ULI Trustee Sujata Govada Investigates Housing in Hong Kong
June 24, 2015
Like other global cities, Hong Kong is facing a crisis in housing affordability. Compounded by stagnant wages and a difficult financing environment, the current situation offers residents few opportunities to gain entry into the private housing market. At HK$4.89 million, Hong Kong’s median home price is 17 times its median household income.
So it is not uncommon for families of four to inhabit 150 square feet (14 sq m) of illegally subdivided flats. Many young professionals in their 20s and 30s cannot afford to move out of their parents’ homes. And the waiting period for public housing is three years long, with roughly 280,000 applicants on the waiting list.
The government’s answer has been to focus on increasing housing supply. The Hong Kong Housing Authority has pledged to build more than 282,000 public housing units by 2024, and the Urban Renewal Authority, a quasi-governmental agency focused on urban regeneration, has partnered with private developers to build more market-rate and luxury housing. In addition, the Hong Kong Housing Society, an independent, non-profit organization, is also a housing provider, having built 68,000 units since the 1950’s.
But increasing supply has not made housing any cheaper or accessible for the average consumer, says ULI Trustee Sujata Govada, founding and managing director of UDP International, a Hong Kong-based planning and design firm. Mortgage requirements remain stringent because many cannot afford the downpayment, which at some banks is 60 percent. Household incomes have lagged behind the cost of living, and the scarcity of land in Hong Kong has driven up the price of developable parcels. In recent years, investors from the Chinese Mainland and elsewhere have snapped up real estate, leaving Hong Kong residents scrambling for a place to live.
“This is a really complex issue,” Govada adds. “The government’s long-term housing strategy has been to focus on increasing supply, and while this is needed, it alone will not solve all the issues that make housing unaffordable in Hong Kong.”
Govada and her team along with other ULI members in Hong Kong have decided to examine the housing issue with the goal of identifying a way out of what is currently an unsustainable situation. Partially funded by a ULI Foundation urban innovation grant, the study aims to identify strategies that will increase the availability of decent and affordable housing for the entire workforce. As an initial thought, Govada says that more players need to be involved, in addition to the Hong Kong Housing Authority and the Urban Renewal Authority. The private sector as well as the Mass Transit Railway Corporation, other non-governmental organizations, and universities should step up and play a more active role.
The team’s research began with a forum in October, where J. Ronald Terwilliger, an affordable housing advocate and ULI Nichols Prize laureate, and Tom Murphy, former Pittsburgh mayor and ULI senior fellow, offered U.S. perspectives on the challenges of affordability alongside housing officials and experts from the private sector in Hong Kong.
In May, Govada and other ULI members toured public housing estates in Hong Kong to understand what life is like for the roughly 30 to 50 percent of the population who live in public housing. They then convened a workshop where participants were brief by housing experts from the Hong Kong Housing Authority and the Chinese University in Hong Kong. They discussed fundamental aspects of the problem, including quality of life; the mismatch between household income and housing affordability; and the relatively long period of time (11–14 years) it takes to deliver new housing developments in Hong Kong due to complex planning processes and building regulations.
Workshop participants also compared Hong Kong’s long-term housing strategy to that of London, New York, and Singapore, densely populated cities also grappling with a shortage of affordable and workforce housing options. London has pursued a strategy of integrating subsidized or “social” housing units within market-rate developments throughout the city, a practice known as “pepper-potting,” with mixed results. Released in October 2014, the updated London Housing Strategy has emphasized increasing homeownership through the new First Steps program and by redeveloping brownfield areas throughout the city known as “Opportunity Areas” for new jobs and housing.
Mayor Bill de Blasio of New York City has pledged an ambitious goal of building or preserving 200,000 affordable housing units over the next decade. The policy of “inclusionary zoning,” or setting aside units within market-rate developments for low- and moderate-income renters, is one of the main tools the city has pursued to achieve the mayor’s goal. Yet inclusionary zoning has not “challenged the dynamic between developers and communities, landlords and tenants, or housing and the market,” and is a “flawed methodology that favors development over community needs” and ultimately leads to gentrification and displacement, according to Govada.
Singapore, with a scarcity of land similar to Hong Kong’s, also has relied on dense, vertical development for its housing needs. Yet, the crucial difference is that in Singapore, 95 percent of public housing is owner-occupied compared with just 34 percent in Hong Kong. In Govada’s view, homeownership is a community aspiration and will actually allow for a healthy turnover in units. In Hong Kong, it is not uncommon for public housing renters to occupy their units as they age, preventing new residents from entering the market.
Govada’s next step is to hold follow-up interviews and focus group discussions to come up with a set of preliminary recommendations or guiding principles for affordable housing in Hong Kong and the region. “This is just the beginning of the conversation,” she says.