Difficult leadership decisions needed to resolve housing issue

Chandran Nair
China Daily (Hong Kong Edition)

Hong Kong's divided society does not agree on much, but it does agree on one thing: The lack of affordable housing is a political, economic and social crisis and, in the words of Chief Executive Carrie Lam Cheng Yuet-ngor, "an important livelihood issue".

Despite this, the housing conversation seems to go in circles. The government wants to move forward but only if preceded by a "consensus" which, in practice, means a solution where no one (including the government itself) has to change.

This is an opportunity for Lam to legitimize her position and cement her public support. But these are the key issues and root causes of the housing crisis that she must acknowledge in her upcoming Policy Address. Hong Kong cannot afford to be in denial for much longer.

Why? Because there is much conjecture but little clarity around the housing issue. We don't agree on its causes, which is why the debate is stuck and there is collective denial: Without an objective understanding about what is causing this problem, and without some real data and models, we end up debating politics rather than solutions. But the data is all there and what is needed is for it to be assembled and presented to the public in simple terms.

Firstly most people in Hong Kong know that a consensus on the housing issue is impossible as various vested interests use selective data. The fact is there is no solution where everyone wins: There will need to be compromise, and some will be compelled to make a "sacrifice". Whether they are developers, the green groups, industrial or agricultural landowners, speculative homeowners or even the Financial Services and the Treasury Bureau and Lands Department, will depend on the chosen solution.

Thus, every group has an incentive to deflect responsibility for a solution onto someone else. Developers blame the government's land tender system and the land premiums. The government is suspicious of developers; and some people claim that collusion between the government and property developers keeps prices high. The government also attributes failure to the green groups for blocking development on greenbelts and new reclamations.

Most of these arguments have a grain of truth in them. But without an objective understanding of the issue with clear data, we cannot judge if someone is making a sincere argument or if they are driven by vested interest. For example, when property developers claim that the land premium, the tender system and stamp duties make it difficult for them to purchase and develop land, are they speaking purely from self-interest? Or are they speaking from their on-the-ground experience and genuine concerns about market failure? The ambiguity allows those opposed to developers to dismiss their arguments, even if there is some truth to them and they are being genuine.

Alternately, when the government talks about using more greenbelt areas, are they employing it as a last resort, or because it is easier than other options fraught with the politics of strong players such as land owners in the New Territories? And are the green groups being reasonable in opposing all development on greenbelts, even if it only uses a small percentage of land? It is never clear as the data is not presented clearly.

Lam, in her upcoming Policy Address, should propose an independent body that can objectively and quickly figure out what is at the heart of the problem and present the facts. This will be an objective framework through which to understand what the solutions might need to be and the hard decisions the government needs to make in the interest of the most disenfranchised. It will go a long way toward building understanding and trust.

It must have a broader mandate than what has been currently proposed by the Chief Executive, which is a commission focusing on land supply. While the difficulty of finding suitable land is clearly a major part of the problem, it is not the only cause. The commission has also been criticized for excluding both developers and "pan-democrat" politicians (who perhaps make for strange bedfellows). Ample land in Hong Kong exists to address the issue, but it must be freed by policy interventions. This is where the rubber hits the road and the necessarily tough decisions taken - supported by facts and data - will have the support of the majority.

One could easily think of who ought to sit on such a commission. Perhaps the convener of the Executive Council would direct the effort. There should be representatives from both the pro-establishment and "pan-democratic" camps, as any solution would need to pass the Legislative Council. Young people should be represented as well, along with developers and green groups. Representatives from the key government bureaus, especially lands and treasury, should be involved as land sales and property-related taxes and duties remain the major revenue generator for the government, making the government, in effect, Hong Kong's main landlord. And, finally, there should be a few respected and independent economists (with divergent approaches) to give the conclusions some empirical weight.

Their mandate would be to determine what is at the heart of the problem. And to do so quickly, as it is not rocket science: Nine to 12 months should be plenty of time to release the final report. This should be achievable. Indeed, institutions in the United States and elsewhere can judge the effects of major legislation in a matter of weeks. Yet the currently proposed land supply commission will not have their first public engagement session until the first or second quarter of next year.

Lam's upcoming Policy Address will likely include some measures that will help alleviate the housing crisis. But without agreement on what the problem is, we will continue to point fingers, which won't get us anywhere. Resolving the affordable housing crisis will require making some hard choices based on the facts, not hoping for an elusive consensus among competing interests who are never going to agree on them.