The Benefits of Public Housing for Household Savings in Hong Kong

By March 24, 2015Events, Seminar

Date: May 15 2015
Feature Speaker: Dr. Yi ZHANG

 

To promote the concept of well-being from poverty alleviation in Hong Kong, a series of seminars is held by the Hong Kong Jockey Club Centre for Suicide Research and Prevention, the University of Hong Kong.

 

Dr. Yi Zhang presented a positive relationship was found between public rental housing and household savings in the seminar held on 15th May 2015. The amount of savings between tenants in public rental housing and private housing was compared based on the same monthly household income and household size during 1989/90 to 2009/10. Savings was referred to the amount of income deducted by housing expenditure. Public housing could trigger a redistributive effect in terms of purchasing power based on savings for a private property.

 

According to the statistics from the property price index provided by the Hong Kong Rating and Valuation Department, the price of private properties has increased dramatically in Hong Kong since 2003. However, the over 300% growth of property price index largely outweighed the around 50% increase in median monthly household income and 80% increase in GDP from 2003 to 2013. The median monthly income increased 29% during 1991 to 2001, whereas the property price index increased 131% during 2001 to 2011.

 

According to the 11th Annual Demographia International Housing Affordability Survey 2015, Hong Kong had the least affordable housing for five consecutive years and the highest recorded with a median multiple of 17.0 in 2014. The survey compared the housing affordability in 378 metropolitan markets, including Australia, Japan, the United Kingdom and the United States, etc. The was calculated by price to income multiplies. It increased significantly from 14.9 in 2012. The affordability of housing has been markedly deteriorating as approximately 48% of residential transactions were more than HK$5 million compared to only 30% for the same period in 2013. Meanwhile, there was only small changes in household median income.

 

In Hong Kong, there were 2,404,800 households in total in 2013. 731,100 households lived in public rental housing whereas 427,600 households lived in private housing as tenants. Tenants in public housing saved more than tenants in private housing in all ten levels of household income in year 2009 to 2010. A decrease in savings was recorded among tenants in private housing in the lowest four level of household income. Tenants public housing saved approximately $70000 compared to tenants in private housing saved approximately $40000 on the tenth (highest) level of household income in year 2009 to 2010. The amounts of savings among tenants in public housing also increased with decreasing size of household. On the income level as $18,000, which was the median house income, the value of public housing in terms of savings of a 1-person household was $4243 while of a 6-person household was $2802.

Tenants living in the private housings saved much less when compared to households living in the public rental housings. The differences between the savings varied according to household size and income levels. The gap implied a differences in expenditure patterns between households living in two different housings. Noticeably, the effect of public housings on savings were stronger on households with higher incomes. Households living in public housings were considered to have higher purchasing power based on savings for private housings.

 

Hong Kong government and the Housing Authority aim at providing public rental housing to low income households who cannot afford private rental accommodation. The average waiting time for general public rental housing applicants is targeted at around 3 years. There is no target on the average waiting time for non-elderly one-person applicant.

 

In fact, the number of general applicants, who are family or elderly one-person applicants, on the waiting list for public rental housing has been increasing from 77,800 to 137,900 in 2010 to 2015. The number of non-elderly one-person applicant have been increasing since 2007. The number increased from 36,700 to the peak as 140,600 in 2015. However, only 15,511 households were allocated to public rental housings in year 2012 to 2013.

 

There is a considerable differences between the supply and demand of public rental housing. Despite of the government’s plan to increase the supply of public rental housings to 200,000 flats, there is a projected shortfall of supply in the coming ten years. The projected estimated average waiting time for general public rental housings applications also increases to nearly 5 years in year 2020 to 2021.

 

As presented, one-person households living in public housings are able to save more than their counterparts living in private housing, in turn increasing their purchasing power for private housings. It is arguable that the government should increase the supply of public housing to this target group, viewing them as potential moving-outs in the long term.

 

Hong Kong government not only should consider the supply of housings in Hong Kong, but also the allocation of resources, i.e. the units allocation of public rental housings seriously and promptly. The government should also consider the direction of its housing policy, whether it should be government-oriented or market-oriented.