Tim Hamlett: looks at the ongoing wrangling over whether to resume the HOS

A proposal to revive the Home Ownership Scheme produced interesting scenes in the Legislative Council building last month.

The HOS, as it is familiarly known, was a piece of ‘70s idealism designed to support the public housing programme by providing a means for the more prosperous tenants to move out into a home of their own. The Housing Authority would plan and the government would subsidise (with land) the construction of flats which could then be sold at prices which working class families could afford.

In those days this was a stunning innovation and the flats, even though purchasers were means tested, were always over-subscribed. This problem was solved not by raising the prices but by holding a lucky draw for slots in the queue. Of course some of the flats were eventually sold on, but the HOS estate near me still seems to have many of its original residents. They have grown old together (the estate was built about 30 years ago) and there is now a large elderly population.

The arrangement was a response to the discovery, which since seems to have been forgotten, that the private sector, or the market, or whatever you want to call it, had failed catastrophically to meet the housing requirements of low-income families. Selling flats in Hong Kong is like selling cars. The numbers may be in the mass market but the big profits are in the luxury sector. This resulted in a continuing desperate shortage which was only remedied by government intervention on a large scale. Adam Smith
fundamentalists would like you to forget this. We have seen what the market can produce for us: squalor.

In 2002 the HOS was abruptly stopped. When I say abruptly I mean not only were no new flats to be built, also those which were already under construction were not to be sold. Completed flats presented a problem which hung about for four years, after which it was agreed that flats in the pipeline could be sold under the old system. No new flats have been started, however.

The decision in 2002 was a straightforward grovel to the real estate developers, who were then having a rough time. This is turn was a result of the Tung administration's deliberate and well-intentioned efforts to get prices down to more affordable levels.

No doubt they overshot a bit because of other things which were going on, like the Asian financial crisis. It is a recurring feature of the real estate market in Hong Kong that when the luxury market collapses, some developers discover a sudden interest in less affluent purchasers. Planned megaflats are hastily converted into multiple miniflats and sold at less astronomical prices. Competition from the government is not welcomed.

This brief history brings us up to the present, which had the Legislative Council housing panel debating the possibility that the HOS should resume its work now that the real estate scene had returned to normal.

On the whole the panel thought that it should. Panel chairman Lee Wing-tat observed that the properties now being offered by developers were very expensive, and the only hope for a "grassroots" family wishing to own its own home was either the HOS or sales of public housing flats.

There is a reasonable argument to be made against this, which would go roughly that it is the government's job to ensure that people are housed; if they want to own their own place that is their business. The pleasures of ownership are not a good which the public sector should provide.

Nobody present, however, wished to say anything that simple. The government spokesman, Secretary for Transport and Housing Mr Thomas Chan Chun-yuen, justified inaction on the grounds that there was "no serious imbalance" in the property market and "no problem in turnover in public housing".

This is interesting stuff. What would a non-serious imbalance look like, one wonders. The point about public housing is presumably that the waiting list is now much shorter, so the government does not care whether existing tenants move out or not.

Mr Chan also said that prices were 30 percent lower than they were in 1997, which he admitted was "the peak". One would hope so. The whole point of a peak is that prices are lower the rest of the time. That is why it is called a peak.

The most interesting thing about Mr Chan's point on prices, though, was that his example was for a flat of a saleable area of 400 square feet. This sheds an interesting light on what the government hopes for the people in its care.

My home estate is an old one and perhaps dates from a more spacious age. Still, many of my neighbours have this much space for their cars.

The government's idea of a village house is 700 square feet – times three floors. The smallest flats in Taikoo Shing, when I moved there many years ago, were 800 square feet.
It is difficult to get much smaller than this in a two-bedroom flat because a bedroom must have room for a bed, a bathroom for a bath, and so on.

I dare say that on Mr Chan's salary he also has the run of something a good deal more generous than 400 square feet when he gets home.

Home ownership, after all, is an ambition of families. It is something you do when you get married in anticipation of the pitter-patter of little feet. Has official indifference to the less well-off now reached the point where we expect a family of four to live in an average of 100 square feet each? Perhaps it has.

Mr Chan thought relaunching the scheme would "affect the property market", which is plausible because that is of course its purpose.

He thought the Housing Authority should concentrate on public rental housing, which was perhaps a long-winded way of putting the point he should have made first. But there we are. Mr Chan was doing his job of making the best case he could for the existing policy, which is to do nothing.

No such excuse is available for his supporters. Two Liberal Party members supported Mr Chan on the grounds that the HOS would distract the Housing Authority from its priority, which should be public housing. Mr Abraham Razack, who occupies the real estate developers' rotten borough, thought the same thing.

Or so they said. This is the sort of behaviour which gives functional constituencies and business-friendly political parties a bad name. Everyone knows why Mr Razack and his Liberal friends do not want the HOS to resume: they fear that it would produce lower property prices. This may in fact be a bad thing, or at least may be a legitimate drawback.
That is hardly the same thing, though, as being concerned for the health of the public housing programme and haunted by the fear that the Housing Authority may be distracted from its mission of bringing succour to the poorest of the poor.

Probably it would be a good thing to have more people in Legco with a business background. This would be easier to arrange if the existing crew could try to avoid looking such hypocrites.