Restrict new housing scheme's resale to qualified buyers only

Chief Executive Carrie Lam Cheng Yuet-ngor has revealed that her Policy Address, to be delivered next month, will include a plan specifically designed for Hong Kong's first-time buyers of homes. Housing Society Chairman Marco Wu Moon-hoi says the new batch of housing under the proposed plan should be reserved for Green Form and White Form applicants for Home Ownership Scheme housing. He also thinks the prices of these homes should be linked to applicants' incomes to ensure affordability and resale should be restricted. Chairman of the Housing Authority's Subsidized Housing Committee Stanley Wong Yuen-fai agrees. He believes open-market resale should not be allowed.

I agree, and I welcome the idea. Resale indeed should be restricted. However, the restriction should not be in the form of "having occupied the unit for XX years", but rather in the form of "buyers should satisfy eligibility tests". As long as buyers satisfy the eligibility criteria, the owner should be allowed to resell any time. Even if doing so gives him some profit, the owner should be allowed to do so, because one eligible household's needs will be fulfilled, and the original owner also benefits. If everybody gains or stays put, what is the objection?

The idea of forbidding resale before 10 years (or anything like this) is intended to reduce the enthusiasm of those who apply for the "first-time" housing but who have their eyes on profiting from the purchase. I agree we really don't want these people to be in the ranks of those who have a genuine need for housing. Public housing - whether rental or HOS - really is intended to meet the needs of those who are short. The prospect of big gains will certainly attract those who have eyes on profit to join the queue. This will certainly prolong the wait before being allocated an apartment.

I have no objection to someone becoming rich but I have a lot of objections to a longer wait for those who have a genuine need for government assistance to fill their housing needs.

However, requiring those who have bought subsidized housing to wait 10 years before being allowed to resell is really not the way to dispel those who seek profit. One possible result of such a restriction could be that the apartment is kept vacant, while the owner who has no need for it waits for the "no resale period" to be over. That would be exceedingly wasteful. Even if the apartment is not kept vacant, it would not make any sense to stop the owner to move to a more preferred apartment until the "no resale period" is over.

The smarter way to dispel those who seek profit is to require that the buyer should actually live in the apartment; must not own any other property; and can sell only to those who are eligible to buy these apartments. If these requirements are enforced, those who seek profit will certainly not join the queue because they will have to forgo the chances of big capital gains through buying and selling properties. The proposed three restrictions will reduce "investment demand" or "speculation demand" so much that the resale price will certainly not be very attractive. If the owner does not need the apartment any more, we would like him to sell it right away. If the buyer is someone in the queue, we should be happy that this happens, because those in the queue behind him will move up by one place.

If we just keep the three conditions as listed, there should be no requirement for the owner to repay any "unpaid land premium".

But then I do not really agree with Wu that the "First-Time Buyer Homeownership Scheme" (not official name, so-called for convenience only) should be restricted to Green Form and White Form applicants. It is well known that presently some people, in order to maintain their eligibility, actually prefer not to be promoted to a position that could disqualify them because the salaries are too high. This will be bad for Hong Kong. If the apartments are relatively small, and the amenities relatively limited, those who are financially capable of buying better housing in the private market would do so of their own accord. Thus, I would simply require that the buyers must be Hong Kong permanent residents; must be married or about to be married couples; and must agree to the three restrictions as stated above. The apartments should be priced at, say, 10 times the median household income on average, regardless of the market price of comparable apartments. The usable area should be no more than 400 square feet per unit. I have recommended such a scheme in a previous column (Aug 8). This is essentially the design of Shih Wing-ching, who introduced the idea at a dinner meeting when I was president of the Hong Kong Economic Association. It is the best idea I have heard in years.

(HK Edition 09/12/2017 page8)