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Wednesday, Aug 17, 2022

New Hong Kong leader’s vow to fix housing crisis draws skeptics

New Hong Kong leader’s vow to fix housing crisis draws skeptics

Incoming Chief Executive John Lee is facing a challenge that his predecessors -- experienced civil servants and business mavens -- failed to resolve. As the former security secretary who led the crackdown on the 2019 protests, Lee’s lack of exposure to the business community and his own priority on securing stability mean the world’s most unaffordable housing market isn’t likely to get cheaper any time soon.
“All chief executives pledged to solve housing and livelihood issues when they came in. In the end, the problem of inequality and unaffordable housing continued to worsen,” said Ho-fung Hung, a political economy professor at Johns Hopkins University. “It is not sure whether he has the caliber and expertise to deal with those problems more effectively than his predecessors.”

Tackling housing issues has always been a thorny issue for the Hong Kong government. For Lee, it would mean taming the city’s property moguls while obtaining their buy-in, and tempering prices while ensuring the health of a crucial pillar of the economy and government coffers. Letting resentment continue to seethe at housing and other social issues could also deepen public distrust in government and exacerbate the outflow of residents already underway.

The challenges faced by Lee, who served in the police force for three decades, are only growing.

Soaring property prices during more than a decade of ultra-low interest rates have become a major political risk for governments all around the world. The problem in Hong Kong is particularly acute as not only are homes expensive, they are mostly small. Many underprivileged residents live in tiny subdivided units or cage homes.

It’s also taking longer for Hong Kongers to get into public housing. They can currently expect to wait 6.1 years before getting an apartment as of the end of March, the most since 1998, according to government data. There are about 147,500 applicants at the moment. About 28% of the population lives in public housing.

Unlike previous chief executives, Lee’s manifesto, released weeks before his confirmation, had a clear focus on how he would safeguard China’s constitution and Hong Kong’s Basic Law, while policy issues lacked extensive detail.

Though that focus on national security is in line with President Xi Jinping’s agenda, expectations for Lee to tackle livelihood issues are also high as Chinese authorities have made it clear that they see a connection between housing and the public discontent that exploded into 2019’s unrest.

Chinese Vice Premier Han Zheng told local officials in early 2021 that they needed to work on solving the housing problem, and months later, the head of China’s top agency overseeing Hong Kong set a goal to tackle the crisis and get rid of cage homes or subdivided apartments by 2049.

Lee has pledged that housing will be a major focus of his administration and has presented ideas for how to increase the supply. The most notable suggestion in his manifesto was an idea to allow residents seeking public housing to move in before nearby facilities and transportation are completed, which Lee said can shorten waiting times by a year.

Last week, Lee announced a government department revamp that will split the existing Transport and Housing Bureau into two, creating a Housing Bureau dedicated to property issues. The idea was first proposed by the current administration.

“I’ve emphasized time and again that the provision of land and housing is a major area of the government’s attention and agenda,” Lee told reporters, adding that increasing land supply will be a priority.

Lee has also said he would simplify the land and housing development process, which in practice could mean reducing the time given to public consultations and environmental impact assessments.

The incoming chief executive is also getting a helping hand from the very people who are often blamed for the city’s housing problems, as developers including Sun Hung Kai Properties Ltd. have been voluntarily donating land for social housing and participating in the government’s public-private land sharing program.

Ultimately, property analysts don’t see Lee’s tenure as having a significant impact on prices in the near future. Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, expects home values to increase next year after an initial decline from rising interest rates.

Meanwhile, Cusson Leung, head of Asia property research at JPMorgan Chase & Co., forecasts prices to go up as much as 10% this year, citing demand from mainland Chinese buyers.

Ivan Choy, a senior lecturer at the Chinese University of Hong Kong, said that in the end Lee will have to answer to the mainland on policies including housing.

“One of the indications of seeking someone with a disciplined service background to be chief executive is that Beijing will decide on many complicated policy issues and help him execute,” he said.

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