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Additionally, the first generation of HOS units were built in the
1980s. Under the current mechanism, by the time redevelopment of these
units is called for, the amount of unpaid premium will probably reach an
astronomical level. Given that after settlement of unpaid premium to
the government, the owners would be highly unlikely to be able to afford
another unit in the market, they would therefore be reluctant to participate
in private redevelopment. The city will then be left with numerous run-
down HOS and TPS estates with shared ownership between the quasi
homeowners and the government.

Furthermore, the present layout of HOS and TPS units is unfair.
Unlike private owners who pays 100% of the maintenance fee and can
subsequently enjoy 100% of the appreciation in value associated with the
units, the owners of HOS and TPS units who are paying the full amount of
maintenance fee will only be able to enjoy the capital appreciation minus
the unpaid land premium. In the previous example, the owner can only
enjoy 70% of any appreciation in captial values.

In terms of public finance, the public housing system is
unsustainable. The average rent per public rental housing (PRH) unit is
about $1,700 per month. This figure falls significantly short of the market
value, which was put at $11,000 per month for a 360-sf private housing unit.
On top of this, the government is subsidising on average $158 per flat per
month on maintenance and other operational services.

Assuming a discount rate of 4% and assuming that each PRH unit
has an estimated useful life of 50 years, the government is actually, in
present value terms, subsidising around $2.4 million for each unit. Likewise,
to meet the 10-year public housing supply target, the government has set
aside its investment returns in 2015 and 2016 into the Housing Reserve
which now stands at $74 billion. This is a tremendous fiscal burden.

The current public housing policy has produced the gulf between
the ‘haves’ and ‘have-nots’, which has been widening since the mid-2000s.
Disturbingly, this is connected to an array of malign issues including (a) an
unequal and inequitable allocation of public housing; (b) the increase in
rate of divorce and family breakdown; (c) low intergenerational mobility and
poverty; and (d) social injustices.

2. The Inequality and Inequity of

Housing Units

The small size of PRH units relative to other types of housing is
a historical product of Hong Kong’s resettlement housing programme
introduced in the 1950s. And given the large difference in the median size
of the housing units between the private and public housing sectors, an
efficient or optimal housing arrangement would require that there be very
different income levels between the occupants of these sectors.

In reality, however, the PRH programme fails to achieve equity in
housing consumption. In 1981, the incomes of the wealthy half of the public
tenants were equal to the wealthy half of the private tenants. By 2011, there

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