructions among investors and the Mass Transportation Railway Company (Ko, 2019). Hong Kong’s land supply was constrained before China’s takeover of the territory in 1997; hence, the concept could turn limited land into hotels, office space, retail malls, conference centers, and apartments. Despite the model’s limited success, private sector engagement is encouraged and integrated rather than crowded out. The Hong Kong Housing Scheme, a non-governmental house provider, plays a vital role in providing both rental and private enterprise flats in Hong Kong (Ko, 2019). A Long Term Housing Strategy marked the beginning of the government’s systematic engagement in the housing market.

As a result, the government set a goal of constructing 960,000 additional housing units by 2001 to meet the current demand (Sing et al., 2018). The plan’s goal was to address critical housing issues in an organized and progressive manner. However, it failed to close the gap between supply and demand and exacerbated market uncertainty (Sing et al., 2018).

Public Rental Housing

A considerable percentage of Hong Kong’s less-affluent households are supported by the city’s Public Housing Scheme (PHS). A quota & point scheme allocated PRH to non-elderly applicants between 18 and 57. As a preliminary step, candidates under nineteen were granted three points (Liu & Gou, 2019). One point was acquired for each subsequent year after that. Priority was given to applicants with better grades. A four-person household’s total monthly income must not exceed HK$20,710, and the deposit must not exceed HK$436,000 (Tim Wong, 2018).

PRH’s development is made possible by HK$5 billion in outstanding government donations and interest-free land with a 40-year repayment period. Since it is difficult to trace the rich, many ineligible families stay in PRH, with a population of 2.1 million at the end of 2013. These people have been allowed to acquire priority-purchase HOS units and full-market rentals.

Home Ownership Scheme

In 1977, the construction of 42,000 HOS units for sale, ranging from 37 to 56 square meters, was slated to be completed by 1985/86. Central banks have authorized a 15-year installment plan with interest rates ranging from 7.5% to 9.0% and a 10% deposit. HK$3,500 was the initial monthly limit for HOS families (Tim Wong, 2018). Up to its termination in 2003, the HOS program resulted in the construction and sale of 200,000 dwellings to low-income families. When the HOS was implemented, new applicants for public housing received a 30% to 40% discount on the market price, which shortened the average waiting time for new applicants. The HOS suffered from a lack of high-quality housing as one of its drawbacks (Liu & Gou, 2019).

There was a green form for tenants in the public sector, and those in the private sector, there was a white form. At least two persons in a candidate’s family must be related to them for both forms of the application (Elliott, 2020). A single person’s monthly salary could not exceed HK$10,000 for the white-form applicants, and no family member could own a home of their own. Existing tenants who applied using the green form were not restricted in their income. Five thousand allocations were made available to white-form purchasers with the reopening of the HOS secondary market in 2012. Both the HOS-affiliated private sector participation and the flat-for-sale schemes aim to cut down on the wait time for effective HOS-related programs. However, there are only a limited number of these programs available.

85,000 Plan

Tung Chee-inauguration hwa’s in 1997 promised a rise in the homeownership rate from 52% to 70% in the following decade and a drop in the average waiting period for PRH from 6.5 years to 3.0 years (Ku, 2003). The lofty goals sparked the construction of public and private apartments, known as the 85,000 Plan, in 1999/2000 (Richard Wong, 2015). To meet the Chief Executive’s target, the government and developers agreed to build 85,000 public rental and private ownership apartments per year. Only 85,000 additional dwelling units were completed by 2000/01 (Ku, 2003). The major criticism of this proposal was that it was proposed just after the Asian financial crisis, which caused property bubbles to break faster and put many homebuyers in negative equity. 8 As a result, the average wait period for PRH housing applicants dropped from 6 to 3 years (Richard Wong, 2015).

Tenants Purchase Scheme

The TPS began in 1998 and concluded in 2006. Tenants at PRH were encouraged to use the program to help them purchase the apartments where they lived. A part of certain estates was made available to tenants for purchasing. Families of any size, wealth, or ownership status may participate if they had at least one adult resident in PRH over 18. The TPS allows buyers to get discounts of up to 45 percent on their units. The discount rate was established by the quality and location of TPS buildings. Despite the restricted availability and short implementation time, the program has enabled 150,000 PRH residents to purchase their homes.

Home Purchase Loan Scheme

Renters in PRH who make more than the waiting list may use the House Purchase Loan Program to buy a new home. When the time came for PRH candidates to be allocated, they were given a choice to either rent or purchase in the same neighborhood. On the market price, 45 percent was offered with interest-free loans of HK$800k and HK$600k bank loans over 13 years or 20 years for those who choose to acquire. The average monthly cost of purchasing the apartment was 30 percent of the median family income, or 2.7 times the amount residents at PRH paid in rent. Most of the properties on the market were less than 30 years old. Due to the prohibitive cost of the purchase, many renters considered this option unpalatable. Compared to renting, buying an apartment comes with additional repair and upkeep expenses. There was also the issue of sale agreements between tenants who shared an apartment. However, this was the most affordable option for purchasers compared to other housing assistance.

Sandwich Class Housing Scheme

The goal of this program was to assist middle-class families whose monthly incomes ranged from HK$30,001 to HK$60,000, making them ineligible for PRH or the HOS. With interest rates similar to prime + 1 percent or 2 percent for a first mortgage Hong Kong Housing Society covered half of the land acquisition and all construction expenses—successful applicants may go higher to HK$550,000 or 25% of the original cost. Housing authorities in Hong Kong have set up interest-free periods of three years and five years for anyone who take up a second mortgage. Because of these strategies, the real-world interest rate on a 30-year student loan to 2.12%. Due to the Housing Authority’s budgetary constraints, the Hong Kong Mortgage Corporation assumed over the program in 2002. Over 5,700 families earned an average of HK$475,000; however, the Asian financial crisis rendered mortgage financing unfeasible.

Home Starter Loan Scheme

First-time homeowners may use the Housing Starter Loan Scheme to acquire private sector properties. For qualifying purchasers (i.e., those with monthly salaries below HK$70,000) who had no prior ownership of the real estate in Hong Kong, China, this program offered a low-interest loan of 2.0%–3.5%. First-time purchasers who couldn’t afford a down payment might get a loan of up to 30 percent of the purchase price of HK$600,000 in total. Over 33,000 households and individuals received HK$14.8 billion in loans. However, just twenty percent of successful applicants utilized the loans to purchase apartments, which raises the possibility of exploiting the loans to acquire high-end property.

Reverse Mortgage Programme

To encourage banking institutions to provide reverse mortgages to consumers over 55, the Hong Kong Mortgage Corporation launched a Reverse Mortgage Program in 2011. Only 624 people applied to the program in 2014. The low participation percentage may be due to a lack of understanding of the program and the anticipation that property values will rise.

Spicy Measures

“Spicy measures” were enforced by the Hong Kong Monetary Authority and Legislative Council in late 2010 to “cool down” the overheated property market. The hot measures had a short-term impact on transaction volumes, but they had little effect on bringing down housing prices.

Ownership has its advantages and disadvantages.

Most Hong Kongers, in particular, has aspirations of owning a property. The property market has long been a significant source of income for the Hong Kong government and the local economy, serving as both a consumer product and an investment good. Homeownership has become a heavy burden for many Hong Kongers due to the extraordinary rise in property prices over the last two years or so. There are several benefits and drawbacks to owning a property, examined in the following paragraphs.


In the private sector, becoming a homeowner typically entails a few things. For one thing, it’s seen as a symbol of wealth and social position. Second, it fosters a feeling of place-bound identity. To sum it off, high-end residences and a luxurious lifestyle may be found in private homes. Even if the property market is only marginally functioning, homeownership provides a haven for the elderly and protects them from poverty in the old life. One of the benefits of owning a property at a micro-level is the potential for a wealth impact.

As a consequence of a gain in wealth, there is a “wealth effect,” described as an increase in expenditure. In times of rising house prices or rent, it is expected that homeowners would spend more money on non-housing products and services. As an additional benefit, homeowners may use their property as collateral for loans. Investing in real estate has long been considered a way to protect against inflation. Homeownership has had tremendous effects on the economy at large. According to the Census and Statistics Department, spending on housing has significantly increased Hong Kong’s GDP. Over 10 percent of overall GDP was generated by property ownership in 2008. Using these data, it is evident that the importance of premises as a driving force in the economy has been shown. Homeownership has a positive impact on the stability and development of a community. This is because homeowners are less mobile than renters because of the more extraordinary transaction expenses. Participation in community groups, for example, is encouraged because of this.


Even with all of these benefits, there may be some disadvantages to becoming a homeowner. Homeownership in a society produces a scenario where the economy is intimately linked to the real estate market. When new money pours into the real estate market, demand soars, resulting in asset price bubbles. Property demand is no longer sustainable when speculative activity slows down, asset bubbles explode, and the overall economy.

The rise in the number of properties with “negative equity” is another effect of the collapse of property price bubbles. An asset used to secure a loan’s outstanding amount is said to have “negative equity” if its value is less than the outstanding loan total. This might have a psychological influence on the owners of these assets and impose practical limits on them. A bad debt problem will harm the company and personal finances of banks and financial organizations that provide mortgage loans for these properties because of the incapacity of the borrowers to pay back the debt. As a result of the increased risk posed by mortgage loans, banks are expected to implement a more restrictive policy. People’s spending will fall, and economic development will be slowed as it becomes more difficult for them to secure loans.

Last but not least, even though owning a house may help stabilize and grow communities, this only applies in circumstances where housing is seen as a consumer product. It does not affect social stability if properties are viewed as investments. Residential mobility will only be exacerbated by economic uncertainty and property speculation.

Urban and urbanization concerns

Relocation expenses are an essential factor in the decision to provide public housing for local governments. As a result of relocation efforts, assistance for residents in shantytowns is tied to affordable house ownership or rental accommodation (She, 2021). Housing expropriated families in urban and rural areas at a cheap cost is a significant responsibility of SRH, which helps promote “growth-promoting” urban redevelopment. Disparities in regional political preferences mirror regional differences in economic development approaches (She, 2021).

It’s a valuable strategy for governments to keep talented or semi-skilled employees in big cities by providing public housing (Lin & Yi, 2011). For the middle class, who place a high value on safety and security, PRH in the form of “gated communities” is particularly alluring. Because of PRH’s reasonable and guaranteed rental contracts, the rapidly emerging middle class can now afford good homes. Commercial housing for the emerging urban middle class increased in the first decade of this century, while affordable housing for the working class was neglected (Lin & Yi, 2011).


As a matter of policy, put home affordability first. Even while housing policy may need to satisfy several policy goals, the most important one should always be to ensure that it is affordable. Public housing programs are aimed to stabilize the economy in light of a shortage of affordable housing, rising inflation, and a widening divide between the rich and poor. New urbanization policies have addressed low-income migrants in Hong Kong, and various solutions, including large public housing projects, have been sought. Nonetheless (Lin & Yi, 2011). To address the negative inefficiencies and externalities of China’s brief post-housing reform era, the current national focus on public housing constitutes a significant change in public housing from decades earlier. According to the UN-recognized concept of ” housing rights, ” adequate housing must be considered a basic human right and protected by government action and law, according to the UN-recognized concept of “housing rights.” It is impossible to organize the housing industry in its entirety via a central body. Thus legislation must be put in place to guarantee the supply of adequate, affordable housing.

To reduce the state’s dependence on land revenue. When it comes to funding urban development in China, the local government relies heavily on land-based urban finance, which is very sensitive to increases in the local housing market (Lin & Yi, 2011). The Chinese government uses land and housing policy to fine-tune the economy. Transitioning governments require a housing strategy that meets the demands of the majority. A long-term land distribution plan geared at economic restructuring is now under consideration by the government to regulate the economic cycle. But to promote human-based urbanization, the state must reorganize the central-local fiscal relationship, change the tax system of local governments, and stimulate new types of PPP (public-private partnership) in urban infrastructure finance. The past decade has seen the emergence of several hybrid PPP partnerships involving local governments and private investors (ADB 2008). Preconditions for every successful PPP project include an enabling regulatory and policy environment. In addition, the Chinese municipal bond market has to be developed.

They are creating a System for Financing Affordable Housing That Works. According to the existing policy, increased public housing investment and building might help alleviate some of the burdens on low-income households (Liu & Ong, 2021). However, the construction of a financial structure for such low-cost homes is just as critical. The Chinese government should investigate and explore several concepts. Local governments in China’s Hong Kong province, for example, may use the private capital market to fund public rental housing developments, such as via REITs (Real Estate Investment Trust). If the HPF (housing provident fund—a mandatory savings plan for employees) is restructured, it might serve in the same capacity as Singapore’s integrated CPF, a long-term, predictable source of money for public housing construction and operation (Liu & Ong, 2021). The National Science Foundation of China, the Ministry of Education of China, and the Shanghai Education Development Foundation’s “Shu Guang” initiative contribute to this study.


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