When property prices rise rapidly during property cycles, incomes are not able to catch up.  Many people find themselves unable to buy homes.  To address this, governments would be correct not to adopt policies such as the Home Ownership Scheme.  The HOS is too expensive – because, given loose qualification requirements, benefits exceed actual needs – to be meted out to all but a small fraction of applicants.  Also by offering successful applicants subsidized housing near the crest of property cycles, it is likely to hurt them as well as the private sector housing later when the subsequent completions exacerbate a market downturn.  Above all, it leaves unaided lower-income earners, who were deprived of home ownership by that “deep-seated contradiction”: lagging incomes of workers under Hong Kong’s changing economic structure.

     Governments should maintain market-neutrality by, firstly, steadily making available enough land to meet population growth, and not artificially supporting or depressing prices, which would make cyclical movements bigger later.  Secondly, instead of building HOS and Public Rental Housing, they should make payments to meet people’s actual income shortfalls for buying or renting homes at their choice.  Benefits would be on a sliding scale to encourage upward mobility.  Existing PRH would be sold or rented at market rates.

     Broader social and economic objectives would be achieved.  Income disparity would be mitigated.  Appreciating homes for the poor would provide retirement protection, as the population ages.  On the Mainland, consumption and investment would be boosted by such a policy.

 Click here for the article Enabling home ownership in Hong Kong and China.  

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